Right to Work Laws Improve Economic Well-Being

September 9, 2013

Michigan’s Right to Work (RTW) law—which took effect earlier this year—may prove to be an economic boon for the state, particularly over time. The cumulative effect of Right to Work appears to have dramatically boosted the standard of living in the states which have adopted it.

Our new study, released last month, assumes that growth rates in such things as personal income, population, and employment are proxies for a state’s overall well-being. We measured changes in each over time, including a 64-year sweep from 1947 through 2011 and three other distinct and smaller time periods.

According to our model, states with Right to Work laws enjoyed an annual average increase in real personal income of 0.8 percentage points and average annual population growth of 0.5 percentage points compared to what they would have experienced without such laws. From 1970 through 2011, these laws also boosted average annual employment growth by 0.8 percentage points. Data in this last category are not available back to 1947.

Because national and state economic performances can change over time, we divided our analysis into three smaller segments: 1947 through 1970; 1971 through 1990; and 1991 through 2011. During the first period of study our research indicates that Right to Work laws had little meaningful impact on either average growth of personal income or in average growth of population.

The middle period (1971 through 1990) showed significantly different performance characteristics from Right to Work states in all three categories. Our model reports average annual growth rates for employment, personal income, and population were 0.90, 0.93, and 1.30 percentage points higher, respectively. The final period (1991-2011) shows more modest gains, but ones that are still statistically and economically significant in each category.

Our empirical findings seem to align with more descriptive, blunt looks at the trends between RTW and non-RTW states, which are frequently mentioned by politicians and other analysts. The Mackinac Center has published two papers in the past detailing such key performance differences.

James Hohman updated several Right to Work and non-Right to Work statistics recently for the study. This language appears verbatim in our study:

These statistics suggest that Right to Work states outperform non-Right to Work states in the key areas of employment, population, and personal income growth. Our modeling work provides empirical evidence to support such observations. Other scholarly studies—but not all—have also found positive economic results from state adoption of Right to Work statutes.

By building a statistical model to measure the possible impact of Right to Work laws, we can better isolate the economic impact of other variables that may affect the growth metrics we are researching while correcting for potential problems that have bedeviled other Right to Work studies.

Michigan’s Right to Work law started raucous debates in Lansing and elsewhere over whether or not such policies were beneficial. We believe the evidence reports to positive—sometimes very positive—economic consequences of adopting Right to Work laws.

By Michael D. Lafaive and Michael J. Hicks