Report: Right-to-Work States Have More Income Growth and Employment

Report: Right-to-Work States Have More Income Growth and Employment
September 19, 2013

Over the past six decades, states with right-to-work laws experienced greater improvements in average annual employment, real personal income, and population growth than those states would have experienced without right-to-work, a new study by the Mackinac Center has found.

“As Michigan is the most recent state to adopt a right-to-work law, we thought it valuable to take a fresh look at the data,” said Michael LaFaive, coauthor and director of the Center’s Morey Fiscal Policy Initiative. “What we found generally comports with other scholarship on the subject. Adopting a right-to-work statute can increase the economic well-being of a state.”

Michael Hicks, Ph.D., an adjunct scholar with the Center and director of the Center for Business and Economic Research at Ball State University, created the econometric model used in the study and is a coauthor with LaFaive.

Decades of Data

The study examines 1947 through 2011, but also breaks that down into three shorter periods: 1947 through 1970, 1971 through 1990, and 1991 through 2011. The authors note it can take a significant amount of time, more than a decade, for worker freedom laws to have their full impact on a complex state economy.

“Another challenge related to timing is that the effect of right-to-work laws may change as economies and government policies evolve over time,” LaFaive and Hicks write.

The results varied by the time period studied. For instance, right-to-work laws had no statistically significant impact on economic growth in 1947-1970, but a positive and statistically significant impact in 1971-1990 and 1991-2011.

Higher Income, Employment

On average, over the entire 64-year period the study finds right-to-work laws increased annual real personal income growth in the average right-to-work state by 0.8 percentage points and population growth by 0.5 percentage points. Right-to-work laws boosted average annual employment growth in the average right-to-work state on the whole as well, registering an average bump of 0.8 percentage points in 1971-2011.

“These results may appear modest, but the cumulative effect of right-to-work laws appears to have dramatically boosted the standard of living in the states which have adopted it,” Hicks said.

Hicks and LaFaive conclude the study by stating, “These results suggest that right-to-work laws have a positive and sometimes very positive impact on the well-being of states and their residents.”

Ted O’Neil (oneil@mackinac.org) is media relations manager at the Mackinac Center for Public Policy.

Internet Info

“Economic Growth and Right-to-Work Laws,” Michael Hicks and Michael LaFaive, Mackinac Center for Public Policy: http://heartland.org/policy-documents/economic-growth-and-right-work-laws