The Folly of “Right to Work“

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Seventy-four years ago this month, sit-down strikers in Flint, Michigan began to give organizational shape and meaning to New Deal labor law. Last week, in a lame-duck legislative tantrum, Michigan marked that anniversary by becoming the nation’s twenty-fourth “right-to-work” state.

The dishonesty and cynicism of this legislative putsch (one hesitates to call it a “debate”) were quite remarkable. The “right to work,” of course, neither conveys nor protects any rights whatsoever. Workers are nowhere forced to join to unions. They are, in non-right-to-work settings, simply asked to pay the portion of dues that covers the cost of bargaining. Denying that option not only impinges on the rights of workers who do sustain the costs of representation, as Dean Baker has pointed out, but also denies workers and employers alike the basic right to enter into contracts.

But the real Orwellian audacity here is the insistence that right to work is an engine of economic growth and job creation. In its long campaign to bring Michigan into the right-to-work fold, the Michigan Freedom to Work Coalition argued that such a move “would make Michigan a jobs magnet.” In congratulating Michigan lawmakers, Mark Mix of the National Right to Work Committee claimed that the law promised to provide “significant economic benefits” and that right-to-work laws are “proven job creators.” Governor Rick Snyder justified his about face on the issue on the grounds that neighboring Indiana (which passed right to work in 2011) “was getting a lot of jobs” as a result.

The economic record is actually pretty clear—and offers no support whatsoever for such claims.

For starters, state governments have little capacity to create jobs. The level of employment is driven almost solely by the business cycle and by national (macroeconomic) policies. States can compete with each other for their share of national employment, but the results—in terms of statewide numbers and trends—are a drop in the bucket. Across the last two business cycles, as John Schmitt at the Center for Economic and Policy Research (CEPR) has shown, states cluster around the national unemployment rate—they do well as a group when employment is tight, and they do badly as a group when things fall apart.

If we look at state employment and unemployment over time, as in the work of Milla Sanes at CEPR or Joe Mako at the Guardian, it is clear that state deviation from national rates is largely episodic or accidental. We see spikes in unemployment in Louisiana and Mississippi following Katrina, for example, and we see some insulation from the last recession in states (North Dakota, Nebraska) riding commodity (especially energy and agriculture) booms. But none of this has anything to do with state-to-state differences in labor standards or labor law.

Even on that small margin where states compete for new investment, the staple argument of the American Legislative Exchange Council (ALEC) and the Chamber of Commerce—that lower labor standards offer a competitive edge—is patently false. As Peter Fisher documents in his new smackdown of ALEC’s methods and assumptions, right-to-work laws have no demonstrable impact on state economic or employment growth. Right-to-work states are scattered across the spectrum of economic performance, their relative position determined by climate, demographics, economic assets, and dumb luck—but, again, not by state-to-state differences in labor standards or labor law.

If state policy cannot conjure up new jobs, it can shape job quality and compensation. Here, again, the record is clear—and scarcely recommends Michigan’s choice. As the Economic Policy Institute has argued tirelessly, right to work’s fanciful promises of growth and jobs are accompanied by real costs. Right-to-work laws depress wages—for union and non-union workers alike—by an average of $1,500 a year. And, since decent job-based benefits often flow from collective bargaining, the hit to total compensation, family incomes, and family security is even harsher.

The balance sheet, then, is not that complicated. Right to work does nothing to sustain general prosperity, but, by eroding wages and incomes, it offers a clear threat to shared prosperity. We can see this play out over time in the relationship between collective bargaining and income inequality, in Michigan and across the country. The story here is not just about right to work, but it plays an important role.

In the graph below, income inequality (measured by the Gini coefficient) runs up the vertical axis, with greater inequality at the top of the graph. The share of workers covered by union contracts runs across the horizontal access, with higher rates of coverage at the right. Each dot represents a state—the right-to-work states in red, the others in green (the national numbers are in blue). Use the menu at the top to choose the year (1979, 1989, 1999, or 2009), and the menus on the right to filter by state, or by right-to-work status.

In any given year, the right-to-work states are clustered in the upper left, where union coverage is weakest and inequality is starkest. And states, as a group, move in that direction over time as union coverage weakens across the board. There are a few outliers (the growth of finance drives up inequality in New York despite a strong union presence, a few plains and mountain states manage moderate inequality without much union strength), but the overall pattern leaves little doubt as to the folly of Michigan’s choice.

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