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Testimony before the Maryland House Economic Matters Committee on Right to Work

March 8, 2016

Testimony before the Maryland House Economic Matters CommitteeMarch 8, 2016Jesse Hathaway, Managing Editor of Budget & Tax News, The Heartland Institute Thank you for providing me with the opportunity to testify today.

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Testimony before the Maryland House Economic Matters Committee
March 8, 2016
Jesse Hathaway, Managing Editor of Budget & Tax News, The Heartland Institute

Thank you for providing me with the opportunity to testify today. My name is Jesse Hathaway, and I am the managing editor of Budget & Tax News and a research fellow at The Heartland Institute, a 32-year-old national nonprofit research organization dedicated to finding and promoting ideas that empower people. 

For many years, The Heartland Institute has examined the positive effects of right-to-work (RTW) laws on economic growth. Today, my testimony will explain why right-to-work laws create new jobs and foster economic and population growth. 

Maryland is considering becoming the 27th right-to-work state, a reform which would have a dramatic impact on the state, creating new jobs and improving the state’s business climate and economic competitiveness. Maryland’s proposed right-to-work law would 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. 

The authority of states to create these laws was affirmed in Section 14(b) of the Labor Management Relations Act of 1947, better known as the Taft-Hartley Act. 

Economic Growth and Employment Are Higher in Right-to-Work States

States enacting right-to-work policies have experienced positive economic progress across the board. According to a study by researchers at West Virginia University: “RTW policy leads to long-run rates of [gross domestic product] growth which are around 0.5 percentage point higher than non-RTW states. One-half of a percentage point makes a difference when you consider the average pre-inflation growth rate nationally over the last two decades has been 4.7 percent.” 

Their results include the following facts about the positive effects of right-to-work laws: 

  • Employment has grown more rapidly in RTW states compared to non-RTW states. Overall, employment grew by a factor of 5.7 in RTW states between 1950 and 2014, nearly double the rate in non-RTW states.
  • Gross Domestic Product in RTW states grew faster between 1963 and 2013, compared to non RTW states. GDP grew by a factor of 7.8 in those states with RTW laws in place, compared with 5.3 in non-RTW states.
  • Employment growth in the manufacturing, construction, and mining sectors has been stronger in RTW states compared to non-RTW states over the past five decades.

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 forced-unionization states. 

In a January 2016 article in the Charleston Gazette-Mail, Jason Hart and F. Vincent Vernuccio of the Mackinac Center examined several states that recently implemented right-to-work legislation and argued certain economic factors changed due to the implementation of RTW reforms. In Oklahoma, the state’s private sector employment has grown by 8.5 percent since it became a right-to-work state in 2001, according to the Bureau of Labor Statistics. During the same period, seven of the 10 states with the fastest job growth were right-to-work states. 

The Bureau of Labor Statistics’ data also shows between 1990 and 2014, total employment grew twice-as-fast in right-to-work states compared to states with compulsory dues. Hart and Vernuccio point to Indiana and Michigan as important examples. Indiana has seen faster job growth than 29 other states since implementing right-to-work legislation, and Michigan’s job growth has ranked 16th best in the nation since becoming a right-to-work state. This is notable because Michigan previously had one of the worst-performing economies in the United States. 

Right-to-Work States Experience Greater Population and Workforce Growth

Using many years of economic data and empirical evidence from each state, the 2015 American Legislative Exchange Council’s annual economic competitiveness study Rich States, Poor States ranked Maryland 31st in economic performance and 33rd in economic outlook. The study found right-to-work states outperformed their forced-unionization counterparts, providing their citizens with critical economic opportunities and a path to greater prosperity. 

Hart and Vernuccio examined population trends and movement between states, arguing another way to measure opportunity in the states is to see how Americans vote with their feet. According to the U.S. Census Bureau, seven states experienced a population decline between July 2014 and July 2015; only one was a right-to-work state. Data provided by moving companies found similar results; four of the top five states families moved to in 2015 were right-to-work states. 

Right-to-Work Laws Impact Where Businesses Choose to Locate

Right-to-work states enjoyed greater success attracting new and existing businesses. The Heritage Foundation cites Ron Starner, Mark Arend, and John McCurry of Site Selection Magazine who found “roughly half of all major businesses refuse to consider locating in jurisdictions with compulsory dues.” The National Institute for Labor Relations Research reports a similar trend exists with foreign investment: “[B]etween 2007 to 2013, Total Employment at Majority-Owned U.S. Affiliates of Foreign Firms Grew by 14.4% in Right to Work States as Group, More Than Triple the Average Increase in Compulsory-Unionism States.” 

David Brandon, President of Pathfinders, an economic development consulting firm, explains how this trend is likely to continue: 

“About 35-to-40 percent of manufacturing enterprises in the automotive industry insist on operating in a right-to-work state. Another 20-to-25 percent say it is a very important factor and will be used as a second- or third-tier factor in site selection. More than half of our companies either make it a threshold or a very important factor in making a decision on where to locate a factory and other operations.” 

Right-to-work laws create new jobs and foster economic and population growth. According to the Bureau of Labor Statistics, between 2002 and 2012, the economies of right-to-work states grew by 62 percent, which far outpaces the 46.5 percent growth in non-right-to-work states. Maryland should strongly consider implementing right-to-work legislation and reaping the economic benefits it will provide. 

Right-to-Work Laws Support Worker Freedom

Economic development and employment growth are not the only reasons to support right-to-work laws. One of the key principles behind right-to-work reforms is the concept of worker freedom: No American should be compelled to join a union in order to earn a living. Forcing an employee to join a union and pay union fees violates his or her right to freely associate. 

Opponents of right-to-work policies often argue right-to-work laws create what they have labeled “freeloaders” – people who unfairly share in the benefits of the union and collective bargaining without having to pay dues. RTW supporters disagree. They argue forcing employees into a collective bargain amounts to financial coercion. Many supporters have even started to refer to non-RTW states as “forced unionism” states. 

Right-to-work laws support worker freedom, create new jobs, and foster economic and population growth. Maryland lawmakers should consider implementing right-to-work reforms, a decision that would reap many economic benefits now and in the future.

Author
Jesse Hathaway is a policy advisor for budget and tax issues at The Heartland Institute.
media@heartland.org @JesseinOH