What is the right-to-work debate in Michigan really about? To begin, it is important to understand the history of right-to-work legislation. In 1935 the National Labor Relations was passed to protect employees rights in the workplace. Under the NLRA workers were able to engage in collective bargaining, take part in strikes and other protected concerted activity. The controversy of right-to-work arose in 1947 with the Taft-Hartley amendments to the NLRA. Taft-Hartley allowed for businesses to become closed shops. In other words, the amendment authorized states to pass laws regarding whether or not union dues would be required. The requirement to pay union fees is legally bonded as a union security agreement and that agreement would be terminated if a state were to pass a right-to-work bill. Under right-to-work, employees in said state will still receive union benefits even if they are not paying the due, which is addressed by the Congressional Research Service as the "free rider hypothesis." Now that we know the history, one must ask why legislators would want to pass a right-to-work bill? There are two main arguments.
First, some claim unions are bloated structures and many people don't actually receive the benefits that they pay for. There is contentious attitude towards unions in this sense because many believe they shouldn't have to feed into a program that they get little or no compensation from. A second concern of union security agreements is that they discourage investors and business people from creating jobs in that state. The threat of unionization within a company would force businesses to a better work climate, in other words, a right-to-work state. Being a right-to-work state would therefore create jobs because it establishes, as the Review of Law and Economics identify, what advocates of right-to-work deem to be a pro-business climate. However, do union members actually not to receive union benefits even if they are paying into them? Do business people really consider right-to-work when debating location? Is possible to isolate one part of the economy to determine the truth or falsity? Well, while it is difficult to establish a single causal effect as to why an economy is efficient or not, the evidence we do posses from articles in the Congressional Research Service, Review of Law and Economics and the Economic Policy Institute, overwhelmingly agrees on a few aspects of the right-to-work policy.
The most uncontroversial finding is that making it illegal for unions to require union security agreements weakens the union by decreasing union membership and increasing union free riding. Second, there appears to be virtually no difference in business capital between right-to-work and non-right-to-work states. Right-to-work yields little or no gain in employment or economic growth. Lastly, wages and personal income are both lower in right-to-work states. So, who is claiming right-to-work does have the opposite effect of what numerous studies have found?
Conservative legislators claim right to work will assist in a state's economic growth, raise wages, and create jobs by attracting business. However, where do businesses really want to be located? What kind of economic growth? Whose wages will be raised? What types of jobs are being created?
Site Selection magazine reports:
"The best locations for the type of high-tech industries that are now a priority in most state's recruitment efforts are uniformly found in non-RTW states. In 2010 State New Economy Index-measuring each state's economic dynamism, technological innovation, digital transformation, knowledge jobs, and integration into global trade--ranked non-RTW Massachusetts, Washington, Maryland, New Jersey, and Connecticut as the most desirable and best positioned locations for the globally competitive 21st century"
In addition, Area Development magazine conducts an annual survey of small businesses asking them to rank the factors that most influence their decisions on where to locate facilities. To the sheer disappointment of pro-RTW advocates, in 2009 RTW was ranked 14th in importance below factors such as highway access, available land and construction costs. In fact, RTW has never made to the top 10 most important factors deciding location since Area Development started the survey. Then exactly what kinds of businesses want to locate themselves in RTW states?
The RTW strategy supposedly aims at attracting businesses because without the threat of a union, wages can remain low and benefits minimal. According to the Economic Policy Institute, the businesses that locate in right-to-work states will therefore most likely have a low-skilled workforce. Commonly synonymous with a low-skilled work force is ill education levels. The snowball effect of a low-skilled, uneducated workforce has continuously proven to result in a poorer state. That is good for the proprietor but not necessarily for the worker. In fact, the Congressional Research Service suggests that RTW states have both lower wages for the employees but higher incomes for employers. It can therefore be interpreted that union workers gain the benefit of higher wages, even if they do not realize they are directly tied to their union membership. The rare numbers that suggest higher wages in RTW states, such as those published by economists Serkan Ozeklik and Ozkan Eren, can be explained by the benefits accruing to the top.
Michigan is the first major manufacturing state to pass RTW legislation Is RTW more effective in manufacturing? To determine the effectiveness of RTW attracting and creating manufacturing jobs, the Economic Policy Institute studied the passage of RTW in Oklahoma. Oklahoma's main goal in becoming a right-to-work state was to attract manufacture industries. To begin, Oklahoma had strong economic strength in the 1990s prior to the passage of RTW. Oklahoma's employment grew by 22% and had a low unemployment rate of 3%. It is therefore important to make clear that Oklahoma's economic success in the 1990s is not attributable to RTW. Correspondingly, the year before the legislation passed, the Oklahoma League of Economists reported that its majority asserted that RTW would have no positive impact on the state's economy. Did right-to-work help safeguard Oklahoma's success?
The Economic Policy Institute found Oklahoma ended the decade with 123,000 residents employed in manufacturing, nearly 50,000 less than when the law was voted in. Likewise, the unemployment rate rose to 6.86% by the end of 2010. Granted, the country overall did suffer an unemployment crisis. It is therefore beneficial to measure the state's performance compared to its neighboring states.
The Economic Policy Institute confirms,
"We compared all the counties in Oklahoma with all the counties in the United States. We compared only the Oklahoma border counties, paired with the exactly adjacent county in the neighboring state. We compared average employment levels for the period before Oklahoma's adoption of right-to-work with those in the period following it. We tracked the shift in Oklahoma's adoption of right-to-work with those in the period following it. We tracked the shift in Oklahoma's relative performance for each individual year leading up to the adoption of right to work. No matter how we analyzed the date, the result was the same: The adoption of right-to-work in Oklahoma had no significant positive impact whatsoever on employment."
The evidence so far is that right-to-work has little impact on the broader economy but reduces union's strength and may impact wages. While it is still ambitious to study a single governmental policy and its effects on the economy, what we do have is fairly convincing. The Economic Policy Institute concludes, "It is understandable that, in times of trouble, state legislators would look to any possible avenue in hope of finding a way out of the current crisis. But...it seems clear that the legislator would do better to focus their energy in other, more productive, policy directions."