Right-to-Work Research

Right-to-Work Research

July 26, 2011 Posted by J. Scott Moody - No Comments

Recently I came across two interesting studies on the economic impact of right-to-work laws.  The author of both of these studies is W. Robert Reed who, at the time, was with the University of Oklahoma.  Not surprisingly, he was also in Oklahoma at the time that they enacted right-to-work in 2001 (the last state to do so).  Keep that background in mind since it contextualizes the abstracts below.

The first study is “The Impact of Right-To-Work on State Economic Development: Evidence from Idaho (pdf)” (with James R. Wilbanks):

“This paper presents new evidence on the impact of Right-To-Work (RTW) on state economic growth.  It investigates manufacturing employment growth in Idaho following that states’s adoption of RTW in 1986.  Idaho is the most recent state to adopt RTW, and the only state to have adopted RTW within the last 25 years.  Using a county-level analysis and comparisons based on alternative treatment and control groups, this study finds that manufacturing employment growth was significantly greater in Idaho than in the control groups.  Medium-sized rural counties appear to have received the greatest benefit from the adotion of RTW.”

The second study is “How Right-to-Work Laws Affect Wages (pdf):”

“I examine the wage effects of Right-To-Work (RTW).  Using state-level data, I estimate that, ceteris paribus, RTW states have average wages that are significantly higher than non-RTW states.  This result is robust is [sic] across a wide variety of specifications.  An important distinctive of this study is that it controls fro state economic conditions at the time states adopted RTW.  States that adopted RTW were generally poorer than other states.  Failure to control for these initial conditions may be the reason that previous studies have not identified a positive wage impact for RTW.”

So, RTW leads to greater employment and wage growth.  As such, this is a win-win for both the private and public sector since greater employment/wage growth will lead to higher tax collections.  Not to mention that enacting RTW itself doesn’t cost state government a dime in lost revenue vis-a-vis tax cuts.

Oh, also a quick update on the status of RTW in New Hampshire . . . the legislation was vetoed by Governor Lynch and the House was unable to muster the votes to override the veto (it had already passed by super-majority in the Senate).  The House may attempt an override later this year.  So New Hampshire’s RTW bill is not technically dead so Maine should still keep a weary eye on its neighbor.