Right-to-work laws were enacted by states primarily to attract and to promote
economic growth. This study, employing a large cross-section of economic
indices, finds a broad-based trend of superior economic development in RTW
states over the past three decades.
The comparative statistics on income growth, unit labor costs and poverty rates are the most novel and interesting. Until now, organized labor has stressed the necessity of compulsory union support as a countervailing force against corporate power and rising income inequality. Although they have often derided RTW laws as "right-to-work for less," advocates of compulsory unionism have no economic basis upon which to support that claim.
The RTW economic growth advantage clearly accelerated during the 1990s. Poverty fell further; disposable income grew faster and manufacturing employment expanded in RTW states. There is a strong possibility that this widening in economic development will only continue in the future. Heightened competition, both at home and from abroad, has increased the importance for firms of finding regions with a flexible labor environment and lower cost structures. The advent of the Internet, advances in information technology, lower barriers to entry for most industries, and the increased mobility of financial capital all favor states with RTW legislation.
Table 2 summarizes Michigan's ranking, vis-à-vis all 50 states, over the 1970-2000 period with a separate listing for the 1990s. The state rank is enumerated so that the higher the ranking, the better the economic performance. The 1990s were singled out because the decade is widely regarded as a period of "superior" performance for the state's economy.
Michigan's relative economic performance over the past three decades was
dismal, finishing in the bottom quintile in economic and employment growth, unit
labor costs and poverty rate improvement. Interestingly, with the exception of
per-capita personal income growth (for which it was tied) and income inequality,
Michigan performed worse in every category vis-à-vis the average non-RTW state.
More worrisome, however, are the startling statistics on Michigan's unit labor costs. As the forces of globalization and competition intensify, Michigan's high unit labor costs will increasingly discourage fresh capital from planting new seeds.
While the 1990s brought some very modest improvement in Michigan's relative standing, it was hardly a decade of economic superiority. The state continued its three-decade tradition of below-average growth in output, employment and income. The recipient of key economic headwinds, Michigan's relative economic performance should have excelled during the 1990s. Relatively low energy prices and interest rates were a boon to the state's heavy industry. The exchange value of the dollar, significantly weaker since the 1980s, was a boost to state exporters (Michigan is a major exporter). Equally important, the Big Three automakers, riding the wave of light-truck mania, registered record sales and profits.
Interestingly, the 1990-91 recession also favorably impacted Michigan's relative growth statistics. With economic growth contracting more here than in most states during the late 1980s and the 1990-91 recession, Michigan's economic recovery came off a relatively low base, biasing its growth figures upward. Michigan's ensuing cyclical recovery (1991-1999) should have produced much more robust economic growth. Instead, Michigan still lagged behind RTW states.
Communism as a political philosophy eventually died because it couldn't "deliver the goods." Like communism, compulsory union support hasn't delivered the goods but has managed to survive in the majority of states. This paper shows a clear correlation between economic growth and RTW status. Corroborated by a growing body of research conducted by many independent scholars, the compelling conclusion is that RTW laws increase state economic development and overall prosperity.