Eight of top 10 states increasing personal income were RTW
Eight of the top 10 states that saw an increase in personal income from new people coming to those states were right-to-work states, according to an analysis done by the Tax Foundation.
Michigan lost $14.4 billion in personal income from 2000 to 2010 and was 45th overall. Michigan became a right-to-work state in March. Only Ohio (46th), New Jersey (47th), Illinois (48th), California (49th) and New York (50th) did worse. All six of the bottom states did not have right-to-work laws during those 10 years. New York lost $45.6 billion in personal income in that time period.
Florida did the best gaining $67.3 billion in that 10-year span.
The Tax Foundation tracked people migrating from one state to another from the years 2000 to 2010. The "interstate migrants" had their income added to all the other income in that state. The state gaining that person had an increase in personal income while a state losing a person lost personal income. The figures are in 2010 dollars.
Nick Kasprak, an analyst with the Tax Foundation, a nonpartisan tax research foundation based in Washington, D.C., said the analysis is based on the adjusted gross income from IRS 1040 forms. The study was not conducted specifically to address right-to-work versus non-right-to-work comparisons.
"People have hundreds of reasons for moving from place to place, including, but not limited to, home prices, jobs, the local economy, weather, taxes, relationships, whatever," Kasprak said in an email. "Personally, I doubt the right-to-work issue is anything more than a coincidence, but it's impossible to draw any conclusions either way from this data alone."
University of Michigan Economist Don Grimes said he suspected right-to-work states would beat non-right-to-work states in terms of employment and population, which will show up in growth in total income, but he was curious about how right-to-work status affected growth in income per capita or income per job.
Grimes said generally, jobs for the less educated in fields such as manufacturing, trucking and warehousing appear to be moving to lower labor cost places and less educated Americans are following those jobs.
"The big population growth is mostly occurring in the right-to-work states," Grimes said in an email. "Economic theory supports right-to-work states out performance in terms of the number of jobs and the population; in terms of 'earned income' per person or per worker it is not as clear that right-to-work matters very much."
Non-right-to-work states prosper when the companies have a monopoly whereas right-to-work states prosper in a more competitive world, Grimes said.
"That is why unions thrive when their employer is a monopolist like the teachers union and school districts, or electric utilities in the private sector, but they don't do very well in organizing, or sustaining their membership in highly price competitive industries like grocery stores," Grimes said.
Scott Moody, CEO of the Maine Heritage Policy Center, said he's been tracking migration data for years, particularly when he worked for the Tax Foundation and The Heritage Foundation.
States like Florida and Texas attract people not just because they are right-to-work states but they also have a low tax burden, Moody said. For example, Florida and Texas don't have a personal income tax. Florida was ranked No. 1 in the survey; Texas was No. 3, adding $17.68 billion.
"The fact people are choosing those states is the ultimate expression of what economists call 'revealed preference,' " Moody said. "Basically, you just watch what people do. Rather than hypothesis, you can sit back and watch people vote with their feet."