Commentary
New Evidence: Right-to-Work Laws Work
Center scholar co-authors CEI study
A 2013 Mackinac Center study found positive economic effects for states with right-to-work laws. RTW states enjoy increased real personal income growth, population growth and employment growth. New evidence supports this finding.
The evidence comes from a Competitive Enterprise Institute study. Authors Richard Vedder (a member of the Center’s Board of Scholars) and Jonathon Robe control for a variety of factors that impact state economic growth. They then compare the performance of RTW states and non-RTW states from 1977 to 2012. A chief finding is “that the overall effect of a RTW law is to increase economic growth rates by 11.5 percentage points.”
Vedder and Robe also analyzed RTW laws' impact on per-capita income. They estimate how much non-RTW states lost in potential income from 1977 to 2012. The median was $3,278 per capita, or about $13,000 annually for a family of four.
This analysis places Michigan as one of the states missing out on the most from not having a RTW law. Michigan suffered the 6th largest state income loss ($34.2 billion) and was 10th in per capita income loss ($3,460).
The study highlights some additional statistics that suggest RTW laws have a positive impact on economic growth. For instance, real personal income in RTW states grew by 165 percent from 1977 to 2012, but only by 99 percent in states without such laws. Measured by per-capita income, states with RTW laws grew by 65 percent, whereas non-RTW states grew by only 50 percent.
Generalizing about the millions of interactions and factors that impact a state’s economy is tricky, and one should always use caution. But a growing amount of evidence suggests that states with RTW laws, by lowering the actual, perceived or future cost of doing business, attract more capital, firms and workers. Eventually these factors add up and contribute to a growing state economy, just as general economic theory would predict.
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New Evidence: Right-to-Work Laws Work
Center scholar co-authors CEI study
A 2013 Mackinac Center study found positive economic effects for states with right-to-work laws. RTW states enjoy increased real personal income growth, population growth and employment growth. New evidence supports this finding.
The evidence comes from a Competitive Enterprise Institute study. Authors Richard Vedder (a member of the Center’s Board of Scholars) and Jonathon Robe control for a variety of factors that impact state economic growth. They then compare the performance of RTW states and non-RTW states from 1977 to 2012. A chief finding is “that the overall effect of a RTW law is to increase economic growth rates by 11.5 percentage points.”
Vedder and Robe also analyzed RTW laws' impact on per-capita income. They estimate how much non-RTW states lost in potential income from 1977 to 2012. The median was $3,278 per capita, or about $13,000 annually for a family of four.
This analysis places Michigan as one of the states missing out on the most from not having a RTW law. Michigan suffered the 6th largest state income loss ($34.2 billion) and was 10th in per capita income loss ($3,460).
The study highlights some additional statistics that suggest RTW laws have a positive impact on economic growth. For instance, real personal income in RTW states grew by 165 percent from 1977 to 2012, but only by 99 percent in states without such laws. Measured by per-capita income, states with RTW laws grew by 65 percent, whereas non-RTW states grew by only 50 percent.
Generalizing about the millions of interactions and factors that impact a state’s economy is tricky, and one should always use caution. But a growing amount of evidence suggests that states with RTW laws, by lowering the actual, perceived or future cost of doing business, attract more capital, firms and workers. Eventually these factors add up and contribute to a growing state economy, just as general economic theory would predict.
Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.
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