HICKS: Right-to-work laws make economic sense

April 9, 2011

Right-to-work legislation is once again at issue in Indiana and a dozen other states where it would have been unthinkable only a few years ago. It is a good time to review what economists know and do not know about the effects of right-to-work laws.

To begin with, it seems pretty clear that unions have been, and always will be, a part of the economic landscape. They’ve been with us in some fashion for at least a millennium, and nothing survives that long without benefiting its members. But there are different types of unions.

Most professional organizations and trade unions play a role in labor quality and promotion of the industry. Government unions act primarily as bargaining units, while private-sector industrial unions have a very different history. It is these latter two that right-to-work legislation targets.

Right-to-work laws let employees work for unionized businesses without being forced to pay union dues or submit to rules established by a collective bargaining arrangement. Union representatives rightly argue that most collective bargaining rules affect all workers and that exempting some workers from paying dues allows them to enjoy the benefits of a union without paying the costs.

Advocates of right-to-work legislation argue such laws are fairer to workers who don’t wish to pay dues and are better for the economy. Because my children tell me that I under-appreciate fairness, I will focus on the research regarding the economy.

There is abundant research on the economic effects of right-to-work laws by economists of both the right and left. The results are pretty clear that right-to-work legislation leads to increased employment.

Several studies at the county and state level that account for myriad other factors and trace the issue as far back as the 1940s support this finding. The only questions are whether it is the right-to-work laws alone or other related pro-business policies also that boost job growth, and how big might the job growth be?

Economists are mixed on the effect on wages. Studies that look at states over time find that wages are generally unaffected by right-to-work laws, but it is true that states with lower wages are more likely to have right-to-work laws.

I have studied right-to-work issues and found that foreign direct investment was boosted by the legislation and employment grew very slightly in right-to-work states. My study traced labor laws back to the Great Depression. I found no change in wages.

In the end, industrial unions are collapsing. In the mid-1900s, one in three American workers was in a union. Today, that figure is one in eight, and more than half of those workers are in government.

Some claim that right-to-work laws are thinly veiled efforts to bust unions. That may be, but it would seem to me the fastest and easiest way to bust unions is simply to let them keep exterminating themselves.•


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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