Right-to-work: Boom or bust?

From the pages of In Business magazine.

Wisconsin Manufacturers & Commerce lobbied hard for it. Unions and left-leaning organizations decried it, warning that it would further erode workers’ already fading influence.

Proponents said it was about individual freedom. Opponents claimed that argument was a deceitful red herring, meant to mask the proposal’s true purpose.

Supporters cited studies showing it would be a boon to states’ economies. Detractors trotted out their own numbers, supposedly showing that it wreaks havoc on local economies and leaves workers wanting.

But wherever you stand on right-to-work, one thing is certain: In Wisconsin, it’s now the law of the land.

Early last month, in a whirlwind romance that could have made a Kardashian’s head spin, the Republican-led Legislature passed — and Gov. Scott Walker signed — a bill that made Wisconsin the 25th right-to-work state in the union, for better or worse.

So what can Wisconsin expect from its new right-to-work statute?

That’s tough to say. Although our nation’s first right-to-work laws were passed more than 70 years ago, there remains little consensus about their effect on the economy and the U.S. workforce, and the answers you do get will depend largely on whom you ask.

Freedom’s just another word?

The definition of right-to-work varies — again, depending on whom you ask — but the gist is this: Under right-to-work, employers can’t force their employees to join a labor union, nor can they force employees to pay union dues as a condition of employment.

For many right-to-work proponents, this is the philosophical foundation stone upon which such laws are built. To them, it’s about freedom — and to force employees to pay dues to a union whose political values are diametrically opposed to their own is simply unfair and un-American.

“Workers should be able to decide for themselves if they want their hard-earned money supporting a labor union,” said Patrick Semmens, a spokesperson for the National Right to Work Committee. “Nothing in a right-to-work law will prevent workers who like their union and want to financially support their union to continue doing so.”

That’s a compelling enough argument, it seems, for most Wisconsinites. According to polling done in January by the Wisconsin Policy Research Institute (WPRI), a right-leaning free-market think tank, 62% of Wisconsin residents were in favor of a right-to-work law, 32% were against, and 6% were unsure. Meanwhile, a nationwide Gallup poll from August of last year showed that 71% of Americans favored right-to-work legislation, while just 22% opposed it.

But the argument is not as simple as whether one comes down on the side of freedom or coercion, argues Scot Ross, executive director of One Wisconsin Now, a frequent critic of Gov. Walker and the Republican Legislature. As many right-to-work opponents have pointed out, under federal law, employees already have the option not to join a union, but many employers still agree to union contracts that require all employees to pay dues if the unions represent them in negotiations. Such contracts, say right-to-work critics, ensure that non-union employees aren’t unfairly benefiting from union members’ investments in their unions, and they also protect all workers’ bargaining power.

That bit of nuance is often missed, says Ross, and that has allowed right-to-work proponents to cast unions as an enemy of freedom.

“The fact is, that talking point is garbage,” said Ross. “Since the Taft-Hartley Act in 1947, you are not forced to join a union, and everything that they’ve continued to say about this in their use of poll-tested, quote-unquote, freedom language is based on the fact that they can’t win on the facts, so they are deceiving. And that is why they have passed this so quickly and shut off debate, because the more people find out about right-to-work, the more they oppose it. They get educated, and they get angry.” 

Pick a study, any study

One of the most compelling arguments in favor of right-to-work laws is that the states that enact them gain a competitive advantage.

After Gov. Walker signed Wisconsin’s right-to-work bill, WMC lauded the move. “Wisconsin is truly open for business,” stated WMC Vice President of Government Relations Scott Manley, in a press release. “Site selectors frequently just skip states that are not right-to-work. This reform puts us on the map for job creators.”

One frequently cited study that supports WMC’s contention that businesses favor right-to-work states is from economist Thomas J. Holmes of the University of Minnesota. In the 2000 study, titled “The Location of Industry: Do States’ Policies Matter?” Holmes concluded that legislative “pro-business packages,” which frequently include right-to-work laws, have a significant effect on economic activity within a state.

“There are some remarkable facts about what has happened to manufacturing in the right-to-work states since World War II,” wrote Holmes. “Manufacturing employment in the states without right-to-work laws is virtually the same now as it was in 1947, but manufacturing employment has increased 150% in the right-to-work states. Of the 10 states with the highest manufacturing employment growth rates, 8 are right-to-work states; of the 10 states with the lowest growth rates, none is a right-to-work state.”

(Continued)

Some critics point out, however, that having a set of policies that’s attractive to businesses says little about what’s good for workers across the country, and many fear a “race to the bottom” that gradually erodes workers’ economic clout nationwide.

“It may be that you can get businesses to migrate to Southern factories where right-to-work exists because they can pay workers less, but you don’t need science to know that,” said Ross. “But there’s always going to be a Mississippi, and then consequently for Mississippi, there’s always going to be a Honduras or Mexico.”

One study that was frequently cited during Wisconsin’s recent debate over right-to-work was authored by Gordon Lafer, a University of Oregon economics professor and a research associate with the Economic Policy Institute, a left-leaning, Washington, D.C.-based think tank.

According to Lafer, the whole point of right-to-work laws is to depress wages and benefits in order to encourage out-of-state manufacturers to relocate. “If it didn’t lower wages, there would be no incentive for companies to move into the state,” wrote Lafer in his study “‘Right to Work’ Is the Wrong Answer for Wisconsin’s Economy.”

And, claims Lafer, right-to-work laws have had exactly that effect. He notes that the average worker in a right-to-work state makes 3.2% less than a similar worker in a non-right-to-work state, while the incidence of employer-sponsored health insurance is 2.6% lower and the incidence of employer-sponsored pensions is 4.8% lower.

Meanwhile, Lafer argues that the state to look at when assessing the likely impact of Wisconsin’s right-to-work law is Oklahoma, not Indiana or Michigan, the 23rd and 24th states to adopt right-to-work. States are no longer flocking to Southern right-to-work states to take advantage of cheap labor, argues Lafer, but to countries like China and Mexico. In this new economic paradigm, the positive impact of right-to-work laws is diminished.

“Oklahoma is the only state to adopt [right-to-work] since NAFTA and where enough time has passed to measure its impact,” wrote Lafer. “Oklahoma lawmakers were told that if they passed an RTW law, there would be an eight- to 10-fold increase in the number of new companies coming into the state — especially in manufacturing. Instead, manufacturing employment in the 10 years after RTW fell by one-third, as did the total number of new jobs created by companies coming into the state.”

Missing out?

Of course, as soon as you feel like you’ve started to get a handle on the probable effects of right-to-work, another study comes along to reorient the discussion. In February, WPRI released a study concluding that the economic impact of right-to-work on states’ economies is not only measurable but also substantial.

The study, which was commissioned by WPRI and conducted by Ohio University economist Richard Vedder, determined that if Wisconsin had adopted a right-to-work law in 1983, the state’s per capita income would now be $1,683 higher.

According to WPRI President Mike Nichols, Vedder’s study was more complex and nuanced than studies such as Lafer’s, and the regression analysis it employed helped control for factors other than right-to-work that might have accounted for total income differences among states over the past 30 years.

“We believe [that number] is backed up by the regression analysis,” said Nichols. “So if you look at our polling, a plurality of Wisconsinites intuitively believe that right-to-work legislation would be economically beneficial, because people just sort of think about the economics about how our economy grows, and they think right-to-work would be a contributor to that. So this, I think, shows that what most people intuitively believe is accurate.”

A constructive argument?

Meanwhile, not all businesses in the state are happy about the new right-to-work law, despite WMC’s strong advocacy on behalf of the legislation.

In December, the Wisconsin Contractor Coalition (WCC), an informal group of statewide businesses, formed around the right-to-work issue, arguing that right-to-work threatens the strong, mutually beneficial partnership that contractors and labor unions have established over the years. At last count, the group had around 450 members, after launching with approximately 300.

According to WCC spokesperson Steve Lyons, unions help supply contractors with skilled workers, acting as a staffing agency of sorts that makes sure all workers are up to date on their training and certifications. It’s a relationship, he says, that has worked for 100 years in Wisconsin and is now threatened by a right-to-work law that will likely undermine the state’s unions.

“The business community is divided on this,” said Lyons. “For all of our coalition members, this is a bottom-line issue. They deal with this every day. So it’s not an afterthought, it’s not another issue on the agenda; this is their livelihood. So there’s a big difference between [us and WMC].”

Meanwhile, Lyons argues that enacting legislation that will likely depress wages simply doesn’t make sense in a state that still faces a skills gap.

“We don’t have a jobs problem in Wisconsin, we have a workforce problem,” said Lyons. “We have over 70,000 jobs that need to be filled, and many of them in the skilled trades. … We’re already dealing with a workforce crisis, and you’re going to either try to attract people to go into that profession, have people stay in Wisconsin, or try to have people move here, and you’re going to say, ‘By the way, you’re going to make less money, less benefits, and less retirement.’ The economics don’t add up, in our opinion.”

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