Job, Income Data Indicate Right to Work Laws Are Economically Beneficial

Moreover, the Burden of Economic Proof Should Be on Apologists For Compulsory Unionism

(Click to download Fact Sheet)

As of the end of 2012, 22 states had Right to Work laws on the books prohibiting the termination of employees for refusal to pay dues or fees to an unwanted union for a decade or more.  Twenty-seven states lacked Right to Work laws.  And one state, Indiana had a Right to Work law that was less than a year old.  This March, Michigan became the 24th Right to Work state when the forced-dues ban approved by legislators and signed by Gov. Rick Snyder in December 2012 first took effect.

It was in a September 1, 1941 editorial for the Dallas Morning News that journalist William Ruggles originally proposed a law banning forced union membership and dues as a necessary and appropriate means of protecting the personal “right to work.â€Â  But the movement Ruggles launched only really began to gain momentum a couple of years later as a result of a popular backlash against the aggressively pro-forced unionism policies pursued by President Franklin Delano Roosevelt’s War Labor Board.  By the end of 1949, 11 states had adopted and put into effect Right to Work laws.

Ruggles’s purpose in endorsing first a Right to Work amendment to the U.S. Constitution and then state Right to Work laws and constitutional amendments was not primarily to promote economic development.  Indeed, his path-breaking editorial (entitled “Magna Cartaâ€) did not mention economics at all.  Rather, his goal was to promote “open shops†in which “the union man has his organization and bargains with it as he pleases†and in which the “non-union man has his rights, free of coercion to join an organization he does not want.â€

In the 21st Century scientific polls have continued to show that popular support for Right to Work is driven mostly by moral, rather than economic, considerations.[1]  However, proponents of compulsory unionism have focused heavily on economics in waging their public campaigns against Right to Work measures.[2]  Right to Work advocates must periodically respond to an array of Big Labor claims regarding supposed negative economic effects of laws prohibiting forced union dues and fees in order to clear the air.

Right to Work Status Positively Correlated With Faster Growth in Jobs, Employee Compensation

There is absolutely no doubt about the fact that Right to Work status is positively correlated with faster growth in jobs and employee compensation, net in-migration of young adults in their career-building years, and a host of other desirable outcomes for a state.  It is also a fact that, when interstate differences in cost of living are taken into account, Right to Work status is correlated with higher compensation per employee.

With regard to job growth, both the U.S. Commerce Department’s Bureau of Economic Analysis (BEA) data, which track self-employment and contractual employment as well as payroll jobs, and the U.S. Labor Department’s Bureau of Labor Statistics (BLS) data, which track payroll jobs only, reveal very substantial Right to Work advantages.

From 2001 to 2011, the most recent 10-year period for which BEA data are available as this fact sheet is written, total private-sector employment in states that had Right to Work laws at the time grew by 12.5%.  That’s well over triple the 3.5% average for the 28 states that then lacked Right to Work laws, and nearly double the national average.  Every one of the top five, and 10 of the top 12, states for 2001-2011 private-employment growth are Right to Work states.  Meanwhile, none of the 10 bottom-ranking states for employment growth had a Right to Work statute prior to 2012.[3]

Multiyear BEA data tracking growth in private-sector employee compensation (including wages, salaries, benefits and bonuses) show similar advantages for Right to Work states.  From 2001 to 2011, for example, inflation-adjusted private-sector compensation grew by 12.0% in Right to Work states, quadruple the 3.0% gain for forced-unionism states.  Seven of the top 10 (and 11 of the top 16) states had Right to Work laws.  Sixteen of the 17 states with the lowest compensation growth (or with negative growth) were non-Right to Work.[4]

U.S. Census Bureau statistics regarding private health-insurance coverage trends in the 50 states confirm that Right to Work states have a far superior record of creating jobs that either directly furnish employees with health-insurance benefits or pay sufficiently well to enable employees to buy their own private insurance.  From 2001 to 2011, for example, Right to Work states as a group added roughly 870,000 people, net, to the ranks of the privately insured, whereas forced-unionism states saw their ranks of privately-insured people shrink by 7.71 million people.[5]

The narrower, payroll-only yearly employment data reported by the BLS are available several months sooner than their BEA counterparts.   For 2002-2012, BLS statistics show private-sector payroll employment in Right to Work states grew by 6.4%, compared to an aggregate gain of just 0.4% for forced-unionism states.  (Indiana, which did not adopt its Right to Work law until early 2012, is excluded.  Michigan, whose Right to Work law did not take effect until this year, is counted as a forced-unionism state.[6]

Very likely because overall employment and compensation growth data, regardless of how you slice them, are not helpful to propagandists for compulsory unionism, they are rarely even discussed in analyses of the economic impact of Right to Work laws propounded by union officials or Big Labor-allied academics.

Instead, forced-unionism champions tend to furnish snapshots of per employee wage-and-salary data, or other data pertaining to incomes and benefits, for one particular year.  Generally ignoring income and compensation growth trends, they assert that living standards are lower in Right to Work states than elsewhere.

Frequently, state wage, salary and other income data cited by officers of unions and union front groups as grounds for their opposition to Right to Work measures do not incorporate interstate differences in the cost of living in any way.[7]  This is a serious flaw.

Forced-Unionism States Were on Average 20% More Costly to Live in Than Right to Work States in 2012

An analysis of comparative cost-of-living indices for the four quarters of 2012, calculated and published by the nonpartisan, Jefferson City, Mo.-based Missouri Economic Research and InformationCenter (MERIC), has shown that the then-23 Right to Work states combined had a population-weighted cost of living 5.5% below the national average last year.  The 27 forced-unionism states combined had a population-weighted cost of living 13.5% above the national average.  (MERIC itself does not weigh states based on population size in calculating its indices.  For that reason, the national average for population-weighted states does not equal 100.)   On average, forced-unionism states were roughly 20% more expensive to live in than Right to Work states.[8]

In 2011 (the last year for which BEA employment statistics are currently available), there were 43.8503 million full-time and part-time, private-sector employees earning wage and/or salary income in the 22 states that then had Right to Work laws on the books.[9]  After adjusting for regional differences in cost of living with the help of MERIC’s indices for 2011, these employees earned a total of $2.056 trillion in wage-and-salary income that year, or $46,886 per employee.[10]

Meanwhile, the 68.323 million private-sector employees earning wage and/or salary income in forced-unionism states took in a total of $3.1074 trillion in cost of living-adjusted wage-and-salary income, or $45,482 per employee.

The data thus reveal a positive, albeit modest, correlation between Right to Work status and cost of living-adjusted wage-and-salary income per private-sector employee.

Not all state income comparisons made by Big Labor partisans ignore cost of living completely.  For example, the Washington, D.C.-based Economic Policy Institute (EPI) acknowledges it gets a very substantial share of its funding from forced dues-fueled union treasuries, and consistently takes the same stands on policy issues as Organized Labor officials.  And a frequently-cited February 2011 EPI analysis compares employee compensation in Right to Work and compulsory-unionism states, with adjustments for cost-of-living differences.[11]  But the way these adjustments are made is very curious indeed.

Authors Heidi Shierholz and Elise Gould incorporate two different cost-of-living indices into their analysis, one by MERIC and one by the Amherst, Mass.-based Political Economy Research Institute (PERI), a think tank that, like the EPI,  has a strongly pro-forced unionism orientation.

Big Labor-Funded Think Tank Manages to Get Virtually the Same Answer, No Matter the Data It Inputs

Basic math dictates that the EPI’s results would differ substantially depending on which index they used.  The PERI index, which is rarely cited either by scholars or by laymen comparing the economic performance of different regions in the U.S., shows an average cost of living in forced-unionism states that is just 8.4% higher than in Right to Work states.  MERIC’s far more widely-cited index (presumably for the year 2009 or 2010) indicates a cost of living 18.1% higher in forced-unionism than in Right to Work states.

Incredibly, however, EPI President Lawrence Mishel has contended, in written correspondence with the author of this fact sheet, that his organization’s researchers found a cost of living-adjusted average employee pay advantage of roughly 3% for forced-unionism states over Right to Work states, regardless of whether the PERI or the MERIC index was used to adjust for cost of living![12]

In other words, it seems, the 2011 EPI study is rigged so as to get the same outcome regardless of the data you input.  Obviously, this is not a reliable source for the purpose of comparing living standards in Right to Work and forced-unionism states.

Demographic data constitute important additional evidence that Right to Work states typically furnish superior economic opportunities for employees and entrepreneurs.  Multiyear, age-grouped population data indicate there has for many years been a large net out-migration of people at all stages of their lives out of forced-unionism states and into Right to Work states.  However, Right to Work states’ population-growth advantage over forced-unionism states has consistently been widest among young adults aged 25-34 and children aged 17 and under.

Young adults in their career-building years are more apt to move out of forced-unionism states than are other adults, and young adults with children (or who are planning to have them in the near future) are the most likely of all to transfer to a Right to Work state.

From 2002 to 2012, for example, the number of 25-34 year-olds living in the 22 states that Right to Work laws throughout the period increased from 15.47 million to 17.2 million, or 11.2%.  Over the same period, the young-adult population of the 27 forced-unionism states increased by just 2.5%.[13]  (Since Indiana switched from forced-unionism to Right to Work in 2012, it is excluded.)

Although nationwide the 25-34 year-old population increased by 6.0%, 10 states (Illinois, Kentucky, Maine, Massachusetts, Michigan, New Hampshire, Ohio, Rhode Island, Vermont, and West Virginia) suffered young-adult population declines.  Not one of these states had a Right to Work law until this year, when Michigan’s ban on forced union dues took effect.  Six of the eight states with the greatest percentage increases in young-adult population have longstanding Right to Work laws.

When it comes to residents under the age of 18, the 27 states that lacked Right to Work laws from 2002 to 2012 experienced an aggregate population decline from 42.665 million to 41.192 million.  That amounts to a 3.5% loss.  Seventeen of the 27 forced-unionism states had fewer children residing in them in 2012 than 10 years earlier.  (Indiana is again excluded.)

Meanwhile, the 22 states that had Right to Work laws throughout the last decade saw their aggregate “under 18†population increase by 2.311 million, or 8.1%.  Among these 22 states, only Hurricane Katrina-ravaged Louisiana and Mississippi had fewer children in 2012 than a decade before.

‘[A] Great Nation Needs Growth to Give People Opportunity to Move Upward . . . ’

The 11.6 percentage point Right to Work advantage in “under 18†population growth is substantially greater than Right to Work states’ aggregate 8.5 percentage point advantage in “18 and over†population growth.  And international immigration trends can’t account for any more than a tiny fraction of the discrepancy.  In fact, forced-unionism states like California and New York actually saw their total juvenile populations decline despite taking in large numbers of immigrant young adults and children.

As Washington Examiner political analyst Michael Barone explained in a column this March, “a great nation needs growth to give people opportunity to move upward . . . .â€[14]  Domestic migration patterns of young adults, and especially of young adults with children, suggest very strongly which regions of the U.S. offer the best and worst prospects for upward mobility.  Overwhelmingly, the states that are magnets attracting families have Right to Work laws, while states that are repelling families lack them.

Academic apologists for compulsory unionism such as University of Oregon labor-studies professor and EPI spokesman Gordon Lafer pooh-pooh demographic evidence such as the Census data showing the nine states with the greatest increases in their juvenile populations from 2002 to 2012 all have Right to Work laws, while not one of eight states with the greatest declines in their juvenile populations does.

At times, Lafer has implied that, unless every single Right to Work state outpaces every single forced-unionism state according to a particular economic or demographic gauge, a strong positive correlation between Right to Work status and growth means nothing.[15]  Of course, this is a ridiculous and unscientific standard.  If it were true, the compelling correlation between long-term smoking and lung cancer would mean nothing, because many people who smoke for decades never get lung cancer!

Elsewhere, Lafer has suggested that, unless Right to Work proponents can prove conclusively that faster job or compensation growth in Right to Work states or massive and ongoing net domestic migration of young adults and their children into Right to Work states is caused by Right to Work laws, the data should not even be considered in the debate over compulsory unionism.[16]

‘Dismissing Correlation Entirely, as if It Does Not Imply Causation’ Is a ‘Fallacy’ That Would ‘Dismiss a Large Swath of Important Scientific Evidence’

As the cliché goes, correlation is not causality, but this truism hardly means correlation is irrelevant to the question of whether one phenomenon causes another.  Establishing whether or not two phenomena are correlated is a necessary step toward making a scientific assessment of causation.

Steven Novella, a prominent clinical neurologist and professor at the Yale University School of Medicine, pointed out in a brief 2009 analysis of correlation and causation in medical research that “dismissing correlation entirely, as if it does not imply causation†is a “fallacy†that would “dismiss a large swath of important scientific evidence.â€[17]

The fact is, given the unfeasibility of genuine controlled experiments in economics and the complexity of state economies, it is very unlikely anyone is going to resolve definitively the key outstanding questions about Right to Work laws’ impact on job and compensation growth in the foreseeable future.

But there is ample evidence “implying†Right to Work laws’ impact on economic growth is positive, and, pace Big Labor apologists, no meaningful evidence that Right to Work laws cause employee compensation to fall or slow the rate of employee compensation growth.  And if Right to Work laws do not negatively affect job or compensation growth, then Lafer’s contention that such laws “lower wages†is a logical impossibility.[18]

Supporters of Equal Legal Protection For Workers Who Don’t Want a Union Shouldn’t Have to Demonstrate Conclusively That Providing It Is Economically Beneficial

Supporters of Right to Work laws have good reason to cite growth data when they are lobbying to pass such statutes or keep them on the books, because the data tend to strengthen the case for what they already believe.  But in order to prevail, supporters certainly shouldn’t need to demonstrate beyond a shadow of a doubt that Right to Work laws are economically beneficial.  The freedom-of-association case for ending compulsory unionism is sufficient unto itself.

In essence, Right to Work opponents reject the principle that the personal right not to join a union is just as worthy of protection under the law as the right to join a union.  From time to time union spokesmen and their allies have been quite frank about this stance.

Back in 1948, for example, the American Federation of Labor  (AFL)-backed  union plaintiffs in  Lincoln Union v. Northwestern Co., who were trying to get state Right to Work laws prohibiting compulsory union membership and dues declared unconstitutional, told the U.S. Supreme Court:

[T]he right to work as a non-unionist is in no way equivalent to or parallel of the right to work as a union member; . . . there exists no constitutional right to work as a non-unionist on the one hand while the right to maintain employment free from discrimination because of union membership is constitutionally protected.[19]

In recent decades, Big Labor has normally been more circumspect.  But forced-unionism apologists’ views in the 21st Century evidently don’t appear to have changed.

Just 11 years ago, for example, pro-union monopoly labor historian Nelson Lichtenstein charged that Right to Work laws represent “an ideological onslaught [against unions] of the first order,†because under such laws “the ‘rights’ [the scare quotes are Lichtenstein’s] of anti-union workers [are] given the same moral weight as those of workers loyal to the union idea.â€[20]

Even when union officials seem to contradict AFL lawyers’ Lincoln brief and Lichtenstein and pay lip service to the right not to join a union, in practice only a handful at most believe the law should equally protect the right to join and the right not to join a union.  The legal right not to join, union propaganda contends over and over again, is sufficiently protected if a worker who doesn’t want a union can refrain from becoming a formal union member, but can’t refuse, while keeping his job, to pay dues or fees that may be equivalent to or nearly equivalent to what a voluntary union member pays.

No union official would say that a law allowing a worker to become a union member over the objections of his employer and fellow employees, but not allowing him to pay dues to the union he’s joined, would provide adequate protection for the right to join. Yet Big Labor insists workers who prefer to remain union-free should be satisfied with only nominal legal protection for their choice.

It is not Right to Work supporters, but proponents of compulsory unionism, who have overturned American constitutional traditions by granting workers who have conflicting views about the benefits of union affiliation different levels of protection under the law.

To justify perpetuating federal and state labor statutes that are at odds with the principle of equal protection, union officials and their allies would have to show that their repeal would bring about enormous and irreparable economic harm.  That’s a burden they haven’t come remotely close to meeting in nearly three-quarters of a century of debate over Right to Work laws and legislation.  By now, it is safe to predict they never will.

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Stan Greer is the National Institute for Labor Relations Research’s senior research associate.  Nothing here is to be construed as an attempt to aid or hinder the passage of any bill before Congress or any state legislature.