Why Do Right to Work States Have Superior Economic Outlooks?

As Dr. Mark Perry, a scholar at the American Enterprise Institute and a professor of economics and finance at the University of Michigan’s Flint campus, pointed out this week, all of the top 14 states for 2017 “economic outlook” as assessed by the American Legislative Exchange Council are Right to Work states. Meanwhile, none of the 17 bottom-ranking states are Right to Work. Image: Dr. Perry’s Twitter photo

The just-released 10th edition of Rich States, Poor States, a survey of the economic policies, past performance and prospects of the 50 states published by the Arlington, Va.-based American Legislative Exchange Council, is like its predecessors brimming with optimism about the ability of state voters and elected officials to control their own financial destinies.  (See the link below to obtain a free PDF copy.)

Arthur Laffer, Stephen Moore and Jonathan Williams, the three co-authors of Rich States, Poor States, clearly believe that, notwithstanding a state’s climate, natural resources and location and regardless of the overall training, abilities and age-composition of its working-age residents, it can significantly accelerate its growth path by adopting better policies.

The Laffer-Moore-Williams analysis highlights an “economic outlook ranking,” a forecast of economic performance “based on a state’s current standing in 15 state policy variables” related to taxes, spending, and business regulation as well as labor-management relations.  Right to Work status is given no more weight than any other factor.

And yet, as economist Mark Perry, a popular commentator on economic matters as well as a professor, has already pointed out on his Twitter account, this year every single one of the 14 top-ranking states for economic outlook has a Right to Work law.  And not one of the 17 bottom-ranking states for economic outlook protects employees from compulsory unionism.

Right to Work has a much greater influence on a state’s overall climate for job and income growth than one might expect in large part because, wherever Big Labor is endowed with forced-dues privileges, it funnels a substantial share of the loot extracted from workers into efforts to elect and reelect politicians who support higher taxes, more government spending, and strait-jacket regulation of business.

And, as Laffer, Moore and Williams show, all of these union boss-favored public policies are negatively correlated with job and income growth.

Rich States, Poor States