Right-to-Work Laws Produce Greater Economic Growth

New study compares states vs. how they would have performed without right-to-work laws

For Immediate Release
Wednesday, Aug. 28, 2013
Contact:
Ted O'Neil
Media Relations Manager
989-698-1914

MIDLAND — States with right-to-work laws over the past six decades saw improvements in average annual employment, real personal income and population growth compared to what those states would have experienced without right-to-work, according to a new Mackinac Center study.

“As Michigan is the most recent state to adopt a right-to-work law, we thought it valuable to take a fresh look at the data,” said Michael LaFaive, co-author and director of the Center’s Morey Fiscal Policy Initiative. “What we found generally comports with other scholarship on the subject. Adopting a right-to-work statute can increase the economic well-being of a state.”

Michael Hicks, Ph.D., an adjunct scholar with the Center and director of the Center for Business and Economic Research at Ball State University, created the econometric model used in the study and is a co-author with LaFaive.

The study examines 1947 through 2011, but also breaks that down into three distinct periods: 1947 through 1970; 1971 through 1990 and 1991 through 2011. The authors note that it can take a significant amount of time, more than a decade, for worker freedom laws to fully impact a complex state economy in such a positive manner.

“Another challenge related to timing is that the effect of right-to-work laws may change as economies and government policies evolve over time,” LaFaive and Hicks write.

The results varied by the time period studied. For instance, right-to-work laws had no statistically significant impact on economic growth from 1947-1970, but a positive and statistically significant impact in the following periods, 1971-1990 and 1991-2011.

On average, over the entire 64-year period, the study finds that right-to-work laws increased annual real personal income growth in the average right-to-work state by 0.8 percentage points and population growth by 0.5 percentage points. Right-to-work laws boosted average annual employment growth in the average right-to-work state on the whole as well, registering an average bump of 0.8 percentage points, as measured from 1971-2011.

“These results may appear modest, but the cumulative effect of right-to-work laws appears to have dramatically boosted the standard of living in the states which have adopted it,” Hicks said.

Hicks and LaFaive conclude the study by stating: “These results suggest that right-to-work laws have a positive and sometimes very positive impact on the well-being of states and their residents.”

The study is available at www.mackinac.org/19051.

The Mackinac Center for Public Policy is a research and educational institute headquartered in Midland, Mich. The largest state-based free-market think tank in the country celebrates its 25th anniversary this year.

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