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.