Analyst: RTW Opponents Use Flawed Math

Citing research by James M. Hohman of the Mackinac Center, Michigan Capitol Confidential takes issue with the claim that right-to-work states feature lower wages. Hohman's conclusion is that, after all the facts are in, right-to-work states actually have the higher per-capita incomes.

Scores of right-to-work critics ranging from politicians to economists have cited lower per-capita incomes in right-to-work states as why the new law is not good for Michigan.

However, not factoring in cost-of-living exposes a flaw in that analysis, said Mackinac Center for Public Policy Fiscal Analyst James Hohman. Once that is considered, Hohman said the per-capita income is higher in right-to-work states than non-right-to-work states.

For example, Texas per-capita income was $37,098 but would have a purchasing power of $49,700 in the state of New York in 2007, according to Hohman’s analysis. New York’s per-capita income was $47,852.

Hohman found that in terms of Michigan dollars in 2000, right-to-work states had 4.1 percent higher per-capita personal incomes than non-right-to-work states when factoring in cost of living. Michigan was considered a non-right-to-work state because the law was passed in late December 2012. Hohman said the right-work-states didn’t surpass non-right-to-work states until 2003.

“One of the most basic arguments repeated time and time again by right-to-work opposition is that Michigan is going to lose income by passing this law,” Hohman said. “That just isn’t the case. When you adjust for what a dollar can get you, the difference reverses itself."

Hohman used the cost of living index done by political scientists William Berry, Richard Fording and Russell Hanson. They adjusted for cost-of-living in every state from 1960 to 2007.

Pennsylvania Legislators Introduce Right-to-Work

The Washington Free Beacon reports that legislators in the Pennsylvania legislature want to bring right-to-work to their state, citing its passage in Indiana and Michigan and the need for job growth and desire to attract businesses.

Six GOP lawmakers on (Jan. 22) introduced a proposal to make Pennsylvania, the “Keystone State,” the nation’s 25th right-to-work state.

The legislation, which would end the longstanding practice of forcing employees to join unions as a condition of work, has stalled several times over the past decade. The bill’s sponsors say new laws in Michigan and Indiana forced the state’s hand.

“The needs of our economy dictate that it must be adopted at some point in time,” said state Rep. Daryl Metcalfe. “The victory of right-to-work in Michigan and Indiana certainly thrust the spotlight on it and made the General Assembly look it more seriously than the past.”

Pennsylvania is one of the most heavily unionized states in the country with more than 700,000 workers belonging to organized labor groups. That is nearly 100,000 more union members than in Michigan.

The advent of right-to-work in the traditionally labor-friendly Midwest and Rust Belt has left policymakers scrambling to catch up, said Nate Benefield, director of policy analysis at the free-market Commonwealth Foundation.

“Indiana and Michigan are states that we directly compete with,” he said. “We’re going to have to evolve to remain competitive and it’s also a great opportunity for us to outcompete the northeast.”

If Pennsylvania passes right-to-work, it will be the first state to do so in the northeast. That could give it an economic advantage over neighboring New York and New Jersey, which lead the nation in union membership as a percentage of the workforce, advocates of right to work legislation said.

“We’re playing catch-up to Indiana and Michigan, but our immediate neighbors, New York, New Jersey, and Maryland are even less competitive than Pennsylvania is,” Benefield said. “I think right-to-work is a big part to improving our business climate.”

Restricting the use of compulsory union dues also could deal a blow to union influence.

Favorable Court Decision for Right-to-Work

The United States District Court of the Northern District of Indiana upheld Indiana’s right-to-work law by issuing a decision on Sweeney v. Daniels on January 17. The Court dismissed all counts for plaintiffs (the operating engineers Local 150) for their failure to state a claim upon which relief could be granted.

Chief Judge Philip P. Simon said, “For better or worse, the political branches of government make policy judgments. The electorate can ultimately decide whether those judgments are sound, wise and constitute good governance, and then can express their opinions at the polls and by other means.”

In his written opinion, Simon makes clear that the building trades unions are not carved out of the right-to-work legislation, as has been suggested. Further, he dismissed the notion that permitting so called “free riders” violate unions’ protected political speech rights.

It is not known yet whether the operating engineers will appeal the decision. Moreover, there is a second legal challenge ongoing in a Lake County court.

The Indiana Chamber led the charge for Indiana to become the 23rd right-to-work state in 2012, positioning our state for national leadership in economic development and worker freedom. Opponents have promised continuing action to repeal or strike down right-to-work in the courts and in the Statehouse, in an attempt to resume the practice of imposing union membership and financial support as a condition of employment. The Indiana Chamber will support and defend the continuation of the right-to-work statute in Indiana.

Despite Obama’s Objections, Job Growth in RTW States Likely Aided His Reelection

It’s no secret the Indiana Chamber supports right-to-work and was a driving force in its passage in Indiana. It’s also no secret that big labor and President Obama are not fans. However, an interesting blog from the National Institute for Labor Relations Research explains how right-to-work states have seen the bulk of job increases, and most likely helped inspire confidence in Obama’s economy during his reelection bid:

Exit polling conducted by the Associated Press indicates one important reason the President was able to win at all was that four in 10 voters believed the national economy was improving, while only three in 10 believed it was getting worse.

To convince voters things were getting better, the Obama campaign pointed to the millions of jobs that have been created since the recession officially ended in June 2009.  Household employment data for the 50 states and Washington, D.C., do show an overall net gain of 2.59 million jobs through this September.

Ironically, the bulk of the increase occurred in the 22 states that have had Right to Work laws on the books since June 2009. Their aggregate household employment grew by 1.86 million, or 3.4%.  (Since Indiana did not adopt its Right to Work law until this February, the 19,000 jobs it added are not included.) Because Right to Work laws protect employees from being fired for refusal to pay union dues or fees, Big Labor bosses hate them. And the union hierarchy’s massive, forced dues-fueled campaign support is the single most important reason the President was reelected.

At the same time, Right to Work states (again excluding Indiana) were responsible for 72% of all net household job growth across the U.S. from June 2009 through September 2012 (see chart above).  If these states’ job increase had been no better than the 0.85% experienced by forced-unionism states as a group, the nationwide job increase would have been less than half as great. And the President wouldn’t have been able even to pretend the economy was in recovery.

During his first term, Barack Obama repeatedly expressed virulent opposition to Right to Work laws and enthusiastically supported “card-check” forced-unionism measures and other legislative and bureaucratic proposals designed to shove millions of additional workers under union control.  Fortunately, Right to Work proponents generally thwarted him.

Now a genuine national recovery depends on the President calling off his administration’s guerrilla attacks on Right to Work states for the next four years. Will Obama, his congressional allies, and his political appointees at last step aside and allow the 23 Right to Work states to serve as the bulwark of U.S. economic recovery? Or will they continue trying to deter employers and employees from setting up shop and expanding in Right to Work states?

Hat tip to our Political Affairs Coordinator Ryan McNicholas and the AEIdeas blog.

Chamber Report Ranks State Legislators on Economy, Jobs Issues

Did your legislators support implementing a statewide smoking ban? What about making Indiana a right-to-work state and eliminating the state’s inheritance tax? Find out in the Legislative Vote Analysis report released today by the Indiana Chamber of Commerce; the publication details the pro-economy, pro-jobs voting records for state lawmakers during the 2012 session.

All scores and the full report are available at the Indiana Chamber’s web site at

"The thing that really stands out is how much the vote scores have gone up in recent years – Democrats and Republicans alike. In fact, this year a total of 15 legislators scored 100%. Overall what this shows is the support for prosperity issues continues to grow, and that reflects where Hoosiers are," states Indiana Chamber President Kevin Brinegar.

"We want employers and citizens to take note of this report because it makes it very clear which legislators were supportive of bettering Indiana’s economic climate and which were not."

Legislators who score 70% or greater for the most recent two-year voting period are eligible for endorsement by the Chamber’s political action committee, Indiana Business for Responsive Government.

Bills used in the report were selected based on their significant impact to the state’s economic climate and workforce. Lawmakers are kept apprised of the Chamber position and reasoning on these bills through various communications during the legislative session — and prior to key votes being taken. Only floor votes for which there is a public record are used in the Legislative Vote Analysis.

The final vote on House Bill 1001 — the right-to-work legislation — was counted twice in the report to reflect the importance placed on that policy.

Copies of the Legislative Vote Analysis report are sent to all legislators and Indiana Chamber board members, and made available online for all businesspersons, community leaders and citizens.

For 28 years, the Chamber has measured the voting performance of all 150 legislators on bills that reflect the organization’s public policy positions.

The Indiana Chamber has been the state’s largest broad-based business advocacy organization for 90 years, with members in every county and legislative district. Today, the Indiana Chamber serves more than 5,000 member companies that employ 800,000 Hoosier workers.

National Experts Weigh In: RTW Making a Difference

In the economic development world, Site Selection magazine is a major player. People pay attention to its annual rankings and those in the business of helping identify new company locations regard it highly.

It’s no surprise that the publication would feature a story on Indiana’s right-to-work law. And the reaction of the site selection community is expectedly strong; after all, Indiana is the first state to make the RTW move in the last 11 years.

Below are a few very encouraging quotes from the article; find it in full here.

"It changes to the positive my perception of Indiana’s business climate," writes a site consultant. "My marketplace is north Texas. I can give personal testimony that my state has attracted many relocated facilities from the Midwest for two reasons: the absence of a personal and corporate income tax and Texas’ right-to-work laws. I would expect Indiana to be able to keep more of their existing employers now rather than watch them leave for greener pastures."

Also weighing in is Robert Price, director of Atlanta-based Herron Consulting: "This issue is also closely followed overseas," he notes. "Many of our offshore clients are aware of the implications of U.S. right-to-work laws, and the significance of these laws in the site selection decision process has not waned. Some states are exhibiting greater confidence in their ability to make difficult decisions as they come to terms with the ‘new economy,’ and the change in Indiana reflects this."

"This really puts pressure on the other states in the Midwest," says site selection consultant Bob Ady, president of Mount Prospect, Ill.-based Ady International Co. "Site selection is a question of differentiation, and this is a major differentiator for Indiana and its neighboring states and throughout the Midwest."

All things being equal, would Ady steer a client to an Indiana site today — or higher up on a finalist list of Midwestern states? "Yes," he says, "though we just make recommendations. It’s up to the companies in the end. I’m working right now with an international company that is now specifically considering Indiana, where it wasn’t previously. Right-to-work has already had an impact."

Right-to-Work: Time to Move Forward

The legislative battle over right-to-work ended late this morning; if the noise of chanting protesters outside my office window is any indication, however, the issue will linger for some time. And that’s OK — if those disagreeing act in a responsible manner. That’s the way our free society is supposed to work.

How long will the lingering last? The obvious answer is at least November and the next election. One of the Senate Democrats speaking against the bill this morning said that this will awaken his party’s supporters. And that’s OK — that’s the way the system is supposed to work.

No one has proclaimed right-to-work will be the silver bullet that will immediately bring thousands of jobs to our state. (But one Indiana company indicated it is now staying and a Michigan business has invited previously ruled out Indiana to compete for its relocation). It is another important tool, accompanying the other contributors to our state’s strong business climate, one that will put Indiana in the running for many more jobs and economic opportunities. And our state’s batting average is pretty good when it has a chance to be in the game.

The evidence is there for those willing to listen — unions will not go away, safety will not slip, health care and pensions won’t be threatened. Will wages dramatically increase or decline? Probably not.

Right-to-work is here. It’s time to move on at the Statehouse to other important issues; it’s time throughout the state to let individuals have the choice of whether or not they wish to pay union dues as a condition of getting or keeping their job; it’s time for more companies to consider — and choose — our state for their relocations and expansions and the jobs they will bring.

Chamber media statement

Legislative Report summary


Laffer: Right-to-Work a Beneficial Economic Tool for States

A few Chamber staffers joined hundreds in attendance at today’s Economic Club of Indiana luncheon featuring Arthur B. Laffer, an economist, author and former member of President Reagan’s Economic Advisory Policy Board (though he also asserted that Bill Clinton was "a great president"). When asked about right-to-work legislation, he lauded Indiana’s efforts to become the 23rd right-to-work state. Back in May, he co-wrote an editorial on the issue in the The Wall Street Journal. An excerpt:

The Obama administration’s National Labor Relations Board filed a complaint last month against Boeing to block production of the company’s 787 Dreamliner at a new assembly plant in South Carolina—a "right to-work" state with a law against compulsory union membership. If the NLRB has its way, Dreamliner assembly will return to Washington, a union-shop state, along with more than 1,000 jobs.

The NLRB’s action, which Boeing will challenge at a hearing next month, is a big deal. It’s the first time a federal agency has intervened to tell an American company where it can and cannot operate a plant within the U.S. It lays the foundation of a regulatory wall with one express purpose: to prevent the direct competition of right-to-work states with union-shop states. Why, as South Carolina Gov. Nikki Haley recently asked on these pages, should Washington have any more right to these jobs than South Carolina?

A recent New York Times editorial justified the NLRB decision by arguing that unions are suffering from "the flight of companies to ‘Right-to-Work’ states where workers cannot be required to join a union." That’s for sure, and quite an admission. We’ve been observing that migration pattern for years, but liberals have denied it’s actually happening—until now.

Every year we rank the states on their economic competitiveness in a report called "Rich States, Poor States" for the American Legislative Exchange Council. This ranking uses 15 fiscal, tax and regulatory variables to determine which states have policies that are most conducive to prosperity. Two of these 15 policies have consistently stood out as the most important in predicting where jobs will be created and incomes will rise. First, states with no income tax generally outperform high income tax states. Second, states that have right-to-work laws grow faster than states with forced unionism.

As of today there are 22 right-to-work states and 28 union-shop states. Over the past decade (2000-09) the right-to-work states grew faster in nearly every respect than their union-shop counterparts: 54.6% versus 41.1% in gross state product, 53.3% versus 40.6% in personal income, 11.9% versus 6.1% in population, and 4.1% versus -0.6% in payrolls.

For years, unions argued that right-to-work laws were bad for workers and for the states that passed them. But with the NLRB complaint, they’ve essentially thrown in the towel. If forced unionism is better for the economy of a state, why would the NLRB need to intervene to keep Boeing from leaving Washington? Why aren’t businesses and workers moving operations to heavily unionized places like Michigan, New York, Ohio and Pennsylvania and fleeing states like Georgia, Tennessee, South Carolina and Texas?

In reality, the stampede of businesses from forced-union states like Washington has accelerated in recent years. A 2010 study in the Cato Journal by economist Richard Vedder of Ohio University found that between 2000 and 2008 4.8 million Americans moved from forced-union states to right-to-work states. That’s one person every minute of every day.

Right-to-work states are also getting richer over time. Prof. Vedder found a 23% higher per capita income growth rate in right-to-work states than in forced-union states, which over the period 1977-2007 amounted to a $2,760 larger increase in per-person income in those states. That’s a giant differential.

So now the unions concede that this migration is indeed happening, but they say that it is unhealthy and undesirable because workers in right-to-work states are paid less and get worse benefits than the workers in union states. Actually, when adjusting for the cost of living in each state and the fact that right-to-work states were poorer to begin with, a 2003 study in the Journal of Labor Research by University of Oklahoma economist Robert Reed found that wages rose faster in states that don’t require union membership.

Employers that move away from forced-union states mainly do so not to scale back wages and salaries—although sometimes that happens—but to avoid having to deal with intrusive union rules, the threat of costly work stoppages, lawsuits, worker paychecks going to union fat cats, and so on.

Obama’s NLRB Appointments Raise Concerns About Board

The National Labor Relations Board has been in the news quite a bit lately, as we mentioned a couple of weeks ago on this blog. Now, President Obama’s latest NLRB appointments are drawing the ire of some concerned he may be creating an anti-business sentiment on the board. National Journal reports:

President Obama made three recess appointments (recently), filling vacancies on the National Labor Relations Board that were left open by Republican refusals to confirm appointees.

The appointments to the NLRB, a lightening rod for conservatives opposed to any expansion of labor rights, are Sharon Block, currently deputy assistant secretary for congressional affairs at the Labor Department; Terence Flynn, now the chief counsel to NLRB member Brian Hayes; and Richard Griffin, general counsel for the International Union of Operating Engineers.

Block’s appointment fills a vacancy left by Craig Becker, a former associate general counsel to both the Service Employees International Union and the AFL-CIO who was seated on the NLRB via a recess appointment in March 2010. Obama withdrew his appointment of Becker for a full term last month after it was fiercely resisted by Senate Republicans.

The NLRB appointments followed Obama’s controversial recess appointment of Richard Cordray to a new consumer board…

The Wall Street Journal also reports how business groups are less than thrilled about the appointments, or the manner in which they were appointed:

Unions applauded the appointments, which will likely earn Mr. Obama some goodwill with this key Democratic constituency heading into November’s presidential election. SEIU President Mary Kay Henry said Mr. Obama "showed true leadership" with his installments, a notable compliment given that last year, union leaders accused the president of being too willing to compromise with Republicans.

The International Union of Operating Engineers, which employs Mr. Griffin, said he is fair-minded and would provide "stability and balance to American workers and employers." The Senate Republicans that have tried to cripple the NLRB have a position "comparable to ejecting the referee if you don’t like the score of the game," the union said in a statement.

Business groups and Republicans disagreed. Sen. Mike Enzi of Wyoming, the ranking Republican on the Senate Health, Education, Labor and Pensions committee, said he was "extremely disappointed" in Mr. Obama’s decision to "avoid the Constitutionally mandated Senate confirmation process." Mr. Enzi said that two of the three nominees were submitted to the Senate on Dec. 15, just before the Senate was scheduled to adjourn for the year. That gave the Senate "only one day to consider and review these nominations," he said in a statement.

Some labor lawyers who represent employers suggested Wednesday that lawmakers might legally challenge Mr. Obama’s appointments. Senate Republican Leader Mitch McConnell stopped short of saying he would do so but suggested Mr. Obama might have overstepped his boundaries. The NLRB and consumer protection agency appointments "potentially raise legal and constitutional questions," Mr. McConnell said in a statement, adding that the ones at the NLRB "are particularly egregious."

It’s Time to Decide RTW Issue

Indiana House Democrats are correct: Right-to-work (or any important legislation) deserves comprehensive consideration before it is voted upon and potentially enacted.

But the House D’s own web site acknowledges that the issue has been thoroughly debated already.

• Numerous meetings conducted earlier this year by the Interim Study Committee on Employment provided overwhelming proof that making Indiana a “right-to-work” state …

 “Even though months of testimony provided no proof that ‘right-to-work’ would bring new jobs to Indiana …

"Numerous meetings" and "months of testimony" qualify as comprehensive consideration. It’s time for the issue to be decided before the full General Assembly, starting with the joint committee hearing scheduled for Friday morning.

Hoosiers want their representatives to do the jobs they were elected to do, not play games or use delaying tactics. Whether Indiana becomes the 23rd right-to-work state needs to be decided on its own merits.

Let the debate — not the games — continue.  And if you need more facts to help you decide where you stand on the issue, check out our web site.