Right to Work’s Wide Compensation-Growth Advantage Cuts Across Regions

(2013 NILRR Fact Sheet — Right to Work States’ Wide Compensation Growth Advantage Cuts Across Regions)

2013-ff-rtw-compForced-Unionism States From Northeast, South and Midwest in Bottom 11 For 2002-2012 Gains

For years, U.S. Commerce Department data have shown that states with Right to Work laws on the books have far faster private-sector compensation growth than states that do not protect employees from federal policies authorizing the termination of employees for refusal to pay dues or fees to an unwanted union. The latest available data show that Right to Work states retain a wide compensation growth advantage.

From 2002 to 2012, for example, real private-sector compensation (including wages, salaries, benefits and bonuses) in the 22 states that had Right to Work laws throughout the period increased by an aggregate 14.3%. That’s 2.6 times as great as the relatively small 5.4% aggregate increase in private-sector compensation experienced by non-Right to Work states over the same period. (Indiana, which adopted a Right to Work law in early 2012, is excluded from the above analysis. Michigan, which passed a Right to Work law in December 2012 that didn’t take effect until this March, is counted as a forced-unionism state.)

The negative correlation between compulsory union dues and compensation growth is extraordinarily strong. The 11 bottom-ranking states for 2002-2012 compensation growth all lacked Right to Work laws for the vast majority of the period, until Indiana and Michigan finally changed course over the past 15 months. The other nine states with the smallest gains (or losses, once inflation is taken into account) are Connecticut, Delaware, Illinois, Maine, Missouri, New Jersey, Ohio, Rhode Island and Wisconsin. According to U.S. Census Bureau designations, these states are variously located in the Northeast, the South, and the Midwest.

Forced-Dues States’ Growth Has Been Relatively Weak in Every Geographic Region

Meanwhile, eight of the 11 states experiencing the greatest 2002-2012 growth in private-sector compensation have Right to Work laws.

The Right to Work compensation-growth advantage is apparent in every region of the country. Between 2002 and 2012, real private-sector compensation in Right to Work states in the West (as defined by the Census Bureau) grew by more than half again as much as it did in non-Right to Work states in that region. In the Midwest only, inflation-adjusted private compensation grew by 15.6% in Right to Work states, but fell by 1.6% in forced-unionism states. In southern Right to Work states, real private compensation grew by 13.9%, an increase nearly 1.7 times as great as that of southern forced-unionism states.

If compensation had grown nationwide as much as it did in Right to Work states alone over the past decade, in 2012 private-sector employees would have received $7.216 trillion in wages, salaries, benefits and bonuses, or $374 billion more than they actually did receive.

And the slower overall growth America experiences because of forced-unionism states’ relative torpor ultimately hurts employees and businesses in Right to Work states, too. Businesses and the employees of businesses whose suppliers are located in forced-unionism states end up sharing the costs of productivity-quashing Big Labor work rules. Businesses and employees of businesses who sell their products or services in forced-unionism states end up with customers who have less disposable income.

Right to Work laws protect the freedom of both private- and public-sector employees to keep and hold a job without forking over dues or fees to a union that is recognized as their “exclusive” (actually, monopoly) bargaining agent.

Unless they are protected by a state Right to Work law, independent-minded employees have no power to fight back against greedy and tyrannical union bosses by withholding their financial support. And when employees have no personal freedom of choice, union bosses have little incentive to tone down their class warfare. Employees are consequently far less likely to reach their full productive potential and reap the accompanying benefits.

That’s a key reason why not just the private-sector compensation index, but almost every significant economic indicator, shows that forced union dues inhibit growth.