News Story

Right-to-Work States Attracting More Citizens, Wealth

Eight of top 10 states increasing personal income were RTW

Eight of the top 10 states that saw an increase in personal income from new people coming to those states were right-to-work states, according to an analysis done by the Tax Foundation.

Michigan lost $14.4 billion in personal income from 2000 to 2010 and was 45th overall. Michigan became a right-to-work state in March. Only Ohio (46th), New Jersey (47th), Illinois (48th), California (49th) and New York (50th) did worse. All six of the bottom states did not have right-to-work laws during those 10 years. New York lost $45.6 billion in personal income in that time period.

Florida did the best gaining $67.3 billion in that 10-year span.

The Tax Foundation tracked people migrating from one state to another from the years 2000 to 2010. The "interstate migrants" had their income added to all the other income in that state. The state gaining that person had an increase in personal income while a state losing a person lost personal income. The figures are in 2010 dollars.

Nick Kasprak, an analyst with the Tax Foundation, a nonpartisan tax research foundation based in Washington, D.C., said the analysis is based on the adjusted gross income from IRS 1040 forms. The study was not conducted specifically to address right-to-work versus non-right-to-work comparisons.

"People have hundreds of reasons for moving from place to place, including, but not limited to, home prices, jobs, the local economy, weather, taxes, relationships, whatever," Kasprak said in an email. "Personally, I doubt the right-to-work issue is anything more than a coincidence, but it's impossible to draw any conclusions either way from this data alone."

University of Michigan Economist Don Grimes said he suspected right-to-work states would beat non-right-to-work states in terms of employment and population, which will show up in growth in total income, but he was curious about how right-to-work status affected growth in income per capita or income per job.

Grimes said generally, jobs for the less educated in fields such as manufacturing, trucking and warehousing appear to be moving to lower labor cost places and less educated Americans are following those jobs.

"The big population growth is mostly occurring in the right-to-work states," Grimes said in an email. "Economic theory supports right-to-work states out performance in terms of the number of jobs and the population; in terms of 'earned income' per person or per worker it is not as clear that right-to-work matters very much."

Non-right-to-work states prosper when the companies have a monopoly whereas right-to-work states prosper in a more competitive world, Grimes said.

"That is why unions thrive when their employer is a monopolist like the teachers union and school districts, or electric utilities in the private sector, but they don't do very well in organizing, or sustaining their membership in highly price competitive industries like grocery stores," Grimes said.

Scott Moody, CEO of the Maine Heritage Policy Center, said he's been tracking migration data for years, particularly when he worked for the Tax Foundation and The Heritage Foundation.

States like Florida and Texas attract people not just because they are right-to-work states but they also have a low tax burden, Moody said. For example, Florida and Texas don't have a personal income tax. Florida was ranked No. 1 in the survey; Texas was No. 3, adding $17.68 billion.

"The fact people are choosing those states is the ultimate expression of what economists call 'revealed preference,' " Moody said. "Basically, you just watch what people do. Rather than hypothesis, you can sit back and watch people vote with their feet."

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.

Commentary

Right-to-Work Laws Work

New study shows economic advantages

The Mackinac Center for Public Policy released a new right-to-work study titled, "Economic Growth and Right-to-Work Laws" in which these authors find that states with right-to-work laws do better economically — sometimes much better — than they otherwise would have.

A right-to-work law prohibits workers from being forced to financially support a union.

Specifically, we found that from 1947 through 2011 right-to-work laws increased average real personal income growth by 0.8 percentage points. In other words, if a state would have otherwise had a 2 percentage point growth rate, the presence of a right-to-work law raised that rate to 2.8 percent, a 40 percent leap in the average growth rate of personal income.

Likewise, right-to-work laws also boosted average annual employment growth by 0.8 percentage points between1970 and 2011. Data in this category was not available going back to 1947. From 1947 through 2011, right-to-work laws increased average annual population growth by 0.5 percentage points.

A fuller explanation of our findings can be located on the Mackinac Center’s website and in a table summary on page 7 of the study.

We are not the only scholars to tackle the question as to whether right-to-work laws have an impact on the economic well-being of states and their citizens. Indeed, the subject is a frequently researched one, and we highlight several of the most important studies throughout our own work.

Our conclusion is that right-to-work laws can have a positive — sometimes a very positive — impact on the economic well-being of people and their citizens.

 

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.