Right-to-Work Laws Accelerate Economic Development, New Study Finds Michigan Losing Ground to Right-to-Work States

For Immediate Release

MIDLAND-States with right-to-work (RTW) laws grew their economies faster than non-RTW states over the past 25 years, according to a new study by the Mackinac Center for Public Policy. Michigan, a non-RTW state, had poorer performance in nearly every economic measure when compared to the average RTW state, including poverty, unemployment, and income inequality.

Right-to-work laws are state statutes or constitutional provisions that ban the practice of requiring union membership or financial support as a condition of employment. Some 22 states have such laws; Oklahoma was the last to achieve RTW status in 2001. The study, based on data from the U.S. Bureau of Labor Statistics and the U.S. Census Bureau, was conducted by Mackinac Center Senior Policy Analyst William T. Wilson, Ph.D., a former vice president and economist at Comerica Bank. Among the findings in the study:

* Right-to-work states created more manufacturing jobs - 1.43 million, versus a loss of 2.18 million jobs in non-RTW states. Michigan alone lost almost 100,000 manufacturing jobs since 1970.

* The percentage of families living in poverty in RTW states dropped from 18.3 percent to 11.6 percent between 1969 and 2000. During this same period, seven states, all non-RTW, saw increases in poverty. Michigan was among them, with a poverty increase of 0.6 percent.

* From 1977 through 1999, Michigan's Gross Domestic Product grew at roughly half the rate of RTW states.

* From 1978 through 2000, the unemployment rate in Michigan was, on average, 2.3 percent higher than in RTW states.

* Annual per-capita disposable income growth was 0.2 percent higher, on average, in RTW states than in non-RTW states, including Michigan. Although nominal per-capita disposable income was 10 percent higher in non-RTW states in 2000, the cost of living is also higher in these states. After adjusting for regional cost of living, real disposable income is greater in RTW states.

* Michigan posted the second highest unit labor costs in the nation in 2000, outpacing all but New Jersey.

The study concludes that strong RTW laws are beneficial to the long-term economic development of states. "The state of Michigan, because it lacks a strong right-to-work law, has not attained its full economic potential and, in many respects, its economy is declining," said Wilson. "The compelling conclusion is that RTW laws increase state economic development and overall prosperity."

According to Wilson, labor costs will be critical to Michigan's economic growth, and the high cost of labor here bodes ill for the state's future. "As U.S. businesses find it increasingly difficult to raise prices due to greater competition from both home and abroad, relative business costs will likely play an increasingly important role in business location decisions. States or regions that maintain uncompetitive labor costs will see an exit of capital and business to more competitive regions."

The study argues that right-to-work would correct this problem. "One effect of a right-to-work law" Wilson noted, "is that collective bargaining agreements tend to be less rigid, leading to greater productivity and making the state more attractive to new or expanding businesses. This stimulates the demand for labor. If Michigan were to enact a right-to-work law, we could expect the same process to take place here, creating new jobs and boosting wages."

A recent poll by Research 2000 of likely Michigan voters indicated that a majority of them would favor a right-to-work law. When asked if they would support passage of a right-to-work law for Michigan that says no worker can be required to join or pay dues to a labor union to get or keep a job, 62 percent answered yes. The poll had a 4.8 percent error margin.