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The Economic Impact of Right to Work Policy in West Virginia

November 1, 2015
By John Deskins, Eric Bowen, Christiadi

In this report we examine the way in which Right to Work (RTW) policy has affected economic outcomes across US states and we consider how the adoption of such a policy in West Virginia would likely affect economic outcomes in the state.

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In this report we examine the way in which Right to Work (RTW) policy has affected economic outcomes across US states and we consider how the adoption of such a policy in West Virginia would likely affect economic outcomes in the state. We begin with a simple presentation of various economic outcome measures for states that have RTW policies in place versus states that have not adopted such policies. Highlights of this section of the report are as follows:

  • Over the period 1950 through 2014, union membership was consistently lower in RTW states compared to non-RTW states.
  • 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 nonRTW 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.
  • Annual wage and salary rates were significantly lower in RTW states compared to non-RTW states between 1969 and 2013.
  • Employment growth in the manufacturing, construction, and mining sectors specifically has been stronger in RTW states compared to non-RTW states over the last five decades.

While the simple examination of economic outcomes across the two groups of states is important in allowing us to understand our data and in the process of hypothesis formation, this superficial examination does not imply that RTW policy has caused the observed differences in economic outcomes. Instead, RTW policy may be correlated with other factors that could also influence economic outcomes, including other economic policies or factors as simple as climate.

A key benefit of our approach is that we provide a more rigorous examination of the way in which RTW drives economic outcomes by controlling for a wide array of state-level policies and characteristics that may correlate with RTW and that may also influence economic outcomes. This careful approach allows us to arrive at a much more reliable estimate of the specific causal effect of RTW policy on state economic outcomes. Highlight of this section of the report are as follows:

  • We estimate that RTW policy leads to a reduction in the state-level rate of private-sector union membership of around 1.9 percentage points in the long-run. In other words, the rate of union membership is estimated to fall by around one-fifth as the result of the adoption of a RTW policy (based on an average rate of private-sector union membership of 10 percent over our entire 1990-2010 dataset).
  • We estimate that RTW policy leads to long-run rates of employment growth that are around 0.4 percentage points higher than in non-RTW states.
  • We estimate that RTW policy leads to long-run rates of GDP growth that are around 0.5 percentage points higher than in non-RTW states.
  • Our results fail to identify a statistically reliable relationship between RTW policy and the rate of change in real wage and salary rates.

We close with a consideration of how the adoption of RTW policy would likely affect economic outcomes in West Virginia. No factors were identified that would lead one to doubt that RTW policy would generate similar economic effects in West Virginia compared to what has been realized in other states over the past two decades or so. Ultimately these results lead to the conclusion that the adoption of RTW policy in West Virginia would significantly reduce union membership in the state, and would substantially boost overall employment and output growth in the long-run.