Employees In Right-to-Work States Are Richer
When adjusting for the cost of living, workers in right-to-work states have 4.1 percent higher incomes
Scores of right-to-work critics ranging from politicians to economists have cited lower per-capita incomes in right-to-work states as why the new law is not good for Michigan.
However, not factoring in cost-of-living exposes a flaw in that analysis, said Mackinac Center for Public Policy Fiscal Analyst James Hohman. Once that is considered, Hohman said the per-capita income is higher in right-to-work states than non-right-to-work states.
For example, Texas per-capita income was $37,098 but would have a purchasing power of $49,700 in the state of New York in 2007, according to Hohman’s analysis. New York’s per-capita income was $47,852.
Hohman found that in terms of Michigan dollars in 2000, right-to-work states had 4.1 percent higher per-capita personal incomes than non-right-to-work states when factoring in cost of living. Michigan was considered a non-right-to-work state because the law was passed in late December 2012. Hohman said the right-work-states didn’t surpass non-right-to-work states until 2003.
“One of the most basic arguments repeated time and time again by right-to-work opposition is that Michigan is going to lose income by passing this law,” Hohman said. “That just isn’t the case. When you adjust for what a dollar can get you, the difference reverses itself."
Hohman used the cost of living index done by political scientists William Berry, Richard Fording and Russell Hanson. They adjusted for cost-of-living in every state from 1960 to 2007.
The idea is that costs vary state to state. For instance, gas on Friday in Connecticut was $3.66 per gallon compared to $3.37 in Michigan. Connecticut’s gas tax is 6.1 cents higher than Michigan’s and Connecticut’s sale tax is .35 percent higher than Michigan’s. Prices on items like milk, eggs, peanut butter, Tylenol, detergent, diapers and other goods are also higher.
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.