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Michigan Enacts “Right to Work” Law

December 12, 2012

This week Michigan became the nation’s 24th “right-to-work” state. The ideologically loaded phrase “right to work” does not refer to a person’s right to hold a job; it refers to state laws that ban the “union shop” – a workplace in which union membership is mandatory. A union shop does not prevent a person from working; it requires that a person who works in that shop belong to the shop’s union.

One of FDR’s Depression-era initiatives was the National Labor Relations Act, which gave the weight of federal law to unionization and collective bargaining. Big business was not pleased, and big business has big lobbyists.  In 1947, Congress passed the Taft-Hartley Act over President Truman’s veto. Taft-Hartley permits states to prohibit union shops; hence the state right-to-work laws.

The lead argument for right-to-work is that employees should not be compelled to support unions. In other words, as with so many conservative economic positions (unlike conservative social positions), the argument is couched in terms of individual liberties. Some right-to-work proponents try to constitutionalize the argument, contending that compelled union membership violates an employee’s First Amendment right to freedom of association.

The lead argument against right-to-work laws is the “free rider” argument: all employees benefit equally from a collective bargaining agreement whether or not they pay union dues, so each individual employee has an incentive to withhold union dues and let others pay the costs of obtaining the collective benefit. In other words, as with all collective action, collective bargaining socializes benefits. A union shop equally socializes the cost of running the union, whereas a right-to-work law individualizes that burden and misaligns incentives. In other words, the union shop fulfills the same obligation as taxation: it socializes the cost of achieving a collective benefit.

One suspects that the real agenda behind right-to-work laws may not be a sincere concern for the associational rights of working people. One suspects that the real motivation for right-to-work is to weaken unions – to diminish their capacity to engage in political advocacy, and to diminish their effectiveness in collective bargaining.

A concededly gross comparison of right-to-work states to other states suggests that right-to-work laws decrease unemployment but also decrease wages. Counting Michigan as a union shop state, because Michigan passed right-to-work legislation just this week, the 23 right-to-work states have an average  unemployment rate of 6.9 percent, versus 7.6 percent for the 17 other states. But per capita income in right-to-work states is almost 15 percent less than in union shop states. For household income, the gap is almost 14 percent.

I conceded that this is a gross comparison. A much more sophisticated regression analysis was published in 2011 by the Economic Policy Institute. Controlling for a whole host of demographic and economic factors, EPI found among other things that right-to-work diminishes state-wide wages by 3.2 percent; reduces employee eligibility for employer-provided health insurance by 2.6 percent; and decreases employee eligibility for employer-sponsored pension plans by 4.8 percent. In other words, unions in union shop states improve workers’ wages and benefits more than unions in right-to-work states. To be clear: these results are not limited to unionized employees. EPI found that strong unions deliver better wages and benefits to all workers in a state, including non-union workers, than right-to-work unions do.

EPI’s analysis did not include the effect of right-to-work laws on employment rates, so I have to settle for my “gross” conclusion that right-to-work states have an average unemployment rate that is .7 percent lower than union shop states.

Decreased unemployment is clearly a good thing, and right-to-work opponents should own up to the likelihood that when strong unions raise worker wages and benefits, they also increase unemployment. (Same goes for minimum wage laws.) But the discussion should be about the relative costs and benefits of strong unions, not about phony issues like whether union shops violate workers’ rights.

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