News Story

Early Returns On Michigan As a Right-to-Work State: Incomes Rising

State's per-capita income growth ninth fastest in the nation

When Michigan passed right-to-work in December of 2012, critics were quick to predict that workers’ compensation would plummet. Union officials derided it as “right-to-work for less.” 

Senate Minority Leader Gretchen Whitmer, D-East Lansing, said that right-to-work legislation would lower employee wages

But the early returns show that hasn’t happened.

Michigan’s per-capita personal income increased from $38,291 in 2012 (before right-to-work became law) to $39,215 in 2013, according to the U.S. Department of Commerce’s Bureau of Economic Analysis. That increase was the ninth highest in the country.

Per-capita personal income includes income from all sources divided by the number of people in the state. Salaries and wages are a part of per-capita personal income, but it also includes dividends, interest, rent employee benefits and transfer payments like Social Security, unemployment and welfare.

“The dire predictions of right-to-work detractors have not come true — Michigan has been a leader in income growth since passage,” said James Hohman, assistant director of fiscal policy at the Mackinac Center for Public Policy.

A study released this week by Richard Vedder, a distinguished professor of economics at Ohio University and an adjunct scholar with the American Enterprise Institute as well as with the Mackinac Center, found that “incomes rise following the passage of RTW laws, even after adjusting for substantial population growth that those laws also induce. RTW states tend to be vibrant and growing; non-RTW states tend to be stagnant and aging.” 

The study states: “The evidence suggests that if non-RTW states had adopted RTW laws 35 years ago or so, income levels would be on the order of $3,000 per person higher today, with the overall effect varying somewhat from state to state.”

Don Grimes, University of Michigan economist, questioned the role right-to-work plays in determining wages in either direction.

“Right-to-work, or really any policy tool, appears to play a very small role in determining wages. The two big ones are the cost of living and the state’s educational attainment mix,” Grimes said.

Hohman agreed with Grimes that educational attainment does a lot to explain state incomes and that it is generally good advice to individuals.

“I raise skepticism about it being a good predictor of future growth,” Hohman said. “That is, the states that grow their grad populations are not the states that do particularly well.”


See also:

There Is No Relationship Between College Graduates and Economic Growth

Fears of Right-to-Work Proving False

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.