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Research & Commentary: Right-to-Work Debate Continues in Missouri

October 24, 2016

In this Research & Commentary, Matthew Glans discusses right-to-work laws, how they create new jobs and foster economic and population growth and the new proposals being considered in Missouri.

West Virginia recently became the 26th right-to-work (RTW) state, and several other states are now considering becoming the 27th, including Missouri. Right-to-work laws prohibit employers from requiring an employee to join or refuse to join a union, pay fees or other charges to a union, or pay any third party or charity instead of paying a union.

Right-to-work laws have consistently demonstrated a positive effect on jobs and economic growth. According to Watchdog.org, “[F]rom January 1995 through August 2015 six of the 10 states with the worst private-sector job growth were states without right-to-work laws.” Two of the remaining four states with low private-sector job growth, Indiana and Michigan, passed right-to-work laws in 2012.

Over the same period, seven of the top 10 job-producing states had right-to-work laws in place, according to data provided by the U.S. Department of Labor.

Six of Missouri’s neighboring states have right-to-work laws, and Investor’s Business Daily (IBD) notes from 2002 to 2012, the neighboring states “saw a 3% increase in private-sector payroll employment, while Missouri saw a 1.6% decline.” This is not merely a regional phenomenon, IBD also found between 2004 and 2014, “[R]ight-to-work states saw their economies grow 19.3% while the rest of us only saw an increase of 10.2%, according to Bureau of Economic Analysis data.”

Opponents of right-to-work legislation contend the reforms force wages down, disadvantage unions, and lower people’s standard of living, but research shows right-to-work states have experienced positive economic growth across the board.

One of the most commonly used attacks against right-to-work laws is the claim they increase economic inequality. A new study by American Enterprise Institute (AEI) researchers Jeffrey Jordan, Aparna Mathur, Abdul Manasib, and Devesh Roy shows this claim is likely untrue. In the comparative case study, the authors examined a “comprehensive set of measures of inequality” in four states: Idaho, Louisiana, Oklahoma, and Texas. The authors found right-to-work laws have no impact on economic inequality. The four states examined were the only ones that have enacted right-to-work legislation between the 1960s and the 2000s.

States enacting right-to-work policies have experienced positive economic progress across the board. In another study, the Mackinac Center for Public Policy found, “According to the Bureau of Economic Analysis, right-to-work states showed a 42.6 percent gain in total employment from 1990 to 2011, while non-right-to-work states showed gains of only 18.8 percent.” The study also reveals inflation-adjusted gross personal income in right-to-work states increased 86.5 percent between 1990 and 2013, compared to just 51.3 percent for non-RTW states.

Right-to-work states have enjoyed greater success attracting new and existing businesses. The Heritage Foundation cites one report in Site Selection Magazine by Ron Starner, Mark Arend, and John McCurry as evidence of the positive effects of RTW laws on a state’s business climate. Starner, Arend, and McCurry found, “[R]oughly half of all major businesses refuse to consider locating in jurisdictions with compulsory dues.”

Right-to-work laws create new jobs and foster economic and population growth. Missouri lawmakers should consider implementing right-to-work legislation, a decision that is sure to reap significant economic benefits.

The following documents examine right-to-work laws in greater detail.
 

New Evidence on the Effect of Right-to-Work Laws on Productivity and Population Growth
https://www.heartland.org/publications-resources/publications/new-evidence-on-the-effect-of-right-to-work-laws-on-productivity-and-population-growth 
In this article from the Cato Institute, Michael J. Hicks, Michael LaFaive, and Srikant Devaraj expand on work completed by Richard Vedder, distinguished professor of economics emeritus at Ohio University and senior fellow at The Independent Institute that shows the effects of right-to-work (RTW) legislation on employment and economic output in individual states. Vedder found RTW laws have a positive impact on jobs and output, because firms and workers move to states with greater economic freedom. Hicks, LaFaive and Devaraj extended Vedder’s work by examining the impact of RTW laws on productivity and population growth.

An Interstate Analysis of Right to Work Laws
https://www.heartland.org/publications-resources/publications/an-interstate-analysis-of-right-to-work-laws
This paper from the Competitive Enterprise Institute, authored by Richard Vedder and Jonathan Robe, “presents a labor economics analysis of the effect of right to work laws on state economies, and ranks states’ per capita income loss from not having a [right-to-work] law.”

55 Organizations to Missouri Legislature: States Benefit from Right to Work
https://www.heartland.org/publications-resources/publications/55-orgs-to-missouri-legislature-states-benefit-from-right-to-work?source=policybot
This coalition letter from 55 free-market and limited government organizations promotes right-to-work legislation and argues increasing worker freedom produces greater prosperity and growth in state economies.

Did Right-to-Work Laws Impact Income Inequality? Evidence from U.S. States Using the Synthetic Control Method
https://www.heartland.org/publications-resources/publications/did-right-to-work-laws-impact-income-inequality-evidence-from-us-states-using-the-synthetic-control-method?source=policybot
Jeffrey Jordan, Aparna Mathur, Abdul Manasib, and Devesh Roy of the American Enterprise Institute examine right-to-work laws in four states, Idaho, Louisiana, Oklahoma, and Texas, and they found right-to-work laws have no impact on economic inequality.

Right-to-Work Laws Don’t Lower Private-Sector Pay
http://www.heritage.org/research/reports/2015/09/right-to-work-laws-dont-lower-private-sector-pay
James Sherk of The Heritage Foundation argues right-to-work laws have no negative impact on private-sector wages. “RTW laws do appear to slightly reduce the pay of government employees, easing constraints on hard-pressed state budgets,” he writes.

Research & Commentary: Right-to-Work Policies
https://www.heartland.org/publications-resources/publications/research--commentary-right-to-work-policies?source=policybot
Alex Monahan, a former government relations coordinator for The Heartland Institute, says states lacking right-to-work laws should consider implementing them. The evidence shows right-to-work reform has positive effects on states’ economies, workers, and population growth.

Unions Hinder Economic Growth and the Free Market
http://www.aei.org/article/society-and-culture/free-enterprise/unions-hinder-economic-growth-and-the-free-market/
American Enterprise Institute President Arthur Brooks explains how unions hamper economic growth by limiting freedom in the marketplace. Brooks concludes, “States should seek to pass right-to-work laws as part of reforms to strengthen their economies and enhance economic growth.”

Ten Principles for Improved Business Climates
https://www.heartland.org/publications-resources/publications/ten-principles-for-improved-business-climates?source=policybot
Maintaining a good business climate has never been more important. Thanks to the Internet, the collapse of communism around the world, and advances in shipping and logistics, capital and labor are much more mobile than in the past. Businesses must bid for customers and workers, not only from local competitors but also from businesses in other communities, in other states, and even in other countries. Small changes in taxes, regulations, and other cost-drivers may lead to businesses losing customers and possibly failing or relocating.

Economic Growth and Right-to-Work Laws
https://www.heartland.org/publications-resources/publications/economic-growth-and-right-to-work-laws?source=policybot
This study by the Mackinac Center measures the impact of right-to-work laws on states’ economic performance. It uses average annual growth rates in employment, real (inflation-adjusted) personal income, and population to measure the economic well-being of right-to-work states. The results show right-to-work laws have a statistically significant and economically meaningful positive impact, though results vary.

 

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, visit the Health Care News website, The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database.

The Heartland Institute can send an expert to your state to testify or brief your caucus; host an event in your state; or send you further information on a topic. Please don’t hesitate to contact us if we can be of assistance! If you have any questions or comments, contact Logan Elizabeth Pike, Heartland’s state government relations manager, at lpike@heartland.org or 312/377-4000.

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Employment
Author
Matthew Glans joined the staff of The Heartland Institute in November 2007 as legislative specialist for insurance and finance. In 2012, Glans was named senior policy analyst.
mglans@heartland.org @HeartlandGR