Michigan Still Worse Economically Than RTW Oklahoma

Last week, I wrote a blog post (”MEA Misleads on Oklahoma Right-to-Work Numbers”) about Michigan’s largest labor union claiming that since Oklahoma became a right-to-work state in 2001, “10 years later, jobs fell by 25 percent and the number of companies moving there dropped by 33 percent.” As I pointed out, this is false: Jobs in Oklahoma are up 3.8 percent since 2001 while Michigan, on the other hand, lost 13.8 percent of its jobs during the same time, according to the Bureau of Labor Statistics.

After the piece was published, the MEA changed its website to offer a citation for its claim. You can see a saved screen-shot of the website before the update here, and click here for the added citation.

The MEA now says, “10 years later, jobs fell by 25 percent and the number of companies moving there dropped by 33 percent, according to economist Lawrence Mishel, president of the Economic Policy Institute.” First off, the study it links to was published Aug. 1, 2001, a month before Oklahoma voted to become a right-to-work state. Also, the link is to an edited group of statements from a variety of economists on the left mainly focusing on other reasons Oklahoma is growing besides the right-to-work legislation. Nowhere in the link is “25 percent” or “33 percent” used at all and it does not mention the number of companies that moved to the state.

Mishel, the economist the MEA cites, is the president of the Economic Policy Institute — a union-funded and run think tank. I sent him an email asking where the research is showing a 25 percent drop in jobs or 33 percent drop in companies moving to the state. He wrote back that the MEA has the incorrect link: “The data [is] on pp. 8 and 12 of the 2011 report ‘Does RTW Create Jobs? Answers from Oklahoma.’”

But that study doesn't show a loss of jobs in Oklahoma at all, much less 25 percent. Page 8 of the study he cites shows a loss of manufacturing jobs in Oklahoma, which tracks very closely with what has happened across the country. Page 12 gives us a table of “announced openings” of certain facilities in the state. This tells us little: Michigan was a leader in job announcements and business expansions via the state government’s “economic development” arm for much of the past decade — but lead the nation in jobs loss.

The Oklahoma Council of Policy Affairs critiqued the study on a few fronts. OCPA fellows Scott Moody and Wendy Warcholik explain:

[T]he EPI study did not consider whether Oklahoma’s manufacturing industry may have chosen to boost productivity instead of hiring more workers. Chart 1 shows the growth in Gross Domestic Product (GDP) of the manufacturing industry from 2003 to 2010 using a growth index. Oklahoma’s manufacturing GDP has grown 45 percent in that time period, outstripping that of the average manufacturing growth in RTW states (31 percent) and in non-RTW states (22 percent).

This growth in Oklahoma’s manufacturing GDP is a direct result of an increasingly productive workforce. Chart 2 shows the amount of manufacturing GDP per job from 2003 to 2010. In only a few short years, Oklahoma’s productivity growth (67 percent) soon outgrew non-RTW states (55 percent) and in the last few years has even outgrown RTW states (62 percent).

Over the long run, productivity growth is the best way to improve economic performance, for two reasons. First, the higher productivity boosts the spending capacity of businesses and their workers, which filters out to other parts of the economy via “multiplier effects.” Second, increased productivity frees scarce labor to pursue other economic activities. After all, the economy is better off today because Bill Gates is running Microsoft and not toiling away in an old-fashioned steel mill.

More broadly, there is other evidence that RTW has been good to Oklahoma’s economy. Simply look at how people are “voting with their feet.” Using data from the Internal Revenue Service, Chart 3 shows the net migration in Oklahoma of households (as proxied by taxpayers), people (as proxied by exemptions), and income (as proxied by Adjusted Gross Income, or AGI) between 1995 and 2008.

“Still, we get it,” says the group. “Increased manufacturing productivity and population growth mean little to a union employee who is concerned that right-to-work legislation will eventually mean fewer jobs and lower wages to go around. So, let's home in on the most important facts. After Oklahoma passed right to work, the number of jobs in the state grew and wages went up.”

The specifics: “The State Chamber recently reported that Oklahoma’s personal per capita income (PCPI) has grown from $23,517 in 2001 to $35,268 in 2010, a 50 percent growth rate over that period. From 1999 to 2008, Oklahoma had the fourth highest PCPI growth rate in the nation, primarily due to Right to Work.”

As the legislative debate over Michigan becoming a worker freedom state continues, expect to see more distortions. We’ll do our best to keep up with them.