Michigan repeals right-to-work law

With the swipe of a pen held by Democratic Gov. Gretchen Whitmer, Michigan on Friday became the first state to repeal a right-to-work law in over 60 years. That’s unfortunate not just for the workers who have lost their choice about whether to associate with a union, but also for the state economy.

Michigan will be a less prosperous state without right-to-work, and its workers will be less free. Right-to-work is a simple policy. At its core, right-to-work is about choice.

For private sector workers, the National Labor Relations Act establishes rules for what happens when union membership is mandatory. Once a union is recognized, it speaks for all employees within the bargaining unit. An employer must bargain with that union, and only with that union, to set the terms and conditions that will govern the workplace.

Employees who do not wish to associate with the union have no choice but to accept its representation and terms of the contract it negotiates. They cannot negotiate for themselves. Right-to-work restores some voice to dissenting workers by allowing them to keep their jobs without being forced to pay a union “agency fees.” Agency fees are a portion of dues, which workers must pay to a union for its representational activities.

Typically, these fees are 70 percent to 80 percent of the dues payment. In states without right-to-work protections, workers who do not want the union to speak for them can be forced to pay these fees. Right-to-work gives these workers a voice by allowing them to at least not have to pay for their legally mandated silence when it comes to their compensation and working conditions.

Although right-to-work laws are simple, their impacts are broad. The economic impacts of right-to-works have been positive both in Michigan and across the country. Studies have consistently shown that right-to-work leads to stronger economic growth.

A 2002 study by the Mackinac Center for Public Policy (where I am director of labor policy) found gross state product, statewide employment, manufacturing employment, construction employment, and per-capita disposable income all grew faster in right-to-work states from 1970-2002, compared to states without right-to-work. That same study showed lower average annual unemployment, poverty rates, income inequality, and labor costs in right-to-work states. A 2007 Mackinac Center study reached similar findings, as did a later review.

These findings have remained more or less consistent in the years since. Right-to-work states also are more likely to create job opportunities. From 2020 to 2021, 867,104 people moved to a right-to-work state away from a state that wasn’t.

One reason for this might be that job opportunities are more prevalent in right-to-work states. Companies looking for new locations often consider right-to-work as one key factor. Right-to-work is one way that states can compete economically without having to resort to corporate welfare programs.

In October 2022, the unemployment rate in right-to-work states was 3.4 percent, compared to 3.9 percent in states without the law. Since the pandemic, right-to-work states have added 1.6 million jobs, while other states have lost 809,000 jobs. Anyone who thinks manufacturing is important should favor right-to-work.

A 2021 Harvard study found that the share of manufacturing employment in the economy was 28 percent higher in right-to-work states, compared to neighboring states without right-to-work. The study also showed that average wages and labor compensation weren’t negatively affected by the passage of the law. A similar study conducted by the Mackinac Center in 2022 shows similar results.

Michigan’s economic conditions in the 10 years before right-to-work and the 10 years that followed offer an excellent case study on the positive impact of right-to-work. According to the federal Bureau of Labor Statistics, in the 10 years before right-to-work, Michigan’s unemployment rate averaged 8.5 percent. In the following decade, it was 6 percent.

Michigan’s labor force lost 350,657 people from 2002-12, but it gained 90,648 people from 2012-2020. Inflation-adjusted income growth went from 0.06 percent to 21.9 percent. In nearly every measurable way, Michigan has been better off.

Right-to-work gives workers greater choice about how to manage their lives and offers significant economic benefits for the state they call home. The 60,000 private sector workers in Michigan who have opted out of union membership are not the only ones who will be hurt by the repeal of right-to-work. Union members are also likely to find they are worse off.

The reasons for this lie in simple market forces. In a right-to-work state, a union’s financial stability requires it to please its members. If the union fails to deliver services that justify the price of dues, workers may opt out, denying the union revenue.

This incentive is gone once right-to-work is repealed. A union is guaranteed that nonmembers will pay agency fees that are the vast majority of union dues. Repealing right-to-work gives unions a guaranteed income stream, which removes the incentive for them to provide the best services possible to the employees they represent.

Repealing right-to-work, then, harms both those who would voluntarily pay the union and those who would not.