Right-to-Work, Tax Rates Paint Interesting Picture

Worker freedom, low taxes draw people

Scholars with the Mackinac Center for Public Policy, as well as other institutions, have used descriptive statistics in conjunction with empirical evidence to tell stories — sometimes profound ones. A good example of this was published recently by “Opportunity Ohio” and should be explored further.

One of my favorite uses of descriptive statistics numbers involves right-to-work laws and American migration. For many reasons, Americans pick up and move. Often such moves involve economic motivations. A great policy question is why so many Americans have moved from non-right-to-work states to ones with such legal protections. Is it just a coincidence or is there some type of clear link?

The evidence seems to be clear: a right-to-work law makes that state more economically attractive and tends to draw in-migrants.

Of the nine states with the greatest population growth from 2000 to 2009, six were right-to-work states and a seventh (Colorado) possessed a quasi-RTW law with its “Labor Peace Act.”

Economist Richard Vedder, a member of the Center’s Board of Scholars, examined population changes and other possible explanations including climate, taxes, population and other variables and found “without exception, in all the estimations, a statistically significant positive relationship … was observed between the presence of right-to-work laws and net migration.”

Opportunity Ohio, a Buckeye-based nonprofit group, released a chart titled “Two Winning Policies for Job Growth” in which it detailed states that maintain “winning policies” for job growth such as low personal income tax rates and right-to-work laws, as measured by employment. It found, for instance:

  • Seven of the 15 highest growth states since 1990 had no income tax;
  • Six others maintained rates below the national average, which was 5.6 percent;
  • Right-to-work states outperform forced unionization states. Nine of top 12 performers are also right-to-work states.

It specifically noted that “right-to-work states perform well even with higher income taxes.”

The Mackinac Center’s own empirical research confirms that the presence of a right-to-work law is a powerful economic development tool. We found that between 1970 and 2011, right-to-work status meant an average employment growth rate 0.8 percentage points higher than the rate would otherwise be. So, if a state would have had a 2.0 percent growth rate, right-to-work status made it 2.8 percentage points; a huge 40 percent difference.

The Opportunity Ohio people who put this graphic together believe that combining these two policies — low personal income tax rates and status as a right-to-work state — can be particularly effective for creating employment.

It is an idea worth exploring.