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May 2015 - Volume 23, Number 2


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Economic Benefits of Right-to-Work

by Richard Larsen, President of Larsen Financial, Pocatello, Idaho


In March, Wisconsin became the 25th state to pass and sign into law so-called “Right-to-Work” legislation. Despite the negative light often associated with Right-to-Work (RTW) laws, in reality all they do is proscribe the requirement that a worker join or pay dues to a union as a qualification for employment.


Unions often view laws removing compulsory union membership for work in the private sector as “anti-union,” while advocates of Right-to-Work laws maintain it’s a matter of personal liberty and economic freedom. They argue that workers in given trades or industries should have the option to choose whether to join a union or not. If a union is doing a good job representing the interests of its members, it should not be threatened by the freedom to choose, as the benefits of union membership would be self-evident.


Even some union leadership supports this sentiment. Gary Casteel, the Southern region director for the United Auto Workers, explains, “This is something I’ve never understood, that people think Right-to-Work hurts unions. To me, it helps them. You don’t have to belong if you don’t want to. So if I go to an organizing drive, I can tell these workers, ‘If you don’t like this arrangement, you don’t have to belong.’ Versus, ‘If we get 50 percent of you, then all of you have to belong, whether you like to or not.’ I don’t even like the way that sounds, because it’s a voluntary system, and if you don’t think the system’s earning its keep, then you don’t have to pay.”


One cannot be a student of history without recognizing the tremendous contributions unions made to the emergence of the middle class in early to mid-20th century America. They significantly improved working conditions, workweek hours, and compensation levels. In today’s economy, their focus seems to have changed, as they seem to be primarily political entities, with compulsory union dues used mostly for amassing power in the political arena and spent on candidates and causes that some members may object to. Even Bob Chanin, former top lawyer for the National Education Association, admitted that in his farewell speech a few years ago. “It’s not about the kids…it’s about power,” he said.


According to Department of Labor statistics, only about 7 percent of America’s private-sector workforce is unionized. In the post-World War II era, it was nearly 40 percent. The trend is reversed for public employees, where 60 years ago the unionized public employee workforce was less than 10 percent, while it currently is nearly 37 percent. Maybe all those “evil corporations” have gotten it right and are providing pay and benefits that employees are satisfied with. The same logic might lead us to believe that, following those trends, it is “evil government” that is taking advantage of employees and must be represented by collective bargaining.


Average wages do tend to be slightly lower in Right-to-Work states, as reported by The Wall Street Journal last year. But the differences may be attributable to other factors. As the Journal explained, “Many economists say when differences in cost of living are taken into account, wages are roughly the same — or even higher — in Right-to-Work states.” Last year the National Institute for Labor Relations released a detailed study of Right-to-Work vs. non-Right-to-Work states. Five economic factors were analyzed in states in the Midwest, with the following conclusions:


Job growth is twice as strong in RTW states. The percentage growth of non-farm private-sector jobs (1995-2005) in Right-to-Work states was 12.9 percent while non-Right-to-Work states came in at 6.0 percent.


Perhaps surprising to some, poverty is actually higher in non-Right-to-Work states. The average poverty rate, adjusted for cost of living, was 8.5 percent in RTW states and 10.1 percent in non-Right-to-Work states. This may likewise have more to do with geography and cost of living factors, however.


New company and new product growth is significantly greater in RTW states. During that same period, annual percentage growth in patents granted was 33 percent in RTW states and only 11 percent in non-Right-to-Work states.


Income growth rates are higher in RTW states as well. The percentage growth in real personal income was 26.0 percent in RTW states, while non-Right-to-Work states grew at 19.0 percent.


Even health insurance coverage in RTW states fared better. Note that this data was gathered before implementation of Obamacare. The percentage growth in number of people covered by employment-based private health insurance was 8.5 percent for RTW states and 0.7 percent for non-Right-to-Work states.


Consequently, based on National Institute for Labor Relations research, RTW states create more private sector jobs, enjoy lower poverty rates, experience more technology development, realize more personal income growth, and increase the number of people covered by employment-based private health insurance. Clearly, when looking at the big picture, the economy of a state is more likely to be more robust when the workforce has the freedom to choose.



Associated Press award-winning columnist Richard Larsen is President of Larsen Financial. He is a graduate of Idaho State University. Originally published – Idaho State Journal, March 15, 2015, reprinted with author’s permission.


IOWA ECONOMIC SCORECARD is our quarterly economic forecast, arriving in February, May, August,
and November. It consists of statistics about and analysis of the Iowa economy.


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