West Virginia recently became the 26th right-to-work (RTW) state, and several other states are now considering becoming the 27th, including New Hampshire. Right-to-work policies have become increasingly popular nationwide. Since 2012, four states have enacted right-to-work legislation. RTW laws allow employees the option to join or refuse to join a union, pay fees or other charges to a union, or pay any third party or charity instead of paying a union.
In 2011, the New Hampshire legislature passed a right-to-work law, but then-Gov. John Lynch (D) vetoed the bill. The recent election of Republican Chris Sununu as governor, who has voiced support for RTW, makes passage of the law more likely. New Hampshire would become the first right-to-work state in New England, giving it a competitive advantage over its neighbors.
Right-to-work laws have consistently demonstrated they have a positive effect on jobs and economic growth. In an October 2016 study, Americans for Prosperity-New Hampshire (AFP-NH) found an RTW law would create an improvement in “employment growth and state GDP growth that would be about .5 percentage points above current projections.” AFP-NH also argues RTW legislation would improve wage growth and keep New Hampshire residents working in state, rather in neighboring states.
States enacting right-to-work policies have experienced positive economic progress across the board. In another study, the Mackinac Center for Public Policy found, “According to the Bureau of Economic Analysis, right-to-work states showed a 42.6 percent gain in total employment from 1990 to 2011, while non-right-to-work states showed gains of only 18.8 percent.” The study also reveals inflation-adjusted gross personal income in right-to-work states increased 86.5 percent between 1990 and 2013, compared to just 51.3 percent for non-RTW states.
According to Watchdog.org, “[F]rom January 1995 through August 2015 six of the 10 states with the worst private-sector job growth were states without right-to-work laws.” Two of the remaining four states with low private-sector job growth, Indiana and Michigan, passed right-to-work laws in 2012. Over the same period, seven of the top 10 job-producing states had right-to-work laws in place, according to data provided by the U.S. Department of Labor.
Opponents of right-to-work legislation contend the reforms force wages down, disadvantage unions, and lower people’s standard of living, but research shows right-to-work states have experienced positive economic growth across the board.
One of the most commonly used attacks against right-to-work laws is the claim they increase economic inequality. A new study by American Enterprise Institute (AEI) researchers Jeffrey Jordan, Aparna Mathur, Abdul Manasib, and Devesh Roy shows this claim is likely untrue. In the comparative case study, the authors examined a “comprehensive set of measures of inequality” in four states: Idaho, Louisiana, Oklahoma, and Texas. The authors found right-to-work laws have no impact on economic inequality. The four states examined were the only ones that have enacted right-to-work legislation between the 1960s and the 2000s.
Right-to-work states have enjoyed greater success attracting new and existing businesses. The Heritage Foundation cites one report in Site Selection Magazine by Ron Starner, Mark Arend, and John McCurry as evidence of the positive effects of RTW laws on a state’s business climate. Starner, Arend, and McCurry found, “[R]oughly half of all major businesses refuse to consider locating in jurisdictions with compulsory dues.”
Right-to-work laws create new jobs and foster economic and population growth. New Hampshire lawmakers should consider implementing right-to-work legislation, a decision that is sure to reap significant economic benefits.
The following documents examine right-to-work laws in greater detail.
Right to Work: Updated Trends and Implications for New Hampshire
This paper from Americans for Prosperity-New Hampshire examines the extant literature regarding the economic and demographic effects of right-to-work legislation, and it attempts to rebut the prevailing counter argument made in support of union security agreements. The authors predict what would reasonably be expected to happen should New Hampshire adopt legislation that promotes worker freedom, and the results are very positive.
New Evidence on the Effect of Right-to-Work Laws on Productivity and Population Growth
In this article from the Cato Institute, Michael J. Hicks, Michael LaFaive, and Srikant Devaraj expand on work completed by Richard Vedder, distinguished professor of economics emeritus at Ohio University and senior fellow at The Independent Institute that shows the effects of right-to-work (RTW) legislation on employment and economic output in individual states. Vedder found RTW laws have a positive impact on jobs and output, because firms and workers move to states with greater economic freedom. Hicks, LaFaive and Devaraj extended Vedder’s work by examining the impact of RTW laws on productivity and population growth.
An Interstate Analysis of Right to Work Laws
This paper from the Competitive Enterprise Institute, authored by Richard Vedder and Jonathan Robe, “presents a labor economics analysis of the effect of right to work laws on state economies, and ranks states’ per capita income loss from not having a [right-to-work] law.”
Did Right-to-Work Laws Impact Income Inequality? Evidence from U.S. States Using the Synthetic Control Method
Jeffrey Jordan, Aparna Mathur, Abdul Manasib, and Devesh Roy of the American Enterprise Institute examine right-to-work laws in four states, Idaho, Louisiana, Oklahoma, and Texas, and they found right-to-work laws have no impact on economic inequality.
Right-to-Work Laws Don’t Lower Private-Sector Pay
James Sherk of The Heritage Foundation argues right-to-work laws have no negative impact on private-sector wages. “RTW laws do appear to slightly reduce the pay of government employees, easing constraints on hard-pressed state budgets,” he writes.
Unions Hinder Economic Growth and the Free Market
American Enterprise Institute President Arthur Brooks explains how unions hamper economic growth by limiting freedom in the marketplace. Brooks concludes, “States should seek to pass right-to-work laws as part of reforms to strengthen their economies and enhance economic growth.”
Ten Principles for Improved Business Climates
Maintaining a good business climate has never been more important. Thanks to the Internet, the collapse of communism around the world, and advances in shipping and logistics, capital and labor are much more mobile than in the past. Businesses must bid for customers and workers, not only from local competitors but also from businesses in other communities, in other states, and even in other countries. Small changes in taxes, regulations, and other cost-drivers may lead to businesses losing customers and possibly failing or relocating.
Economic Growth and Right-to-Work Laws
This study by the Mackinac Center measures the impact of right-to-work laws on states’ economic performance. It uses average annual growth rates in employment, real (inflation-adjusted) personal income, and population to measure the economic well-being of right-to-work states. The results show right-to-work laws have a statistically significant and economically meaningful positive impact, though results vary.
Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, visit the Budget & Tax News website, The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database.
The Heartland Institute can send an expert to your state to testify or brief your caucus; host an event in your state; or send you further information on a topic. Please don’t hesitate to contact us if we can be of assistance! If you have any questions or comments, contact John Nothdurft, Heartland’s director of government relations, at [email protected] or 312/377-4000.