The (F)Law of the Land — Why RTW Laws are Bad for State Economies

Michigan leaders, like moths, are mindlessly being drawn to the destructive Right-to-work flame, soon making them the 24th state to enact a bad law which every qualified economist who has seriously studied the subject finds to be destructive to a state’s economy and workforce, while being little more than a short-term political lever at best. The state will join the ranks of: Alabama, Arizona, Arkansas, Kansas, Florida, Georgia, Idaho, Indiana, Iowa, Louisiana, Mississippi, Nebraska, Nevada, North Carolina, North Dakota, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia,and Wyoming.

Newspapers across Michigan are rethinking their endorsement of the governor, and Virg Bernero is suddenly looking a lot more like “the one that got away” to the media as he is now the darling of recent interviews. Even the Free Press is crying foul about Snyder’s abrupt 180 — apparently they’re feeling duped, as they should. Two years ago my local paper similarly made a bad call by endorsing the sonorous corporate raider with the headline: Little to lose by voting for Rick Snyder for governor.”  The editor had a few choice words this past week about the Snyder bait and switch routine on Right-to-work.

The fall-out of Snyder’s double-agency will be seen and heard this Tuesday on the capitol steps in Lansing with massive peaceful protests . This time, hopefully without being pepper sprayed.

Snyder had better re-read his Sun Tzu, for he’s in for quite a political battle, and if he thinks exempting public safety officials will placate those unions — he’s wrong there too. The rank and file for the most part despise him and his policies. Flashback to the 2011 Blossom Festival in Benton Harbor — Snyder’s police escort in the parade were giving thumbs-up to the 800 plus protesters, and at one point slowed the motorcade down to allow the protestors to catch-up as they worked their way through the crowded sidewalks.

The question of the hour is: Why? What possibly could be the motivation behind this excorcist neck-snappingly abrupt policy change?

Either Michigan’s leaders have truly awful economic advisors, or they are simply kowtowing to a rapidly vaporizing Tea Party contingent….not to rule-out that both are operative factors in their twisted quest to wreck the state’s economy and drive away even more of its dwindling skilled workforce. Factor in a generous dose of stupidity, and you’ve got the Michigan GOP at work.

(Anyone who knows my writing is aware that I’m a bit of a public and fiscal policy research geek — it’s either that, or I’d need a house full of cats. Instead, I’ve got two computers on my desk and scholarly papers open on both…hey, someone’s got to read this stuff, ‘cuz the lawmakers sure as shit aren’t. Plus, the hairballs are only mine — horked-up in a fit of disgust.)

Here’s the “skinny” of the net-effect on states that enact RTW laws, (although it’s probably a bit too droll and wordy for a protest sign, it doesn’t hurt to know).

The science is solid on the folly of RTW laws:

study conducted by the Michigan State University School of Human Resources and Labor Relations, published in January 2011 by the Employment Policy Research Network, examined the economic impact in all 50 states over a three year period, comparing and contrasting RTW states to those that had strong labor standards. Among their key findings:

  • “…high wages increase aggregate demand in the state leading to increased economic activity.”
  • “Right-to-work laws and taxes seem to have no effect on economic activity. Similarly, unionization has little effect on economic activity.”
  • “…unionized firms are able to use productivity enhancements to offset any higher costs associated with collective bargaining.”
  • “…results suggest that the benefits of Right-to-work laws and tax reductions may be more political than economic.”

Another in-depth analysis on the subject enjtitled Does Right-to-work Create Jobs? conducted by the Economic Policy Institute, published March of last year reaches the same conclusions. “When scholars are most rigorous about separating the impact of right-to-work laws from other factors, the evidence suggests that right-to-work has no effect whatsoever on the state’s employment.” Going on to conclude that RTW laws “…have no statistically significant impact whatsoever on either the rate of job growth or the number of businesses opened in the state.

The research that wins the award for the most esoteric title proves to be the harshest critic of RTW laws: The Effect of Endogenous Right-to-Work Laws on Business and Economic Conditions in the United States: A Multivariate ApproachHofstra University, published in May of 2009 in The Review of Law and Economics. They conclude that RTW law states find no effect on employment, yet experience depressed wages and salaries and show increased business owner incomes: “Average per capita income is lower in right-to-work relative to non-right-to-work states.” Whereas “average proprietors’ income is higher in right-to-work relative to non-right-to-work states.”  They found no economic growth attributable to RTW laws.

Here’s the thing — Snyder likely knows all of this (although not so much the third-graders in the legislature). He’s trading-away the state’s economy for some short-term political gamesmanship — “game” being the operative term here — to Snyder this is no more than Monopoly, but with real lives at stake.

Amy Kerr Hardin from Democracy Tree