Opinion and Economic Analysis

HICKS: What to expect from right-to-work legislation

January 14, 2012

I just released a study on the economic consequences of right-to-work legislation on the manufacturing sector. I have been working on this for five years. As with most scholarly work, that meant reading nearly every study written on the topic and conducting my own statistical analysis over more than half a century. I accounted for such factors as weather, regional effects, manufacturing history and trends, and traditional anti-union antipathy. It is an honest attempt to uncover the truth, but I don’t suppose this study will change many minds.

It would be a long way from simply naïve to suppose that my study would alter any decisions about the divisive right-to-work legislation pending in Indiana. That said, readers might be interested in what they might expect from a law banning mandatory union fees.

The simple fact: Right-to-work states are growing faster than non-right-to-work states, but they also have lower wages. Still, this is merely correlation, not causation. My study and a number of others designed for the academic market (as opposed to the policy realm) find far more muted effects of right-to-work laws.

First, there’s no good evidence that passing right-to-work legislation will cause lower wages, poorer working conditions, significantly cut union funding of candidates (who are almost exclusively Democrats) or tangibly hurt unions. Indeed, as any casual observer will know, American unions have perfected their own destruction and require no help from Indiana legislators in their epic quest for irrelevance. My study examined right-to-work legislation dating back to World War II (even before the Taft-Hartley Act), finding no statistically discernible effect on wages.

Second, while some studies have found modest job creation related to right-to-work, the best of these (which I discuss in my study) find no effects, or report that disentangling right-to-work from other business-friendly policies is nearly impossible. My study found no statistically viable evidence that the law alters the share of manufacturing in a state, the size of the manufacturing industry in a state, or manufacturing employment in a state.

Bottom line, we should expect no effect on manufacturing, for good or ill, in wages or employment as a consequence of right-to-work. However, it is also clear that some states have seen positive impacts of such legislation, while others have seen declines in their manufacturing sectors. Factors other than right-to-work are at play, though: A healthy business climate, responsible regulation and low tax rates matter in business relocation and expansion. As I have said repeatedly, these other factors already favor Indiana.

Clearly, there are issues my study does not address in detail. Right-to-work and government costs were not examined. Likewise, I did not examine the service and retail sectors, where unions have targeted workplace rules—in so doing raising costs without tangibly benefiting workers. Most important, I did not examine the issue of freedom of choice, which seems to matter most.•

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Hicks is director of the Center for Business and Economic Research at Ball State University. His column appears weekly. He can be reached at cber@bsu.edu.

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