Wednesday, April 4, 2012

True Impact of “Right to Work” laws

My friend Tom Manton asked what I thought of the National Right to Work Committee (NRTWC) ( and its positions on the right to work VS unions.

Bottom line:  I think the NRTWC is wrong.  Right to Work laws hurt workers while having no, or very little, offsetting positive impact on state economies.

First, let me say I’m always impressed with Republicans’ ability to find names for laws they propose that sound great, after all who is opposed to the “Right to Work”, but disguise the true purpose and affect of the laws.  In the case of the Right to Work laws, they are actually union busting laws.  State so-called “Right to Work” laws ban agreements stipulating that all employees represented by a union must pay dues, even thought unions by federal law are not allowed to treat paying and non-paying workers differently.  Unions must provide the same services, vigorous advocacy, and contractual rights and benefits to every worker represented by the union whether the person is a paying member of the union or not.  For example, if a non-dues paying worker in a unionized workplace encounters a problem at work, the union is required to provide that worker with full and equal representation at no charge.  In states with Right to Work laws, unions have a more difficult time organizing and operating since they must represent members who do not pay dues.  Can you imagine a business organization like the Chamber of Commerce being required to provide services to local businesses whose owners refuse to pay dues?  Not likely.

Twenty-two states have passed “right-to-work” laws since 1947 when they were first allowed. Proponents of right-to-work laws claim that such laws create a more business-friendly environment and lead to economic and job growth. 

Independent non-partisan research has found however that the claimed benefits of Right to Work laws simply don’t exist and that such laws actually depress wages and have other adverse impact on workers by discouraging unionization.

In a 2009 article published in the Review of Law and Economics, Lonnie Stevans, Professor of Information Technology and Quantitative Methods at Hofstra University, compared the business formation and economic growth of right-to-work states with non-right-to-work states using recent data from the U.S. Small Business Administration.  Stevans controlled for variables like education levels, population changes, and type of employment in the states to accurately measure the relationship between right-to-work laws and economic growth.

Stevans found that a state’s right-to-work law:
  • Has no impact on economic growth
  • Has no influence on employment
  • Has no influence on business capital formation (the ratio of firm ‘births’ to the number of firms)
  • Is correlated with a decrease in wages
  • Does not increase the average real state GDP growth compared to non-right-to-work states
  • Results in lower average per capita income compared to non-right-to-work states

Stevans concluded “…From a state’s economic standpoint, being right-to-work yields little or no gain in employment and real economic growth.”

Read the Stevans article here:

The Economic Policy Institute reviewed a variety of studies and reported similar findings: 
  • Right-to-work laws have no impact in boosting economic growth: research shows that there is no relationship between right-to-work laws and state unemployment rates, state per capita income, or state job growth.
  • Right-to-work laws have no significant impact on a attracting employers to a particular state; surveys of employers show that “right to work” is a minor or non-existent factor in location decisions, and that higher-wage, hi-tech firms in particular generally prefer free-bargaining states.
  • Right-to-work laws lower wages—for both union and nonunion workers alike—by an average of $1,500 per year, after accounting for the cost of living in each state.
  • Right-to-work laws also decrease the likelihood that employees get either health insurance or pensions through their jobs—again, for both union and nonunion workers.
  • By cut ting wages, right-to-work laws threaten to undermine job growth by reducing the discretionary income people have to spend in the local retail, real estate, construction, and service industries. Every $1 million in wage cuts translates into an additional six jobs lost in the economy. With 85 percent of Michigan’s economy concentrated in health care, retail, education, and other non-manufacturing industries, widespread wage and benefit cuts could translate into significant negative spillover effects for the state’s economy.

Read the EPI report here:

The Center for American Progress (CAP) found that Right to Work laws: 
  • Lower worker pay and benefits
  • Make workplaces more dangerous
  • Result in less employer-provided health insurance and pensions
  • Weaken the middle classs

 Read the CAP report here:

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