The long-running battle over “right-to-work” (RTW)legislation reappeared recently in Indiana. The Indiana Chamber of Commerce, in a recent report, contends that the growth of realpersonal income in RTW states has been higher thanin non-RTW states. Their argument is thatRTW laws lead to lower wages in RTW states, which attracts businesses to locate in those states. The increased business presence leads to higher income growth, which in turn leads – in the longrun – to higher productivity and higher wages in the state.
We find the Chamber’s arguments unpersuasive. Obviously there are businesses that are attracted to low-wage areas, but in our current global economy it is a risky strategy for a state to think it can compete with workers in developing countries who are paid much less. Moreover, many companies reject the “low-road” approach of low wages and make location decisions on other criteria, like the quality of the work force, infrastructure, and quality of life.
Could low wages bring about high wages? The Chamber’s argument is that increased business investment will lead to higher productivity and eventually higher wages. But businesses that use large numbers of low-wage, unskilled workers are unlikely to see an increase in productivity. And even if productivity did increase, what is to say that those productivity gains would be shared with workers? Wages and compensation of workers have consistently lagged the growth of productivity since the 1970s.
The Chamber’s arguments are weak, and so is its data analysis. To prove its link between RTW states and higher income growth, it inexplicably uses data from only two years, 1977 and 2008. An examination of income growth data for all years between 1947 and 2009 finds that thegrowth rates of income for RTW states in the years after passage of RTW legislation is nearly identical to the growth rates before passage. So RTW laws seem unlikely to have led to a significant increase in income.
The Chamber also lumps all RTW states together, avoiding mention of the vast discrepancies in economic performance among RTW states. It also relies exclusively on growth rates, which show only change, not current levels of economic welfare. It focuses on average income, which obscures the effects of how the total income pie is distributed. An analysis for individual states of median household income in 2009, which avoids all three of these problems, shows that only 4 of the 22 RTW states are above average, while 18 are below average.
The battle over RTW legislation is a continuationof the campaign against workers and unions that has been waged in this country for thepast thirty years. That campaign has led tostagnating wage levels and deteriorating conditionsfor workers.
The Higgins Labor Studies Program at the University of Notre Dame thinks that is it possibleto find a better way. In this endeavor we look tothe wisdom of the man for whom the HigginsProgram is named, Monsignor George G. Higgins. His view was that denying the right toorganize is tantamount to attacking human dignity itself.
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