Indiana’s new right-to-work law could prompt copycats

February 25, 2012

When Indiana Gov. Mitch Daniels signed legislation this month making Indiana the nation’s first new right-to-work state in more than a decade, it turned up the heat on a long-simmering debate about the intent and impact of the anti-union laws.

By making it illegal to force employees to join a union or pay union dues as a condition of employment, state right-to-work laws are touted as a prime enticement for relocating businesses and keeping labor costs down.

That clearly was Daniels’s thinking.

“Seven years of evidence and experience ultimately demonstrated that Indiana did need a right-to-work law to capture jobs for which, despite our highly-rated business climate, we are not currently being considered,” Daniels (R) said in a statement after the signing.

That logic has found new relevance in states’ competition for jobs following the recession. As states offer a slate of smokestack-friendly incentives to lure businesses, conservative lawmakers nationwide are dusting off the decades-old right-to-work legislation for a new-millennium revival.

Last year, various legislatures introduced nearly a dozen state right-to-work proposals, but none became law. It’s unclear whether Indiana’s new law will change that dynamic, but neighboring states have taken notice now that Indiana is the nation’s 23rd right-to-work state, and the only one in the hard-hit Rust Belt region.

“It does mean that Indiana is likely to get a lot of business expansion that might otherwise go into Michigan, especially in the western part of the state,” said Paul Kersey, director of labor policy at the conservative Mackinac Center for Public Policy in Midland, Mich. “But pretty much the entire state has the potential to be affected by that. Right-to-work is a big draw for employers.”

Critics of right-to-work laws say they allow non-union workers to reap higher union-negotiated wages and benefits without sharing the costs. That makes it harder for unions to support themselves financially, which undermines their bargaining strength.

Numerous studies have found that wages for both union and non-union workers are lower in states with right-to-work laws. Others have found that workplace safety suffers in right-to-work states, where workers are less likely to secure job safety enhancements beyond federal and state regulations.

Most troubling, critics contend, is the fact that right-to-work laws allow non-union workers to get free union representation in work-related disputes. They do so by outlawing security agreements that require workers to join the union or pay a fee that covers the cost of their representation.

Most of the nation’s right-to-work states are in the South and the Great Plains states. And there’s evidence that right-to-work laws promote business investment.

A 1998 study by economist Thomas Holmes of the University of Minnesota found that manufacturing job growth was greater in counties with right-to-work laws compared with adjacent counties in neighboring states with no such laws.

But because right-to-work states typically embrace a variety of corporate-friendly policies — such as lower taxes, greater subsidies and softer environmental regulations — Holmes had trouble isolating the true effect of the right-to-work laws by themselves.

“Thus, my results do not say that it is right-to-work laws that matter, but rather that the ‘pro-business package’ offered by right-to-work states seems to matter,” Holmes wrote.

Factors such as operating costs, workforce skill level, transportation access and utility and land costs dominate a company’s final site-selection decision. But when those major factors are excluded, a state’s right-to-work status trails only environmental regulations and the availability of financial incentives in terms of importance, according to a 2011 Boyd survey of 70 manufacturing executives.

But those observations don’t jibe with statistical studies and larger surveys, said Gordon Lafer, an associate professor at the University of Oregon’s Labor Education and Research Center.

A 2010 corporate survey of site selection factors by Area Development magazine ranked right-to-work 16th among 26 factors that influence business relocations.

In 2001, before Oklahoma became the first state to enact a right-to-work law in the post-NAFTA global economy, a site consultant said 80 to 90 percent of businesses were ruling out locating in the state, Lafer recalled. The consultant claimed that a right-to-work law would lead to an eight- to-tenfold increase in new businesses for Oklahoma.

But 11 years later, the number of new companies opening in Oklahoma has declined by one-third, Lafer said. That’s partly because the profits of companies most attracted by right-to-work laws depend on lower wages. But these companies have moved jobs to places such as China, Mexico and Vietnam, where labor is cheaper.

A good example is the textile industry, which moved operations from the Northeast to the South after World War II, only to uproot again to foreign countries in the past 20 years, Lafer said.

Because of that exodus, most states now seek “new economy” jobs: high-tech specialized manufacturing work that pays more, requires a better-educated workforce and is less likely to move overseas. But these firms overwhelmingly prefer non-right-to-work states, according to Lafer. He cited the 2010 ranking of the top new economy states by the Information Technology and Innovation Foundation, a think tank. Virginia was the only right-to-work state to crack the top 10.

“In the age of globalization, right-to-work is impotent because the people who want lower wages go abroad,” Lafer said, “and the people that want higher-tech, higher skills, this is not what attracts them.”

— McClatchy Washington Bureau

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