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Right-to-work states have generally had higher economic growth than compulsory unionism states, which can be seen through historical trends in key metrics such as unemployment rate, employment growth, state GDP growth and interstate migration.
The unemployment rate measures the number of people in the labor force looking for work. A growing economy has jobs for everyone who is looking for one. As you can see by the chart above, with the exception of a period in the late 1980s, right-to-work states over the past 30 years have consistently had lower unemployment rates than states with compulsory union membership laws. Michigan, since 2000, has had higher than average unemployment, and with a rate of 7.2 percent has the highest rate in the nation. The current gap between right-to-work states and non-right-to-work states is 0.7 percentage points. Also notice that in 2007, non-right-to-work states ended up with a higher unemployment rate than in 2006, but right-to-work states wound up with a lower unemployment rate compared to 2006.
In the late 1990s, employment was growing nationwide. As you can see in the chart above, right-to-work states were adding jobs at a higher rate than non-right-to-work states during the boom times. When the recession hit in 2001, employment in right-to-work states still grew. Michigan, meanwhile, took a bit hit — it lost more than 2 percent of employment in a single year. When employment grew again in 2004, right-to-work states grew more than twice as fast as non-right-to-work states. Michigan has lost jobs every year since 2000, a decline that began in June of that year.
Have the positive effects of right-to-work laws become enhanced in recent years? If nothing else, employment trends indicate they have. Here’s another indicator:
Real state gross domestic product, one of the broadest measures of economic well being, is the inflation-adjusted value of all goods and services produced in a state. Again we see that right-to-work states were more robust during the 2001 recession and that the gap between them and non-right-to-work states increased afterwards.
The next metric is what economists call the best measure of state economic growth: per-capita personal income. As you can see, right-to-work states and non-right–to-work states have tracked pretty closely since the mid-1990s. There’s a little bit of an edge to right-to-work states in recent years, but they’re similar. Michigan, however, has been stagnant, and the average per-capita personal income in right-to-work states is now higher than here in the Great Lake State.
Underlying per-capita personal income are two separate metrics — personal income and population — both statements of economic growth in their own right. And as you can see, right-to-work states consistently outpace non-right-to-work states on both fronts.
Sticking with the population theme, there are a couple ways to grow population. One is a so-called natural increase — more births in a state than funerals. Another is through immigration. The last is through internal migration. In economics, there is what is called the Tiebout-Tullock hypothesis, or basically, that if you don’t like the policies or economy of your state, you’re going to vote with your feet. Internal migration is a key indicator for where people find economic opportunity.
While IRS data is the standard for migration research, it offers significant lags in publishing. United Van Lines data, on the other hand, is available from the company shortly after year-end and also at mid-year. There is a strong correlation, however, between the two datasets.
Right-to-work states clearly have a better rate of inbound migration. Over the whole course of the data, the only time that non-right-to-work states had a better rate of in-migration was in 1987, and it was only by less than two percentage points.
The Office of Federal Housing Enterprise Oversight publishes an index of housing prices for each state. Housing is important because home values are very sensitive to economic trends. They may also be a leading indicator for recessions. Homes tend to be the largest investment a household will make, and fluctuations in housing prices have a large impact on a family’s net worth.
Housing trends overall stagnated in 2007. However, it should be noted that there were many states where home prices increased. California, for instance, decreased 6.65 percent while Utah gained 9.27 percent. Overall, 41 states grew and nine declined. As you can see by the chart above, right-to-work states have been robust against housing slumps that have hit places like Michigan.
In the key metrics of economic growth, right-to-work states have a distinct advantage when it comes to unemployment rates, income growth, population increases and jobs.
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James M. Hohman is a fiscal policy research assistant at the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.
The Mackinac Center for Public Policy is a nonprofit research and educational institute that advances the principles of free markets and limited government. Through our research and education programs, we challenge government overreach and advocate for a free-market approach to public policy that frees people to realize their potential and dreams.
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