Michael Hicks is director of the Center for Business and Economic Research and an associate professor of economics at Ball State University. His column appears in Indiana newspapers.
Last week I released a study on some of the economic consequences of right-to-work legislation on manufacturing. This is work I have been involved with for a half decade. As with most scholarly work, this included reading nearly every study written on the matter and conducting my own statistical analysis over more than half a century. In it I accounted for such things as weather, regional effects, history and trends of manufacturing and traditional anti-union antipathy. It is an honest attempt to uncover the truth, but I don't suppose this study will change many minds. It would be a long way from simply naïve to suppose that a limited study at this date from me would alter any decisions about right-to-work legislation in Indiana. That said, readers might be interested in what they might expect from this legislation.
The simple fact is that RTW states are growing faster than non-RTW states, but also have lower wages. But this simple fact is merely correlation, not causation. My study, and a number of others designed for the academic market (as opposed to the policy realm), find far more muted effects of RTW.
First, there's no good evidence that passing right-to-work will cause lower wages, poorer working conditions, significantly cut union funding of candidates (who are almost exclusively Democrats) or tangibly hurt unions. Indeed, as any casual observer will know, American unions have perfected their own destruction, and require no help from Indiana's legislature in their epic quest for irrelevance. My study examined RTW legislation dating back to the Second World War (even before the Taft-Hartley Act), finding no statistically discernible effect on wages.
Second, while some studies have found modest job creation related to RTW, the best of these (which I discuss in my study) find no effects, or report that disentangling RTW from other business-friendly policies is nearly impossible. My study found no statistically viable evidence that RTW alters the share of manufacturing in a state, the size of the manufacturing industry in a state or manufacturing employment in a state.
Bottom line, we should expect no effect on manufacturing, for good or ill, in wages or employment as a consequence of RTW. That is, we should expect the "average effect" -- which is nothing. However, it is also clear that some states have seen big positive impacts of RTW, while others have seen declines in their manufacturing sectors. Factors other than RTW are at play -- a healthy business climate, responsible regulation and low tax rates matter in business relocation and expansion. As I have repeatedly said, these other factors already favor Indiana.
Clearly there are issues regarding RTW that my study does not address in detail. RTW and government costs were not examined. Likewise, I did not examine the service and retail sectors, where unions have targeted workplace rules, in so doing raising costs without tangibly benefiting workers. Most importantly, I did not examine the issue of freedom of choice, which seems to matter most.