Right-To-Work Laws: Designed To Hurt Unions and Lower Wages

The fact that unions are responsible for workplace benefits, higher wages, and the right to overtime pay is the very reason Wisconsin Governor Scott Walker, the Koch Bothers, and other corporate interests hate them. Walker hates unions so much he compared them to ISIL terrorists, so it’s no wonder that he and Wisconsin’s Republican legislature are rushing through a “right-to-work” (RTW) bill.

RTW laws were originally designed by business groups in the 1940s to reduce union strength and finances, and over the years they’ve been successful. As Melanie Trotman of the Wall Street Journal pointed out to me this morning, none of the 10 states with the highest rates of unionization are right-to-work. The Illinois Economic Policy Institute calculates that RTW reduces union coverage by 9.6 percentage points, on average. Unsurprisingly, weakening unions leads to lower wages and salaries for union and non-union workers alike. Heidi Shierholz and Elise Gould showed that RTW is associated with a $1,500 reduction in annualized wages, on average, even when the analysis takes into account lower prices in those states. (On average, wages in RTW states are nearly $6,000 less.)

Nevertheless, RTW supporters look at the very recent experience of Michigan and Indiana, which passed RTW laws in 2013 and 2012, respectively, to argue that RTW doesn’t inevitably lead to wage reductions. It’s a misguided argument, since no critic claims that the effects of RTW are immediate: It takes a little time for RTW to reduce dues collections, weaken union finances, undermine organizing, and weaken the bargaining position of workers. The law hasn’t even begun to apply to many contracts in Michigan.

And of course, Michigan’s economy has recovered for one reason, which isn’t RTW. As Moody’s Analytics puts it in a profile of the state: “Michigan’s recovery remains on solid footing thanks primarily to strength in auto manufacturing. Job growth outside of auto-related industries lags the Midwest and U.S. averages.” RTW supporters want to take credit for the auto industry’s resurgence in Indiana and Michigan, and for those states’ rising weekly wages, but no serious person thinks RTW has anything to do with it. U.S. motor vehicle production increased from 14.5 million vehicles in 2012 to 16.5 million in 2014. Credit belongs to President Obama’s bailout of GM and Chrysler, the new management at those companies, and the nation’s general economic recovery, which restored consumer confidence and spurred auto sales. Auto workers worked overtime and received sizable bonuses at all of the “big three” Detroit companies in 2014 because of the UAW’s collective bargaining agreements, not RTW.

Supporters claim that RTW will spur job growth and attract new companies to RTW states, but in reality 7 of the 10 states with the highest unemployment rates are RTW. And neither Michigan’s nor Indiana’s governor has identified a single company that says it moved to their state because it passed a right to work law. Many factors influence business site location decisions, but RTW isn’t among the top five or even the top ten. The availability of skilled labor, the quality of life the company’s executives will have, access to a highway, proximity to markets, robust telecom infrastructure, facility and energy costs, the provision of training subsidies, construction costs, and corporate tax incentives matter—not RTW.

It’s good to see Michigan bouncing back from the economic depression caused by the auto industry’s collapse, but it has a long way to go to get from its average weekly wage of $808.05 to non-RTW Minnesota’s $877.81, let alone from its 6.3% unemployment rate to Minnesota’s 3.6%. Indiana, too, with 5.8% unemployment and weekly wages of $788.70, lags far behind Minnesota. Gov. Mark Dayton’s opposition derailed RTW in Minnesota in 2012, and the state has been one of the five fastest-growing states in the nation ever since.

RTW laws have been on the books of various states for almost 70 years, so if RTW were going to make life better there, it ought to have happened by now. In fact, the quality of life in RTW states is measurably worse. The Organization for Economic Cooperation and Development, a fairly conservative international body, measured nine quality of life indicators and then ranked the 50 states, along with more than 100 regions around the world. Eight of the 10 worst states in terms of quality of life are RTW, while eight of the 10 best are non-RTW. The political outcomes that produce RTW have led to other bad outcomes, as well, including poorer life expectancy and infant mortality, higher homicide rates, worse pollution, lower voter turnout, less broadband access, lower educational levels, and poorer housing.