Friday, February 10, 2012

Do Right-To-Work Laws Hurt State Economies

We all know the conventional wisdom on right-to-work laws:
"Proponents argue that it creates jobs, on the theory that there are a bunch of anti-union employers who will flock to whatever state passes the law ... Opponents dispute that claim, and argue that all it does it allow employers in those states to pay workers less and give them fewer health and pension benefits. They claim it is part of the race to the bottom that corporations encourage and that Republican politicians are more than happy to implement in exchange for the huge political contributions to their campaigns."
Under either philosophy, the idea is that jobs shift from union to non-union states, and for decades that pattern was beyond dispute. But in this post-NAFTA, internationalized era, might the story have changed?
Only one state has passed right to work since NAFTA: Oklahoma in 2001. (Before that, the most recent was Idaho in 1985.) About a year ago, Lafer and economist Sylvia Allegretto published a report for the Economic Policy Institute* exploring just what had happened in the decade since Oklahomans got their "right to work." The results weren't pretty.

Rather than increasing job opportunities, the state saw companies relocate out of Oklahoma. In high-tech industries and those service industries "dependent on consumer spending in the local economy" the laws appear to have actually damaged growth. At the end of the decade, 50,000 fewer Oklahoma residents had jobs in manufacturing. Perhaps most damning, Lafer and Allegretto could find no evidence that the legislation had a positive impact on employment rates.
Given that the U.S. can no longer win a "race to the bottom" in terms of wages, perhaps we've moved into an era in which it's more important to offer communities sufficiently attractive to professionals and skilled labor than to offer the cheapest domestic wage for factory line workers. A company that has so little loyalty to state and community that it will relocate half-way around the country to save money on labor will have no more regard for the new community when the total cost of production is cheaper outside of the United States. Whether or not you believe there is a moral factor involved, that's the story of modern manufacturing and a company that doesn't shave production costs is apt to be undersold by cheaper imported goods.

For a state like Michigan, my approach might be to try to create an environment in which certain hub communities, offering a good lifestyle to workers, a highly educated and highly skilled workforce, and other factors that could attract workers at the top of the market, are at the center of a manufacturing hub, such that manufacturers can have a reasonable expectation of being able to find local (or near-local) suppliers, labor, and support. I don't know if it will work, but it seems to beat trying to drive down labor costs to compete with other states, starving communities of the tax base they need to fund schools, recreation, roads (already bad enough in Michigan), and other factors that make for an appealing community. If the effort fails, it all falls apart anyway, so why not try?

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