What do ‘right-to-work’ laws do to a state’s economy?

December 10, 2012

The most significant policy fight of the week is arguably taking place in Michigan, where Republican lawmakers are pushing through a "right-to-work" bill that would weaken labor unions in one of the country's most heavily unionized states. President Obama traveled to Michigan today and criticized the bill, which Gov. Rick Snyder (R) has yet to sign.


Workers protesting the right-to-work proposal in Michigan. (Carolos Asorio/AP)

Why the uproar? Under right-to-work laws, employees in unionized workplaces can no longer be required to pay unions for the cost of being represented. These statutes are broadly understood to erode the influence and power of organized labor — if unions have a harder time collecting money for the services they offer, they'll have fewer resources to work with. Currently, 23 states have such laws on the books. Michigan would be the 24th — and, because of its long pro-union history, perhaps the most important. 

So what effects do these laws have? There's a dizzying amount of research on the subject, but a few broad conclusions have emerged over the years: Right-to-work laws do weaken labor unions. The laws appear to tilt the balance of power so that workers reap fewer of the gains from growth. And it's still hard to find definitive evidence that right-to-work laws help (or harm) a state's overall economy. 

1) Right-to-work laws tend to weaken labor unions. This is one thing the left and right agree on. If unions are barred from requiring employees to pay the cost of representation, there's a free-rider problem. Why bother sending money to my union if I'll benefit from its bargaining efforts regardless? Pretty soon, unions are drained of funds and can't launch as many organizing drives or wield influence. 

And unions do get weakened. A 1998 survey of the econometric literature by William J. Moore found that right-to-work laws lead to more free-riding behavior among employees. That, in turn, leads to a decline in unionization drives, in organizing successes, and ultimately in overall union density. Recently, Idaho and Oklahoma saw their union densities drop after adopting right-to-work laws in the early 2000s.

Some labor backers have wondered if unions can overcome this adversity. They'll just have to prove their worth to workers. "For example," writes Rich Yeselson, "the most powerful local union in the country, Culinary 226 in Las Vegas — a political powerhouse that ensures middle-class wages and benefits for hotel housekeepers — operates in a right-to-work state and gets close to 100% dues compliance." That said, this appears to be an exception, not the rule.

2) Under right-to-work laws, workers reap fewer gains from economic growth. Supporters of right-to-work laws often argue that they'll help attract more businesses to a state. Opponents retort that weakening unions will lead to an erosion of wages. (A large Economic Policy Institute study from 2011 found that, after controlling for a host of factors, right-to-work states have lower wages on average than pro-union states.)

Both arguments might be correct. One careful study conducted by Hofstra's Lonnie Stevans in 2007 found that right-to-work laws do help boost the number of businesses in a state — but the gains mostly went to owners, while average wages went down. "Although right-to-work states may be more attractive to business," Stevans concludes, "this does not necessarily translate into enhanced economic verve in the right-to-work state if there is little 'trickle-down' from business owners to the non-unionized workers."

So business owners gain, and workers lose. One possible retort is that these states could simply set up new safety-net programs to compensate workers who are hurt. But that leads to another question: Without strong unions in place, who will push for these policies?

3) The broader economic effects of right-to-work laws are often difficult to disentangle. There's all sorts of research back and forth on the impacts of right-to-work rules. But as economists Ozkan Eren and Serkan Ozbeklik complained in one major study last year, most of this work is plagued by the "difficulty of distinguishing the effects of the [right-to-work] laws from state characteristics, as well as other state policies that are unrelated with these laws."

For instance: In 2001, Oklahoma passed a right-to-work law and soon saw its manufacturing base shrivel. But how much of that was due to the law and how much due to competition from China? Similarly, one 1998 study by Thomas J. Holmes found that companies in heavily unionized states often relocated just across state borders to right-to-work states. But is that due to the right-to-work laws or other policies?

One reason why it's so difficult to determine cause and effect is that only about 7 percent of private-sector U.S. workers are currently unionized — a small (and dwindling) slice of the workforce. What's more, companies make decisions on where to locate for a whole slew of reasons, from energy costs to infrastructure. The strength of unions isn't the only factor. That's why we'll continue to be barraged by study and counter-study for years to come.

4) The laws should also be placed in broader context. But set all the research aside for a second. The right-to-work bill in Michigan is also an indicator of a broader trend in the United States. As Rich Yeselson details, Michigan is one of the most heavily unionized states in the country, with 17.5 percent of workers belonging to a union. The United Autoworkers is one of the most storied unions in the country. If Michigan, of all places, is no longer safe from a sweeping revisions to its labor laws, then none of the remaining pro-union states in the Midwest and Northeast are immune.

In a country where the strength of organized labor has already been dwindling for decades, that's a major change.

Further reading:

--My colleague Sean Sullivan has an overview of the political fight around Michigan's right-to-work bill, while Greg Sargent offers some reasons to think that Snyder may not sign the legislation after all.

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December 10, 2012

The most significant policy fight of the week is arguably taking place in Michigan, where Republican lawmakers are pushing through a "right-to-work" bill that would weaken labor unions in one of the country's most heavily unionized states. President Obama traveled to Michigan today and criticized the bill, which Gov. Rick Snyder (R) has yet to sign.


Workers protesting the right-to-work proposal in Michigan. (Carolos Asorio/AP)

Why the uproar? Under right-to-work laws, employees in unionized workplaces can no longer be required to pay unions for the cost of being represented. These statutes are broadly understood to erode the influence and power of organized labor — if unions have a harder time collecting money for the services they offer, they'll have fewer resources to work with. Currently, 23 states have such laws on the books. Michigan would be the 24th — and, because of its long pro-union history, perhaps the most important. 

So what effects do these laws have? There's a dizzying amount of research on the subject, but a few broad conclusions have emerged over the years: Right-to-work laws do weaken labor unions. The laws appear to tilt the balance of power so that workers reap fewer of the gains from growth. And it's still hard to find definitive evidence that right-to-work laws help (or harm) a state's overall economy. 

1) Right-to-work laws tend to weaken labor unions. This is one thing the left and right agree on. If unions are barred from requiring employees to pay the cost of representation, there's a free-rider problem. Why bother sending money to my union if I'll benefit from its bargaining efforts regardless? Pretty soon, unions are drained of funds and can't launch as many organizing drives or wield influence. 

And unions do get weakened. A 1998 survey of the econometric literature by William J. Moore found that right-to-work laws lead to more free-riding behavior among employees. That, in turn, leads to a decline in unionization drives, in organizing successes, and ultimately in overall union density. Recently, Idaho and Oklahoma saw their union densities drop after adopting right-to-work laws in the early 2000s.

Some labor backers have wondered if unions can overcome this adversity. They'll just have to prove their worth to workers. "For example," writes Rich Yeselson, "the most powerful local union in the country, Culinary 226 in Las Vegas — a political powerhouse that ensures middle-class wages and benefits for hotel housekeepers — operates in a right-to-work state and gets close to 100% dues compliance." That said, this appears to be an exception, not the rule.

2) Under right-to-work laws, workers reap fewer gains from economic growth. Supporters of right-to-work laws often argue that they'll help attract more businesses to a state. Opponents retort that weakening unions will lead to an erosion of wages. (A large Economic Policy Institute study from 2011 found that, after controlling for a host of factors, right-to-work states have lower wages on average than pro-union states.)

Both arguments might be correct. One careful study conducted by Hofstra's Lonnie Stevans in 2007 found that right-to-work laws do help boost the number of businesses in a state — but the gains mostly went to owners, while average wages went down. "Although right-to-work states may be more attractive to business," Stevans concludes, "this does not necessarily translate into enhanced economic verve in the right-to-work state if there is little 'trickle-down' from business owners to the non-unionized workers."

So business owners gain, and workers lose. One possible retort is that these states could simply set up new safety-net programs to compensate workers who are hurt. But that leads to another question: Without strong unions in place, who will push for these policies?

3) The broader economic effects of right-to-work laws are often difficult to disentangle. There's all sorts of research back and forth on the impacts of right-to-work rules. But as economists Ozkan Eren and Serkan Ozbeklik complained in one major study last year, most of this work is plagued by the "difficulty of distinguishing the effects of the [right-to-work] laws from state characteristics, as well as other state policies that are unrelated with these laws."

For instance: In 2001, Oklahoma passed a right-to-work law and soon saw its manufacturing base shrivel. But how much of that was due to the law and how much due to competition from China? Similarly, one 1998 study by Thomas J. Holmes found that companies in heavily unionized states often relocated just across state borders to right-to-work states. But is that due to the right-to-work laws or other policies?

One reason why it's so difficult to determine cause and effect is that only about 7 percent of private-sector U.S. workers are currently unionized — a small (and dwindling) slice of the workforce. What's more, companies make decisions on where to locate for a whole slew of reasons, from energy costs to infrastructure. The strength of unions isn't the only factor. That's why we'll continue to be barraged by study and counter-study for years to come.

4) The laws should also be placed in broader context. But set all the research aside for a second. The right-to-work bill in Michigan is also an indicator of a broader trend in the United States. As Rich Yeselson details, Michigan is one of the most heavily unionized states in the country, with 17.5 percent of workers belonging to a union. The United Autoworkers is one of the most storied unions in the country. If Michigan, of all places, is no longer safe from a sweeping revisions to its labor laws, then none of the remaining pro-union states in the Midwest and Northeast are immune.

In a country where the strength of organized labor has already been dwindling for decades, that's a major change.

Further reading:

--My colleague Sean Sullivan has an overview of the political fight around Michigan's right-to-work bill, while Greg Sargent offers some reasons to think that Snyder may not sign the legislation after all.

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Ezra Klein | December 10, 2012