Right to Work States Attract Job-Creating Investments

A crane is in the sky with buildings behind it.

Every year, hundreds of thousands of additional jobs are “insourced” into the United States by foreign companies. By 2017, there were more than 7.4 million insourced jobs across the country, which “represented 5.9% of all private sector U.S. jobs,” as University of Michigan-Flint economist Mark Perry reported last month in a post for Carpe Diem, his popular American Enterprise Institute blog

.More and more in recent years, data show that investment dollars deployed in our country by majority-owned U.S. affiliates of foreign companies are flowing into states with Right to Work laws prohibiting the termination of employees for refusal to join or pay dues or fees to an unwanted union. (See the Bureau of Economic Analysis’s recently updated statistics.)

As a group, the 22 states that protected employees’ Right to Work for the entire period from 2007 to 2017 experienced an overall 38.9% gain in employment at foreign-owned firms, which is 65% greater than the aggregate increase for the 23 states where compulsory union dues and fees are still permitted today.

Among the 45 states that did not change their policy regarding compulsory unionism at any time between 2007 and 2017, 10 of the 12 states with the greatest percentage increases in jobs derived from foreign direct investment are Right to Work states. Meanwhile, 10 of the 12 bottom-ranking states are forced-unionism.

Over just the past year for which data are available, the total employment at majority-owned U.S. affiliates of foreign multi-national enterprises (MNEs) increased by 108,700 in Right to Work states, or 26% more, in absolute terms, than the gain for forced-unionism states.

Economic analysts and elected officials across the ideological spectrum agree that the elimination of artificial barriers to foreign direct investment across the U.S. is an important goal for lawmakers in Washington, D.C., and in state capitals.

The average compensation per American employee of foreign MNEs in 2017 was roughly $84,000, compared to $49,805 for all full-time and part-time employees of private, nonfarm firms. From 2007 to 2017, the total number of U.S. jobs at foreign MNEs grew by nearly thrice as much, in percentage terms, as employment at all private, nonfarm companies in the U.S.

In short, to quote Dr. Perry, “the insourcing of production and jobs to the U.S. has a significant and positive impact” on our economy. And the data show that, to an ever-increasing extent, it is Right to Work states that are the primary direct beneficiaries of insourcing.