Tax incentives have been a huge help to businesses in Michigan and across the nation. By offering money to firms that are ready and willing to expand, their availability has spurred so many investments.
Michigan's former governor, Jennifer Granholm, supported the offering of tax incentives to businesses. Under her watch, the Michigan Economic Development Corporation, or MEDC, specialized in targeting specific industries for development in state. What will Rick Snyder's proposed changes bring?
The positive impact is it provided fresh money for the jobless to survive while seeking another job. From the unemployment benefit program, the maximum weekly benefit for an unemployed Michigan worker is $387. It is equal to a salary of $11 a day, for working 7 hours/day, and 5 days/a week. However, the unemployment benefits program also creates hidden problems. It makes the jobless people depend on the unemployment benefits.
Michigan is in need of an entrepreneurial makeover. Young innovators are ready to implement their business concepts yet continually face obstacles known to both the seasoned and rookie business leader.
For decades, universities nationwide have pondered the question: If research funding increases exponentially, will the rate of economic growth follow the same pattern? Now, more than ever, researchers are devoting more time and energy into digging into this very question. The results however, are not only varied, but also questionable in the sense of scientific research and explanation.
Effect of Right-To-Work in Michigan
Written by Carmine DiPiero
Monday, 13 May 2013 00:50
The Right-To-Work (RTW) law that passed in Michigan last December was a very controversial piece of legislation, especially considering how pro-union Michigan is. It mandates that employers in both the public and private sector must not require employees to join union memberships or pay union dues as a condition of employment (excluding firefighters and police officers). Opponents of this law believe that it will divide workers and lower the collective bargaining power of the unions as a result of a decreased amount of union dues. On the other hand, supporters of the bill, such as Senator Lamar Alexander (R-Tenn) believe that "No one is, in passing a Right-To-Work law, taking away workers' rights. They're actually giving them a new right: the right not to have to pay union dues in order to get or keep a job." Even though the law passed, Michigan has seen picketing and protests nonstop from union affiliates voicing their opinion. Throughout this analysis the controversy of RTW passing in Michigan will be covered, along with issues regarding RTW, general trends of employment and wages in other RTW states, the current state of Michigan's economy, and then finally there will be a conjecture made about the future of Michigan after RTW.
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."
Last month, Michigan became the nation's newest right-to-work state. The legislation had already caused much controversy with a gathering of roughly 12,500 people at the Capitol. The Michigan Economic Development Corporation recently purchased a $144,000 full page ad in the Wall Street Journal advocating right-to-work along side the Pure Michigan logo. The ad was titled "What Happens When Michigan Makes History?" and appoints Michigan as "the perfect storm of opportunity, resources and passion." The ad was certainly right about one thing, there is indeed a storm brewing in Michigan.
Some are concerned that the Pure Michigan name, being Michigan's most successful tourism campaign, is being tainted as a result of the MEDC's decision to associate such a divisive issue to a pristine tourism brand.
Tourism executives at Pure Michigan knew their bosses were going to use the logo for some type of marketing advertising promoting right-to-work. Pure Michigan was chosen as the MEDC's marketing brand two years ago. There was therefore no conversation between the executives and their bosses at the MEDC.
"I knew they were going on some ads based on business climate, including right-to-work," George Zimmermann, vice president of Travel Michigan said in a phone interview on January 11th. "But in the end, once Pure Michigan was adopted as the MEDC?s marketing brand, then it is their brand."
Zimmerman believed the Wall Street Journal ad to be appropriate.
Pure Michigan, however, is known for promoting the state's natural wonders and cultural opportunities. Many people are therefore arguing that Pure Michigan is not a political campaign and there is a widely accepted disappointment for dragging the Pure Michigan name into the dirty right-to-work debate. Left leaning group Progress Michigan issued a statement criticizing the MEDC?s decision.
"I'm disappointed to see a widely successful tourism campaign wielded as a tool for the right-wing extremists running Lansing," claimed Communications Director Jessica Tramontana. "The only history made yesterday was when Gov. Snyder chose to drag the Pure Michigan name through the political mud."
Gov. Rick Snyder yesterday voiced criticism at the ad.
"I would not have been emphasizing one issue the way it was emphasized in that ad. I would have preferred it had a much broader definition of what makes Michigan a desirable place to locate a business, including elements such as the elimination of the Michigan Business Tax in 2011," he said.
So was the MEDC validated in fusing Pure Michigan to a business ad mentioning right-to-work?
"At minimum, it's just going to kind of dilute a very powerful and kind of focused campaign," said Christie Nordhielm, clinical associate professor of business administration at the University of Michigan. "At worst, it could actually detract from it. And then what you have is a state spending money against itself."
George Zimmerman assured Michiganders that "the words 'Pure Michigan' will continue to make people think of beautiful scenery, not nasty politics and in the end, that is going to win out."
On March 2nd, 2012 MI State Representative Jon Switalski and fellow members of congress introduced HB4363: The Job Applicant Credit Privacy Act with the intention of providing an additional safeguard to applicants from being rejected for a job position solely due to their credit score, debt, history, or associated personal finances. The passage of this bill with its original content would prevent employers from inquiring financial history, prevent retaliation, and provide a remedy for those seeking jobs without perfect credit scores.
Senate Bill No. 806 was passed on December 16, 2011 after strong support in Michigan's Republican-led Senate. The purpose of the bill was to stabilize the state's unemployment trust fund, which has recently caused controversy after the state had to borrow $3.2 million from the federal government in order to cover unemployment benefits (Phipps, Report). As the unemployment rate in Michigan remains higher than the national average, much of this debt has accrued as more money is leaving the trust fund than entering; a fact that is still true today. Senate Bill 806 couples with Senate bills 483 and 484, which were passed in 2009 and 2011, respectively, to authorize the state to borrow additional money in order to repay the federal government.
The Michigan Policy Network is a student-led public education and research program to report and organize news and information about the political process surrounding Michigan state policy issues. It is run out of the Department of Political Science at Michigan State University, with participation by students from the College of Social Science, the College of Communication, and James Madison College.
The thoughts, opinions, and positions represented herein are solely those of the participating students and in no way represent an official position or policy recommendation of Michigan State University.