Could Indiana’s Right to Work Law Mean Trouble for Neighboring States?

Michigan, Ohio, and Illinois soon may need to construct a wall—not to keep people out but to keep business in. While such a drastic move is unlikely, they will need to do something because they are at a severe regional economic disadvantage now that Indiana has passed a right to work law.

Wise policy decisions by Governor Mitch Daniels and the Indiana Legislature have given that Hoosier state the highest recovery in gross domestic product in the Great Lakes region. Now with the passage of right to work, 333,000 Hoosier workers represented by unions (12.4 percent of the Indiana workforce) will have right to say no to union bosses and still keep their job.

Indiana is poised to surge ahead of its forced unionism neighbors. With a similarly skilled workforce, geography, and manufacturing background, Indiana can offer businesses from around the world the same benefits as other states in the region without the drawbacks of having workers forced into a union against their will.

According to Heritage Foundation analyst James Sherk, “Right-to-work states are much more attractive for businesses investment. Unionized firms earn lower profits, invest less, and create fewer jobs than comparable nonunion firms.” Sherk adds that studies “of neighboring counties on state borders with and without right-to-work laws …. manufacturing jobs in counties in right-to-work states is one-third higher than in adjacent counties in non–right-to-work states. Right-to-work laws attract jobs.”

As Rob DeRocker, an economic development consultant told The Christian Science Monitor, some companies consider right to work essential because, “[T]he lack of a right-to-work law suggests that the mentality at the government level is that it’s not a business-friendly state”.

Overall statics back up Sherk’s and DeRocker’s assessments. Arthur B. Laffer and Stephen Moore noted in The Wall Street Journal last year that, “Over the past decade (2000-09) the right-to-work states grew faster in nearly every respect than their union-shop counterparts: 54.6% versus 41.1% in gross state product, 53.3% versus 40.6% in personal income, 11.9% versus 6.1% in population, and 4.1% versus -0.6% in payrolls.”

Indiana learned the hard way about how union monopolies can kill jobs. In 2010, United Auto Workers (UAW) members refused a generous deal and forced an Indianapolis metal stamping plant to close. The union rejected an offer by a buyer for the General Motors plant (which was in liquidation due to the company’s bankruptcy.) The buyer agreed to keep the plant open if the union agreed to industry average wages, with a $35,000 bonus for taking a pay cut, or a transfer to another GM plant keeping their higher than average salary.

The union refused and 650 local jobs were eliminated, along with potentially thousands more. The closure cost the state and local county $1.8 million in property taxes and $40 million in payroll taxes from the plant. Adding insult to injury, the union members who voted to close the plant became eligible for the taxpayer-funded federal Trade Adjustment Assistance Program in 2011.

This could be why Volkswagen wouldn’t return Governor Daniels’s calls when the state didn’t have a right to work law. Daniels says this helped make him realize his state needed to change. As he told Forbes, “[W]e’re clearly the fastest growing automotive state, and we couldn’t even get [Volkswagen] to talk to us.”

Besides being better for business, right to work is also better for workers. Workers in right to work states have more disposable income than those in forced unionism states, according to the National Institute for Labor Relation Research’s analysis of government data. They are also less likely to lose their health insurance. During the last decade, the percentage of workers with health insurance fell by almost three times the amount in forced unionism states compared to right to work states.

It is not just economics; public opinion overwhelmingly supports right to work. A January Rasmussen poll showed only 15 percent of likely U.S. voters believe that workers should be forced by law to pay union dues if their company is unionized. Nearly two-thirds of those surveyed disagreed.

So what are the other Great Lakes states to do? They can either try to appease Big Labor by pretending that the status quo is working. Or they can follow the example of Governor Daniels and the courageous Hoosier legislators who helped make right to work possible—House Speaker Brian Bosma, Senate President David Long, and bill sponsors Rep. Jerry Torr and Sen. Carlin Yoder. If political leaders in these forced unionism states do nothing they will continue to see their populations and economies lose to states with more freedom and opportunity, such as Indiana.