With the stroke of a pen held by Democratic Governor Gretchen Whitmer, Michigan on Friday became the first state to repeal a right-to-work law in more than 60 years. This is unfortunate not only for the workers who no longer have the choice of joining a union, but also for the economy of the state. Michigan will be a less prosperous state without the right to work, and its workers will be less free.
The right to work is a simple policy. Fundamentally, the right to work is a matter of choice. For workers in the private sector, the National Labor Relations Act sets rules on what happens when union membership is compulsory. Once a union is recognized, it speaks on behalf of all employees in the bargaining unit. An employer must negotiate with this union, and only with it, to establish the conditions that will govern the workplace. Employees who do not wish to associate with the union have no choice but to accept its representation and the terms of the contract it negotiates. They cannot negotiate for themselves.
The right to work gives a voice back to dissident workers by allowing them to keep their jobs without having to pay “agency fees” to a union. Agency fees are part of the dues that workers must pay to a union for its representational activities. As a general rule, these costs represent 70 to 80% of the payment of contributions. In states without right-to-work protections, workers who do not want the union to speak on their behalf may be forced to pay these fees. The right to work gives these workers a voice by at least not having to pay for their legally mandated silence regarding their pay and working conditions.
Although right-to-work laws are simple, their impacts are far-reaching. The economic impacts of the right to work have been positive both in Michigan and across the country.
Studies have consistently shown that the right to work leads to stronger economic growth. A 2002 study by the Mackinac Center for Public Policy (where I am director of labor policy) found that gross state product, statewide employment, manufacturing employment, employment in construction and per capita disposable income all grew faster in right-to-work states from 1970 to 2002, compared to non-right-to-work states. This same study showed lower average annual unemployment, poverty rates, income inequality, and labor costs in right-to-work states. A 2007 Mackinac Center study reached similar discoveries, as did later review. These results remained more or less constant in the years that followed.
Right-to-work states are also more likely to create employment opportunities. From 2020 to 2021, 867,104 people moved to a State of right to work far from a State which was not. This could be because job opportunities are more prevalent in right-to-work states. Companies often looking for new locations consider the right to work as a key factor. The right to work is one of the means by which states can be economically competitive without having to resort to corporate social protection programs.
In October 2022, the unemployment rate in right-to-work states was 3.4%, compared to 3.9% in lawless states. Since the pandemic, right-to-work states have added 1.6 million jobs, while other states lost 809,000 jobs.
Anyone who thinks manufacturing matters should support the right to work. A Harvard 2021 study found that the share of manufacturing employment in the economy was 28% higher in right-to-work states than in neighboring states without the right to work. The study also showed that average wages and labor compensation were not negatively affected by the passage of the law. A similar study conducted by the Mackinac Center in 2022 shows similar results.
Michigan’s economic conditions in the 10 years before the right to work and the 10 years after provide an excellent case study of the positive impact of the right to work. According to the federal Bureau of Labor Statistics, in the 10 years before the right to work, Michigan’s unemployment rate averaged 8.5%. In the following decade, it was 6%. Michigan’s labor force lost 350,657 people from 2002 to 2012, but gained 90,648 people from 2012 to 2020. Inflation-adjusted income growth rose from 0.06% to 21.9%.
In almost every measurable way, Michigan fared better.
The right to work gives workers greater choice in how to manage their lives and provides significant economic benefits to the state in which they live. Michigan’s 60,000 private-sector workers who have chosen not to unionize aren’t the only ones affected by the right-to-work repeal. Union members are also likely to find that they are worse off.
The reasons are simple market forces. In a right-to-work state, the financial stability of a union requires that it pleases its members. If the union fails to provide services that justify the price of dues, workers can walk away, depriving the union of revenue. This incentive disappears once the right to work is repealed. A union is guaranteed that non-members will pay agency fees which represent the vast majority of union dues. The repeal of the right to work gives unions a guaranteed revenue stream, which prevents them from providing the best possible services to the employees they represent. Abolishing the right to work therefore harms both those who would voluntarily pay the union and those who would not.