The statistical model used in this study attempts to measure the impact of right-to-work laws on states with such laws from 1947 through 2011. It measures the size of these effects with a technique that includes not only the effect of passing right-to-work laws in a state, but also the effect of some spatial dependence (the likelihood of adjacent states adopting right-to-work, for example). The model also attempts to mitigate the impact of endogeneity. A full description of the model can be found below in “Appendix B: The Model.”
A state’s economic performance is represented in the model by average annual growth rates for employment, real (inflation-adjusted) personal income and population. Data for personal income and population are included from 1947 through 2011 and provided by the Bureau of Economic Analysis. Total employment, also provided by the BEA, is only analyzed from 1971 through 2011 as that is the only time period for which data are available.[*] Data from the 48 contiguous states and the District of Columbia were used.
The model’s results indicate that right-to-work laws have a statistically meaningful and positive impact on the economic performance of right-to-work states. Measured over the course of the entire 64-year period (1947-2011), states with right-to-work laws had higher economic growth rates than they otherwise would have based on the results of the statistical model. Specifically, the average right-to-work state had annual growth rates that were 0.8 percentage points higher for real personal income and 0.5 percentage points higher for population growth. Right-to-work laws boosted average annual employment growth rates by 0.8 percentage points measured from 1970 through 2011.
An important component of this study is its unique temporal analysis, which measures the effects of right-to-work laws in three distinct time periods: 1947 through 1970, 1971 through 1990 and 1991 through 2011. This breakdown attempts to capture the change in the use of economic development programs by state and local governments. During this first period (1947-1970), very few governments had active economic development policies. The start of the middle period (1971-1990) marks a time when these programs were beginning to be used by governments — a sort of transitional period. Finally, the last period (1991-2001) begins when nearly all states were actively making use of economic development programs.
These time-based distinctions matter. For instance, from 1947 through 1970 right-to-work laws were associated with very little change, on average, in real personal income and population growth for states with such laws. From 1971 through 1990, however, right-to-work laws boosted average employment and real personal income annual growth by 0.9 percentage points and increased average annual population growth by 1.3 percentage points — all of which were statistically significant. From 1991 through 2011, the effect of right-to-work on these three economic factors was smaller than the previous period, but still statistically significant. Average annual growth rates for employment were 0.4 percentage points higher; for real personal income, 0.7 percentage points higher; and for population, 0.6 percentage points higher.
Graphic 2 below displays all the tested impacts on right-to-work states for employment, real personal income and population over each time period analyzed. All the impacts of right-to-work laws were statistically significant and positive, except for the impacts on real personal income and population over the 1947-1970 period.
Graphic 2: Change in Percentage Points of Average Annual Growth Rates as a Result of Right-to-Work Laws, 1947-2011
* Not statistically significant.
[*] The impact of right-to-work laws on employment, therefore, is not measured during the 1947-1970 period.