Ten years ago, our home states of Michigan and Indiana adopted right-to-work statutes. These laws state that no worker as a condition of employment needs to join nor financially support a union. In addition to providing workers greater freedom, scholarly research suggested that right-to-work laws are powerful economic development tools. Our new study lends credence to those conclusions.
Our desire to measure the initial economic impacts from right-to-work adoptions led us to examine changes in employment shares in industries such as manufacturing — among others — at the county level, across the nation and during two time periods. We also zeroed in on the impact of right-to-work’s adoption for Michigan, Indiana and the state borders they touch.
We found that in 2018 the manufacturing employment share was almost 21 percent higher in the border counties of states that adopted right-to-work laws after the year 2000 than they would have been without them. They were 31.5 percent higher in interior, right-to-work counties. This finding is particularly impressive when you consider that five of those six states adopted their laws only recently. In other words, the full economic impact of the laws’ adoptions has yet to unfold.
Our study also found that manufacturing’s share of employment in Indiana and Michigan were up 27.3 percent and 26.1 percent, respectively, though in the latter case data availability may have limited the statistical strength of the finding. One unambiguous result is that while employment share in manufacturing in a region may not have increased on balance, there is a clear realignment away from counties in non-right-to-work states toward those with them. Ohio’s share of manufacturing employment is 30.0 percent lower than it likely would be, had the state also adopted a right-to-work law in 2012.
The Mackinac Center’s study is not the only of its kind. Last November, two Harvard scholars published a working paper titled “The Long Run Effects of Right to Work Laws,” and used a similar approach to measuring right-to-work laws’ possible impacts. They found a 28 percent increase in the manufacturing share of employment “on the right-to-work side of a policy border.”
We looked at the impact of right-to-work across 18 industrial sectors, six of which we identified as union-dense. In addition to manufacturing, we found intriguing and robust results in the construction, utilities, information and education sectors.
States that adopted right-to-work laws prior to 2000, for example, had 2018 construction employment shares (as a percent of total private employment) 14.2 percent higher in their border counties than they would absent right-to-work. In non-right-to-work border counties adjacent to states that adopted right-to-work laws after 2000, the share of construction employment fell 8.7 percent.
The utilities and information sectors were mixed, but the most robust numbers in our analysis show large drops in employment share in border counties without right-to-work protections. In states that adopted right-to-work prior to 2000, these sectors’ share of employment dropped 22.5 percent and 13.8 percent, respectively, absent right-to-work protections.
Education services was arguably among the worst-performing sectors. We found a 31 percent decline in the share of employment among states that adopted right-to-work laws after 2000 in border counties. We also found a 39.3 percent drop in interior counties in right-to-work states that adopted their law prior to 2000.
Even industries that are not union dense showed positive gains from adoption of right-to-work laws. Our estimates indicate counties in right-to-work states experienced increases in the employment share in the food services and accommodations industry. Nearby counties in non-right-to-work states, by contrast, saw employment share declines in this industry.
We chose to perform this study using a border county-level methodology because there is often little in the way of weather, topography, or attitudes toward unions that might confound our analysis. What is abruptly different at state borders are state policies that may drive economic well-being, including right-to-work laws. By adopting this methodology, and adjusting for other factors such as population and education, as well as state tax, spending and regulation, we better isolate the role that right-to-work has had in driving employment changes.
Early evidence from the Great Lake and Hoosier states demonstrates that adoption of right-to-work laws benefited both states — facts both states should celebrate during the 10th anniversary of their adoption.
Michael D. LaFaive is the senior director of the Morey Fiscal Policy Initiative for the Mackinac Center for Public Policy in Midland, Mich. Follow him on Twitter @lafaive.
Todd Nesbit, Ph.D., is assistant professor of free enterprise and entrepreneurial economics at Ball State University in Muncie, Ind.