Indiana (shown in red) already has the greatest concentration of manufacturing jobs as a percentage of total jobs of any state in the country. Adding right-to-work protections for employees and employers will give the Hoosier State an even greater advantage over Michigan. (Right-to-work states on this map are shown in brown. Forced-unionism states are in green.)
(Editor’s note: This is an edited version of a
commentary that appeared in the Detroit Free Press on Jan. 22, 2011.)
The state of
Indiana is now America’s 23rd right-to-work state. Michigan may need to adopt
such a law to better compete for jobs and talent.
Research shows that states with right-to-work laws
arguably are better off economically. They have typically enjoyed higher rates
of economic and population growth and lower unemployment rates. I say
“arguably” because academic research on the question is generally mixed. On
balance, however, the best scholarship seems to demonstrate that right-to-work
status can be a powerful development tool. Even if it were not, such laws
should still be adopted in the name of individual liberty.
Economic theory and evidence shows that lowering the price of something encourages more of it, so a right-to-work law in Indiana could mean greater population loss here.
Perhaps the best information on the influence of
right-to-work laws comes from a 1998 study authored by economist Thomas Holmes.
Holmes examined manufacturing employment in border counties of neighboring
states where one state had right-to-work protections and the other did not. He
found manufacturing employment as a percentage of county population increased
by one-third in the counties within the right-to-work states compared to those
in the non-right-to-work states.
This study has two vital implications. First, it
shows the impact that state-level public policies can have on economic
development. Second, it neutralizes claims by right-to-work critics that some
other impossible-to-measure variable — such as attitudes toward unions — is
unduly influencing economic performance in right-to-work states.
This is not to say that passage of a right-to-work
law in Indiana will result in an increase in border county manufacturing
employment by one-third. As Holmes points out, right-to-work states are
typically pro-business to begin with. Indiana’s adoption of a right-to-work law
may simply formalize its status while implicitly magnifying Michigan’s
reputation for being more hostile to business.
A more recent (2012) study comes from Michael
Hicks, an adjunct scholar with the Mackinac Center. Writing for Ball State
University’s Center for Business and Economic Research, he found that from 1929
through 2005, the presence of a right-to-work law did not play a role in state
industrial composition or income from manufacturing.
Hicks did, however, find a significant influence
of right-to-work laws on both “accumulated growth of manufacturing incomes” and
the yearly changes in the share of manufacturing in the decade following
passage of a right-to-work law in the 10 most recent states to adopt such a
measure. According to Hicks, seven of the 10 saw manufacturing incomes increase
— after adjusting for inflation — between 15 percent and 40 percent.
Economist Richard Vedder’s 2010 study
“Right-to-Work Laws: Liberty, Prosperity, and Quality of Life” in the Cato
Journal tackles such laws from a migration angle. For many researchers
migration reflects an investment in oneself, and helps aggregate “quality of
life” issues into a single variable.
Vedder, also an adjunct scholar with the Center,
notes that 40 percent of Americans lived in right-to-work states in 2007, up
from 28.5 percent in 1970. Moreover, Census data indicates that from April 2000
to July 2008, more than 4.7 million people moved from non-right-to-work states
to right-to-work states.
These changes are probably more than just a
coincidence. Vedder performed a number of statistical analyses that controlled
for variables that might also influence moves, including weather. His
conclusion was that “without exception … a statistically significant positive
relationship was observed between the presence of right-to-work laws and net
Other variables mattered too, but his research
underscores the argument that people “vote with their feet to move to freer
labor market environments.” This too has important implications for Michigan,
because Indiana is a border state. Moving there from here for work is less
expensive financially and psychologically than, say, to Texas. Economic theory
and evidence shows that lowering the price of something encourages more of it,
so a right-to-work law in Indiana could mean greater population loss here.
Michigan should consider its own right-to-work
law. Doing otherwise would allow Indiana to cement its reputation as a
friendlier climate in which to live and do business to the detriment of the
Great Lake State.
Michael D. LaFaive is director of the Morey
Fiscal Policy Initiative at the Mackinac Center for Public Policy, a research
and educational institute headquartered in Midland, Mich. Permission
to reprint in whole or in part is hereby granted, provided that the author and
the Center are properly cited.
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