"Right-to-work" (RTW) laws are state statutes or constitutional provisions
that ban the practice of requiring union membership or financial support as a
condition of employment. These laws establish the legal right of employees to
decide for themselves whether or not to join or financially support a union. The
right to enact a RTW law is assured by Section 14(b) of the Federal
Labor-Management Relations Act (also called the Taft-Hartley Act) of 1947.
Since the 1940s, 22 states have adopted RTW laws, the most recent being Oklahoma, which added a provision to its constitution in 2001. Michigan, a non-RTW state, is home to 972,000 unionized employees, which represents 21.8 percent of all private and public sector workers employed in Michigan in 2001.
Advocates of RTW laws cite a growing body of evidence showing that RTW states enjoy faster economic and employment growth than non-RTW states. This growth advantage-experienced predominantly by the southern and western states, which comprise the bulk of RTW states-has been in evidence ever since Taft-Hartley was passed.
Opponents of right-to-work laws argue, conversely, that compulsory unionism is necessary to offset the power of big business in a market economy. In this view, big business and free markets are responsible for a slowdown in real earnings for workers and for greater income inequality during the past quarter century.
To evaluate the merits of these arguments, this study compares economic development between RTW and non-RTW states. It examines a broad cross-section of state economic statistics from the past three decades. Michigan's economic performance receives particular attention. The results of this analysis contradict many of organized labor's long-standing contentions.
The following are the key conclusions of the research. Except where otherwise noted, these data are averages of annual figures taken from 1970 through 2000:
From 1977 through 1999, Gross State Product (GSP), the market value of all goods and services produced in a state, increased 0.5 percent faster in RTW states than in non-RTW states. Michigan's GSP grew at roughly half the rate of RTW states.
Employment grew almost 1 percent faster each year, on average, in RTW states. Employment in Michigan grew only half as fast as employment in RTW states.
Manufacturing employment grew 1.7 percent faster in RTW states. Right-to-work states created 1.43 million manufacturing jobs, while non-RTW states lost 2.18 million manufacturing jobs. Michigan lost more than 100,000 manufacturing jobs during this period, performing even worse than many other non-RTW states.
Construction employment grew 1 percent faster each year, on average, in RTW states. Michigan ranked 32nd in the nation in this category.
From 1978 through 2000, average annual unemployment was 0.5 percent lower in RTW states. Unemployment in Michigan was 2.3 percent higher than in RTW states.
Per-capita disposable income was 0.2 percent higher, on average, in RTW states. Michigan's rate of increase in this category matched the average for other non-RTW states. Although nominal per-capita disposable income was 10 percent higher in non-RTW states in 2000, research shows that the cost of living is also higher in these states; so high, in fact, that after-tax purchasing power-real income-is greater in RTW states.
Unit labor costs-the measure of labor compensation relative to labor productivity-were 93.2 in RTW states and 98.1 in non-RTW states in 2000. Michigan, at 109.2, had the second highest unit labor costs in the nation that same year, exceeding all but New Jersey.
The percentage of families living in poverty in RTW states dropped from 18.3 percent to 11.6 percent between 1969 and 2000. During this same period, seven states saw increases in poverty, all non-RTW states. Michigan was among them, with a poverty increase of 0.6 percent, ranking it 45th among the states in poverty rate improvement.
Income inequality rose in both RTW and non-RTW states between 1977 and 2000. But while this inequality was greater in RTW states in 1977, by 2000 the situation had reversed.
This study attributes the better economic performance of RTW states to
greater labor productivity. The post-World War II period has brought rapid
economic globalization, which has dramatically increased the importance of labor
productivity and of policies, such as right-to-work, that affect it.
Advances in information technology, greater capital mobility, and lower barriers to entry for business startups are making it increasingly difficult for businesses to pass higher costs on to suppliers and customers. The net effect is increasing pressure for firms to seek geographical regions with lower cost structures and higher rates of labor productivity.
Right-to-work laws increase labor productivity by requiring labor unions to earn the support of each worker, since workers are able to decide for themselves whether or not to pay dues. This greater accountability results in unions that are more responsive to their members and more reasonable in their wage and work rule demands.
The study predicts that Michigan will continue to fall behind economically relative to RTW states until it adopts a right-to-work policy.