Economists: Right-to-work states have lower-income residents, poor labor relations

By John Gallagher/Detroit Free Press

Gov. Rick Snyder has contended that right-to-work legislation may boost Michigan’s economic performance and attract new investments, but economists challenged those assertions Thursday, pointing out that wages and benefits tend to fall in right-to-work states and that Michigan has been a leader in attracting new investments for decades.

“Right to work is not high on employers’ things to consider when they move to a state,” Dale Belman, a professor at Michigan State University’s School of Human Resources and Labor Relations, said Thursday. “For existing employers it doesn’t provide a benefit and may be a detriment,” he said, because of worsening labor relations in right-to-work states.

Site Selection magazine has often ranked Michigan at or near the top of its annual list of states gaining the most new business location decisions. Michigan, for example, ranked first in the nation from 1997 to 2000 in the annual list – all when Michigan was not a right-to-work state.

And a new study by the Washington, D.C.-based technology group Engine Advocacy reported this month that Michigan ranked third among the 50 states for growth in new technology jobs between 2010 and 2011, with a growth rate in tech jobs of 6.9%, well above the national average of 2.6%.

Backers of right to work applauded the Thursday announcement from Snyder and legislative leaders that they would try to make Michigan a right-to-work state.

“It would be the most important economic reform in decades and it would make Michigan immediately more competitive regionally, nationally and internationally,” said Charlie Owens, state director for the National Federation of Independent Business. “Small business owners have waited years for this reform and they are geared up for the fight.”

Partisans on either side of the issue hurled accusations as protestors walked the hallways of the Capitol in Lansing. State police sprayed mace at a group that tried to rush the Senate floor.

Charles Ballard, a professor of economics at Michigan State University, said the right-to-work legislation, while freighted with symbolic significance for Michigan, would likely produce a minimal impact for the state’s economy and jobs market.

He noted that union membership as a percentage of the workforce in Michigan has declined over the past six decades, “so in a sense the advocates of right-to-work have already won.”

“If what we want to do is do a little bit better at attracting certain kinds of low-wage jobs, I think this may help,” Ballard said. “But it’s an awful lot of political blood to be spilled for something that will not galvanize Michigan’s economy.”

When right-to-work laws were first implemented decades ago, those first states benefitted with increased employment because companies and jobs migrated there in search of the lower wages, Belman said. But that impact has faded over time as more states joined those ranks and as unions have agreed to concessionary demands from employers, he said.

The data on wages tell a fairly clear story. Of the top 10 states in per capita income in 2011, seven were not right-to work states. Of the bottom 10 states with the lowest per capital income, seven were right to work states.

“There is a lot of evidence that wages and benefits are lower in right-to-work states. There’s a redistribution of wages and benefits toward owners’ capital,” Belman said Thursday.


Timothy Bartik, senior economist with the Upjohn Institute for Employment Research in Kalamazoo, a non-profit non-partisan research center, agreed.

“I think the relevant issue that people should be asking themselves about right to work is what impact does it have on employment and what impact does it have on wages. And both of those questions are important,” he said.

Meanwhile, transforming Michigan into a right-to-work state is unlikely to change how manufacturers view the business dynamics in the state, said Art Schwartz, president of Labor and Economics Associates in Ann Arbor. That’s because any new automanufacturer that locates in Michigan is still certain to face an organizing drive from the UAW.

“Even though they are going to put through right-to-work legislation Michigan is still the home of the UAW,” Schwartz said. “The other variables haven’t changed for Michigan. Just throwing this right-to-work switch from off to on doesn’t automatically light up Michigan as destination for manufacturers to locate.”

With both sides prepared for a long struggle over right to work, Belman said that Michigan will be the loser.

“We had bigger fish to fry than this,” Belman said. “It’s going to create a bloody mess in Michigan for years.”