There are now 27 states with “right-to-work” laws. These laws prohibit private sector employers from requiring employees to financially support a union. Research by academics and others explores the impact these laws may have on a state’s economic performance. The evidence produced so far seems to show that, on balance, adopting such statutes contributes to economic growth and development. This study examines this question anew and finds similar results.
The 2010s saw five states — Indiana, Michigan, Wisconsin, West Virginia and Kentucky — adopt right-to-work legislation, in that chronological order. This provides a type of natural experiment that can be studied to test the impact that this policy change may have had, holding all else equal. While these impacts take time to materialize in the data, enough time has passed to attempt a measurement of the potential impacts on economic growth and development in these states.
This analysis relies on a measuring technique popularized by economist Thomas J. Holmes. It involves measuring employment changes in industrial sectors as a percentage of total employment and comparing these among counties in neighboring states across time. Specifically, Holmes compared counties in states with right-to-work laws to counties they border in states without right-to-work laws. This study uses a modified version of this methodology — a spatial regression model — to test the impact of recently enacted right-to-work laws on state economies.
We chose to specifically analyze the impact involving Michigan and Indiana, as they were the first two in a string of five states to adopt right-to-work laws most recently. The states also share a common border with Ohio, a non-right-to-work state. This allows us to investigate the impact of two states becoming right-to-work in short order against a third that had not. Lastly, Michigan is home to the Mackinac Center, the primary focus of its state policy analysis and work.
We collected data from counties across the contiguous United States. The information included employment data from 18 industrial sectors of the economy. We also collected data on a host of control variables. These include demographic information on local populations, such as the percentage of the population in poverty, percentage older than 25 with at least a bachelor’s degree, percentage that is female, percentage that is nonwhite and the percentage of the population aged 20 to 64.
To control for other state policies that may influence employment growth but are unrelated to right-to-work, we also included the 2017 economic freedom score of each state from the Fraser Institute’s Economic Freedom of North America report.
Our output measures the effect of right-to-work laws on employment by sector in 2018. The findings are also divided out and reported separately for states that adopted a right-to-work law before 2000 and those that adopted one after 2000. Throughout this paper, “pre-2000” and “post-2000” are used to refer to this distinction.