Real Earnings Higher In Right to Work States

A Study By Stan Greer
Senior Research Associate

Big Labor propaganda against Right to Work legislation and laws rarely
focuses on the principle at stake: freedom of association.

The fact is, Right to Work laws safeguard employees’ freedom of association
evenhandedly: They prohibit the firing of employees for refusal to join
or pay “fees” to a union, and they also prohibit termination
for joining or financially supporting a union.

Union officials naturally have no problem with the second prohibition.

Where their difficulty lies is in explaining why they believe the law
should protect one employee’s right to support a union, but at the same
time authorize the firing of another employee who chooses not to support
the same union.

Eager to dodge a debate over principle, union officials like to pretend
that the Right to Work battle is only about economics. But union bosses’
economic indictment against Right to Work keeps getting less and less
plausible.

AFT Study Shows Employees in Right to Work
States Enjoy Lower Living Expenses

Ironically, one of the most devastating blows against this indictment
has been dealt by F. Howard Nelson, a veteran researcher for the 1.3 million-member
American Federation of Teachers (AFT) union.

The AFT union is one of the largest and most powerful affiliates of
the vast, 13 million-member AFL-CIO empire.
More than a dozen years ago, Dr. Nelson created a cost-of-living index
that confirms what top union officials shrilly deny: that employees’ real,
spendable earnings are higher in Right to Work states.

Dr. Nelson calculated and periodically updates his “Interstate
Cost-of-Living” Index (whose latest version can be downloaded at
www.aft.org/research/survey01/tables/

tableI-7.html) because it is sometimes in the AFT’s interest to make accurate
comparisons of teachers’ earnings in different states.

Drawing on data from both government and private sources, this index
compares the cost of housing, food, clothing, transportation, medical
care, and other necessities in the 50 states.

In this index, a state whose average cost of living is exactly equal
to the U.S. average would score 1.00. If the average cost of living within
a state is 10% higher than the national average, it will score 1.10. If
living expenses are 10% lower than the national average, it will score
.90.

The index for 2000, the most recent one now available, shows that living
expenses for employees in non-Right to Work states are overall 4.4% higher
than the national average. Overall living costs in Right to Work states
are 7.1% more affordable than the national average. (See Table I.)

Impact of State Income and Federal Taxes
Widens Right to Work States’ Advantage

Of course, neither Dr. Nelson nor AFT President Sandra Feldman intended
for the index to be used to calculate relative living costs in Right to
Work states, where employees may not be fired for refusal to join or pay
dues to a union, and non-Right to Work states.

But the data speak for themselves.

When the 2000 mean weekly earnings for full-time wage and salary employees
in the 50 states, as published on pp. 30-35 of the 2001 edition of the
Bureau of National Affairs’ Union Membership and Earnings Data Book, are
adjusted for differences in living costs, the real earnings of employees
in Right to Work states are shown to be higher.

In 2000, employees in Right to Work states earned a mean of $638 a week,
after adjusting for the cost of living, compared to $632 in non-Right
to Work states. (See Table II.)

But this comparison actually understates, in two ways, the advantage
employees in Right to Work states have in real, spendable income.

First, the prices incorporated by Dr. Nelson in his cost-of-living index
include state and local sales and real estate taxes, but do not reflect
state income taxes, which are on average significantly lower in Right
to Work states.

Second, the Nelson index does not account for the disparities in the
federal tax burden carried by employees in different states.

Progressive federal income tax rates are levied on nominal, rather than
real, incomes. According to the Nelson index, the average employee in
non-Right to Work California would have to earn nearly $65,000 a year
to enjoy the same pre-tax earning power as an employee in Right to Work
Florida who earns $50,000 a year.

However, other things being equal, the California employee would have
to fork out a significantly higher share of his or her nominally higher
income in federal income taxes. As a result, the Californian’s real, after-tax
living standards would actually be lower.

After subtracting state income taxes and all federal taxes, the 2000
cost-of-living-adjusted mean weekly earnings of employees in Right to
Work states was $484, compared to just $468 in non-Right to Work states.
(See Table III.)
Where forced dues are legal, union officials use their power to dislocate
labor markets, jack up costs, and bankroll Tax-and-Spend, regulation-happy
state legislators and governors.

Right to Work Laws Fundamental Purpose
Is to Protect Freedom of Association

Not just the Nelson index, but also other nationwide comparative cost-of-living
indices such as the one supplied in David Savageau and Ralph D’Agostino’s
Places Rated Almanac, show that living costs are significantly higher
and, consequently, real incomes are lower where Big Labor wields forced-dues
power.

But Right to Work laws are not merely or even primarily an economic
development tool.

Right to Work laws and legislation are really a matter of freedom, not
economics. The question is: Should labor law respect the ability of each
employee to choose intelligently whether or not to furnish financial support
for a union?

In many cases, forced-dues treasury money goes to support not only bargaining
positions, but also political candidates and causes that many or most
forced dues-paying workers oppose.

Poll after poll has shown that nearly four out of five Americans support
the individual employee’s Right to Work regardless of his or her union
affiliation.

Union officials who disagree should at least be willing to offer a straightforward
explanation why that’s based on principle, instead of making unsupported
and false claims about Right to Work laws’ economic impact.

TABLE I:

Average Cost of Living Index in 2000:      Right to Work vs. Non Right to Work
Non-Right to Work States	2000 AFTCost of LivingIndex	Right to Work States	2000 AFTCost of LivingIndex
Alaska	1.230	Alabama	0.910
California	1.219	Arizona	0.959
Colorado	1.081	Arkansas	0.891
Connecticut	1.087	Florida	0.942
Delaware	0.970	Georgia	0.938
Hawaii	1.312	Idaho	0.938
Illinois	0.992	Iowa	0.921
Indiana	0.924	Kansas	0.921
Kentucky	0.910	Louisiana	0.936
Maine	0.992	Mississippi	0.896
Maryland	1.009	Nebraska	0.927
Massachusetts	1.144	Nevada	0.934
Michigan	0.974	North Carolina	0.931
Minnesota	0.989	North Dakota	0.924
Missouri	0.930	South Carolina	0.930
Montana	0.979	South Dakota	0.917
New Hampshire	1.062	Tennessee	0.915
New Jersey	1.057	Texas	0.904
New Mexico	0.962	Utah	1.017
New York	1.070	Virginia	0.954
Ohio	0.964	Wyoming	0.997
Oklahoma*	0.898
Oregon	1.036	Average	0.929
Pennsylvania	0.937
Rhode Island	0.987
Vermont	0.999
Washington	1.073
West Virginia	0.907	Sources: U.S. Census Bureau, Statistical Abstract  of the U.S., 2001; U.S. Bureau of Labor Statistics, Employment & Earnings, May 2001; AFT Survey & Analysis of Teacher Salary Trends, 2001.
Wisconsin	0.964
Average	1.044
* Oklahoma became a Right to Work state in September 2001.
In the AFT’s index, a state whose average cost of living is exactly equal to the U.S. average would score 1.00. If the average cost of living within a state is 10% higher than the national average, it will score 1.10. If living expenses are 10% lower than the national average, it will score .90.

TABLE II:

2000 Mean Weekly Earnings          Adjusted for Cost of Living:   Right to Work vs. Non Right to Work
Non-Right to Work States	Weekly Earnings Adjusted for Cost of Living	Right to Work States	Weekly Earnings Adjusted fo rCost of Living
Alaska	600	Alabama	610
California	567	Arizona	630
Colorado	648	Arkansas	568
Connecticut	686	Florida	640
Delaware	637	Georgia	629
Hawaii	425	Idaho	563
Illinois	669	Iowa	621
Indiana	663	Kansas	632
Kentucky	636	Louisiana	598
Maine	551	Mississippi	568
Maryland	723	Nebraska	580
Massachusetts	620	Nevada	637
Michigan	682	North Carolina	629
Minnesota	680	North Dakota	518
Missouri	669	South Carolina	605
Montana	471	South Dakota	563
New Hampshire	610	Tennessee	642
New Jersey	693	Texas	686
New Mexico	558	Utah	558
New York	632	Virginia	722
Ohio	634	Wyoming	520
Oklahoma	607
Oregon	573	Average	638
Pennsylvania	667
Rhode Island	655
Vermont	545
Washington	603	Sources: U.S. Census Bureau, Statistical Abstract of the U.S., 2001; U.S. Bureau of Labor Statistics,Employment & Earnings, May 2001; AFT Survey &Analysis of Teacher Salary Trends, 2001; BNAUnion Data Book, 2001 edition.
West Virginia	583
Wisconsin	627
Average	632
In 2000, employees in Right to Work states earned a mean of $638 a week, after adjusting for the cost of living, compared to $632 in non-Right to work states.

TABLE III:

 

2000 Mean Weekly Earnings Adjusted for    Cost of Living, State & Federal Taxes:    Right to Work vs. Non Right to Work
Non-Right to Work States		Right to Work States
Maryland	539	Virginia	531
Michigan	508	Texas	526
Missouri	507	Tennessee	496
Minnesota	503	Florida	481
Pennsylvania	502	Nevada	479
Indiana	500	Kansas	477
New Jersey	499	Arizona	476
Illinois	495	North Carolina	475
Rhode Island	491	Iowa	474
Kentucky	487	Georgia	470
Ohio	482	Alabama	466
Colorado	480	Louisiana	465
Connecticut	477	South Carolina	462
Delaware	471	Mississippi	443
Oklahoma	467	Nebraska	439
Alaska	463	South Dakota	437
Wisconsin	462	Arkansas	434
New York	460	Idaho	429
New Hampshire	456	Utah	424
West Virginia	454	North Dakota	405
Massachusetts	447	Wyoming	378
Washington	440
New Mexico	429	Average	484
Oregon	427
Maine	418	Sources: U.S. Census Bureau, Statistical Abstract of the U.S., 2001; U.S. Bureau of Labor Statistics,Employment & Earnings, May 2001; AFT Survey &Analysis of Teacher Salary Trends, 2001; BNAUnion Data Book, 2001 edition; Federal Tax Burdens & Expenditures, Tax Foundation, July 2002; State Policy Institute of NY State, www.bcnys.org.
California	413
Vermont	407
Montana	354
Hawaii	326
Average	468

Stan Greer serves as senior research associate
for the National Institute for Labor Relations
Research. Mr. Greer holds a bachelor’s degree
(1983) from Georgetown University in
Washington, D.C., and a master’s degree

(1986) from the University of Pittsburgh.

* * *

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