History, Economics and Right-to-Work
The historic December 2012 passage of a right-to-work law in Michigan was filled with drama, not least of which was unions behaving badly outside the state Capitol on the day of the vote.
Media reports were filled with images of the vandalism and violence in front of the building, but less attention was paid to the histrionics and bad economics displayed by anti-right-to-work politicians on the inside.
The House and Senate chambers resounded with economically faulty and/or misleading claims about the economic effects of right-to-work laws, some of which warrant rebuttal.
For example, Senate Minority Leader Gretchen Whitmer, D-East Lansing, asserted, “… You want to pass right-to-work legislation that hurts workers and our economy by lowering employee wages, benefits and workplace protections.”
However, while the evidence on the economic effects of right-to-work laws is mixed, extensive empirical research generally shows neutral to very positive impacts. Examples include:
- A 1998 study by economist Thomas Holmes examined manufacturing employment in counties that border each other in right-to-work and non-right-to-work states. He found that manufacturing employment was one-third higher in counties on the right-to-work side. This study is important because the employment rate differences it found cannot be explained away by widely different attitudes toward unions, climate or other variables that can confound comparisons of geographically distant jurisdictions.
- Economist Richard Vedder, an adjunct scholar with the Mackinac Center, found that between 2000 and 2009 some 5 million Americans migrated to right-to-work states from non-right-to-work states. His research statistically controlled for other variables that influence migration and still found that right-to-work laws were a causal factor in net migration patterns.
- A 2012 study from economist Michael Hicks, also an adjunct scholar with the Mackinac Center, found that seven of the most recent 10 states to adopt right-to-work laws saw manufacturing incomes increase between 15 percent and 40 percent. His more sweeping analysis of right-to-work from 1929 through 2005 showed no impact from right-to-work on industrial composition or manufacturing income.
On the subject of workplace injuries and deaths, workers in right-to-work states actually appear to be somewhat safer. As my colleague James Hohman has pointed out, workplace fatalities "are typically concentrated in just a few industries and occupations like farming, fishing and forestry regardless of whether the state has a right-to-work law." So, both injuries and deaths may be a function of some variable unrelated to right-to-work.
Sen. Whitmer also dissed Indiana — which enacted its own right-to-work law in early 2012 — as a "bad role model" in terms of income levels, unemployment rates, welfare dependency, and having “an educated and qualified workforce." As evidence for the first, she cited Indiana’s ranking as No. 33 among the states in per capita income.
Politicians and lobbyists often use such static "snapshots" of economic data to support spurious conclusions. What matters much more to real people are the trends. To put it simply, would you rather raise your children in a state where incomes and the economy are growing or one where they are in decline? At the risk of committing the same error, it may be worth noting that in the first nine months of 2012, personal income in Indiana increased 4.1 percent, vs. just 2.5 percent in Michigan.
There's no need to quibble, however, because better evidence is available. A 2003 study by economist W. Robert Reed, which controlled for each state’s economic well-being at the time right-to-work was adopted, found that "RTW states have average wages (per-capita personal income, in this case) that are significantly higher than non-RTW states." The key approach to this finding, according to Reed, was to control the economic well-being of each state at the time its right-to-work law was adopted. Reed estimated that in 2000 right-to-work states enjoyed per-capita personal income 6.68 percent higher than in non-right-to-work states.
On unemployment levels, Sen. Whitmer was just plain wrong. According to the U.S. Bureau of Labor Statistics, there has not been a single month since 1976 — when these particular records began — in which unemployment was not greater in Michigan than in Indiana; at this moment, 8.9 percent of Michiganders are out of work compared to 8 percent of Hoosiers.
She also appears to have been wrong on welfare.
The Urban Institute reports in a 2012 paper prepared for by the federal government’s Administration for Children and Families that Indiana had 36,214 cases in the Temporary Assistance for Needy Families program, while Michigan had 68,233. As a percent of 2010 population for each state that works out to 0.56 percent in Indiana and 0.69 percent in Michigan. And that is arguably only one way to measure "welfare."
According to the federal Bureau of Economic Analysis, between 2000 and 2011 growth in "income maintenance," which includes such things as welfare transfers, day care subsidies and social security, went up 177 percent in Indiana and 179 percent in Michigan — a dead heat.
Hohman has examined Census Bureau survey data and found that from 2004 through 2011 poverty rates increased at a faster rate in forced unionism states compared to right-to-work states. He argued that the presence of a right-to-work law had little to do with whether or not poverty increased or fell in a particular state.
No one will be shocked to hear that politicians frequently cherry pick data and present information lacking vital context. When it comes to right-to-work, the empirical findings of scholars without political axes to grind present a very different picture.
Michael D. LaFaive is director of the Morey Fiscal Policy Initiative at the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.
Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.