III. Literature Review

More than five decades of experience with RTW laws has yielded a large body of economic analysis of their impact on a variety of economic factors.

Right-to-work laws were enacted, in large part, to promote economic growth. Anecdotal evidence suggests that they have. The economies of RTW states have been growing faster than those of non-RTW states since the late 1940s. Much research attributes this phenomenon to employers seeking to avoid unions. (Cobb, 1982; Newman, 1983; 1984; Cappelli and Chalykoff, 1985; Kochan et al., 1986; Reder, 1988). For a review of the pre-1980s literature see Moore (1985).

Survey research also indicates that RTW laws are important in industry location decisions (for a review of the literature see Cobb, 1982 and Calzonetti and Walker, 1991). Businesses often cite RTW laws or "favorable business climate" as major factors in location decisions. For example, Schmenner (1982) reports that in his survey of Fortune 500 firms a "favorable labor climate" was the most important factor in industry location followed by proximity to markets.

Holmes (1996) finds a precipitous drop in manufacturing activity when crossing the border from a RTW into a non-RTW state. Relative manufacturing employment declines by one-third as one moves from within 25 miles of the border in the RTW state to within 25 miles of the border in the non-RTW state. Holmes finds that this pattern did not become statistically significant until the early 1960s or many years after the passage of the Taft-Hartley Act (which permits RTW laws), suggesting that it may take years for these laws to yield significant returns in industrial development.

Examining 311 U.S. metropolitan areas, James Bennett (1994) finds that while families living in non-RTW states have higher average nominal incomes, the average urban family in a RTW state has $2,852 more in after-tax purchasing power per year than the same family would have in a non-RTW state. This is because on average, residents in states without RTW laws pay 24.5 percent more for food, housing, health care, utilities, property taxes, and college tuition than those in RTW states). Moreover, Bennett finds evidence that the gap in living standards between RTW and non-RTW states appears to be growing over time.

Employing similar methodology for nine Midwestern states, David Kendrick (2001) finds inflation-adjusted, after-tax income to be $1,145 higher in RTW states (IA, KS, NE, ND) than in non-RTW states (IL, IN, MN, MO, WI).