Economy
5:06 pm
Fri December 7, 2012

Do right-to-work laws create jobs?

Putting aside for a second the backroom dealing, the protesters, the pepper spray and questions about the structural integrity of the state Capitol building, now might be a good time to address one of the fundamental question surrounding right-to-work legislation.

Do right-to-work laws create more jobs?

Governor Snyder says they do, pointing to Indiana as a recent example of right-to-work success.

During the press conference in which he announced his support for right-to-work legislation in Michigan, Snyder said he had spoken with business owners who would not do business in Michigan because it was not a right-to-work state.

Is it the law, or something else?

Right-to-work laws have been around since the 1940s and there are plenty of data tracking economic indicators like unemployment rates and population growth.

...in 2000-09 the states whose names started with the letters N-Z had an average employment growth rate almost nine times higher than states whose names start with A-M.

The problem, and this is one point where most researchers find consensus, is that given the myriad factors that could impact a state’s economy, isolating the effect of right-to-work can be problematic.

A study done by the Economic Policy Institute points out the trouble with making a simple association between right-to-work and economic success (or failure).

Here’s an example from that paper:

The fact that states that share a common attribute have stronger average growth rates cannot be taken as evidence that the attribute in question is the cause of that growth. To use an extreme example as illustration, in 2000-09 the states whose names started with the letters N-Z had an average employment growth rate almost nine times higher than states whose names start with A-M.

Yet no one would suggest that Indiana and Kentucky could improve job growth by changing their names.

As the study notes, in 2010, both the highest and lowest U.S. unemployment rates were found in right-to-work states, Nevada and North Dakota respectively.

"If what we want to do is do a little bit better at attracting certain kinds of low-wage jobs, I think this may help," Ballard said. "But it's an awful lot of political blood to be spilled for something that will not galvanize Michigan's economy."

In many cases it seems to be a classic case of confusing correlation with causation. And it happens with analysis on both sides of the issue.

As Michigan State University economist Charlie Ballard told the Detroit Free Press, the economic impact of right-to-work appears to be negligible either way:

He noted that union membership as a percentage of the workforce in Michigan has declined over the past six decades, “so in a sense the advocates of right-to-work have already won.”

“If what we want to do is do a little bit better at attracting certain kinds of low-wage jobs, I think this may help,” Ballard said. “But it’s an awful lot of political blood to be spilled for something that will not galvanize Michigan’s economy.”

University of Michigan research scientist Roland Zullo agrees, citing a number of factors that businesses consider before right-to-work:

Our economic problems in Michigan are due primarily to the woes in the auto industry, which RTW would not fix. When making location decisions businesses rate factors such as the quality of the regional work force, the regulatory environment, and tax incentives before ever considering RTW laws.

Income inequality tied to RTW laws

One thing that right-to-work laws do seem to affect is income inequality.

Jake Rosenfeld is a professor of sociology at the University of Washington, and the coauthor of a study that found that the decline in union membership since the 1970s explains approximately a fifth of the increase in hourly wage inequality among women and about a third among men.

From an article printed in the American Sociological Review:

“For generations, unions were the core institution advocating for more equitable wage distribution,” said Rosenfeld. “Today, when unions—at least in the private sector—have largely disappeared, that means that this voice for equity has faded dramatically. People now have very different ideas about what’s acceptable in terms of pay distribution.”

So, will right-to-work create jobs in Michigan? It's hard to say.

One thing that does seem certain is that the new laws will have an impact on the political power of unions. What that means for Michigan workers is still up in the air.

- Jordan Wyant, Michigan Radio Newsroom

Tags: