There are several challenges to isolating and measuring the impact right-to-work laws have on state economies. The first of which is timing. It may require several years for the effect of right-to-work to show up in a meaningful way in the state’s economic statistics.[*]
This theory is supported by William Moore and Robert J. Newman, scholars who have both empirically studied right-to-work laws. In a 1998 review of the research literature on the impact of right-to-work laws on “state industrial development,” Moore dismisses findings from one study that only examined a short time frame. In defending his critique, he points to a 1983 paper by Newman that argues that one should examine a period of at least 10 years to best measure the effects of right-to-work laws on state economies. This theory aligns with the findings of Thomas J. Holmes, who, according to Moore, observed no “significant effects of [right-to-work] laws prior to 1963,” 16 years after the 1947 Taft-Harley Act.
A second challenge to measuring the effect of right-to-work law on state economic performance is disentangling this effect from other factors. A study which examines the role of right-to-work absent such issues as tax policy, weather and other variables that may impact a state’s aggregate economic performance will be unable to tease out the influence of right-to-work laws specifically.
Still another challenge is “endogeneity,” or reverse causation — an issue that has particularly plagued many right-to-work studies. There may be factors that influence the adoption of right-to-work laws, such as high levels of union membership or traditional union antipathy, and these may be correlated with underlying economic growth.
To effectively account for the effect of right-to-work laws, scholars can use measures of these two factors, such as the 1947 share of manufacturing employment, or whether or not a state was part of the Old South, to create a model which more closely mimics a natural experiment. This technique is akin to ensuring that participants in a randomized drug trial share common existing health characteristics. Without doing so, a medical researcher could not be sure that any beneficial effects were due to the medication itself or to pre-existing conditions.
Considering these challenges, it comes as no surprise that there is no single dominant theoretical structure upon which to statistically model the effects right-to-work laws have on state economic performance. Typically when scholars begin trying to answer a research question they posit a thesis on the best available theory and then examine the available data to see if hard evidence supports the theoretical underpinnings. But right-to-work laws may change firm and worker behavior in ways that make these types of theoretical predictions unclear.[†]
[*] In the recent example of Michigan, for instance, hundreds of unions negotiated new “agency shop” collective bargaining agreements before the state’s right-to-work law went into effect. This effectively ensures that the new right-to-work law will have little or no effect for these unions and employees’ ability to choose whether or not to financially support a union as a condition of their employment. For more information, see: Jack Spencer, "Count Update: 145 School Districts Have Deals That Dodge Right-to-Work," Michigan Capitol Confidential, May 28, 2013, http://goo.gl/4DnhHN (accessed July 31, 2013).
[†] For an excellent review of the complexity of the economic theory on right-to-work laws, please see: W. Robert Reed, "How Right-to-Work Laws Affect Wages," Journal of Labor Research 24, no. 4 (2003). Reed reviews and develops differing theoretical arguments regarding the wage effects of right-to-work laws. These are further discussed in “Appendix A: Theoretical Reasoning Behind the Model.”