Analysis shows the economic benefits of a right-to-work law.
By Richard Vedder, Joseph Hartge and Christopher Denhart
Over the last 30 years, states with right-to-work (RTW) legislation have experienced greater per capita personal income growth than other states. And that positive correlation between right-to-work and higher incomes remains true even after controlling for other important variables (such as tax rates in various states) that might have had a simultaneous impact.
Our statistical results suggest that, in fact, the presence of a RTW law added about six percentage points to the growth rate of RTW states from 1983 to 2013. With such a law, Wisconsin’s per capita personal income growth of 53.29% would have been, instead, about 59.29%. Wisconsin would have gone from having economic growth below the national average over those three decades to having slightly above average growth – enough above average that it would have erased the current income per capita deficit between Wisconsin and the nation as a whole.
Wisconsin’s per capita personal income received from all sources in 2013 was $43,244, according to the Bureau of Economic Analysis – $1,521 less than the national average of $44,765.
Our regression analysis suggests that had Wisconsin adopted a RTW law in 1983, per capita income would have been $1,683 higher in 2013 than it actually was – and would have brought the state slightly over the national per capita personal income average.
There are some caveats that apply to all such analysis. Although the results are strong, the reader is urged to be very cautious in using the precise estimation. Some possible determinants of economic growth are very difficult or impossible to measure, such as the extent of statewide environmental regulations, and there may be a significant “omitted variable bias” in this simple regression model. At the same time, it is unlikely the inclusion of other variables would materially alter the estimations with respect to RTW.
Finally, the results in question look at the past – the 1980s through 2013. Labor unions today have a smaller presence than they used to, so the effects of a RTW law might reasonably be expected to have a somewhat smaller impact in the future – especially in Wisconsin where Act 10 is already having an economic impact.
That said, it is a fact that Wisconsin has fallen behind. As this study indicates, Wisconsin’s role in the national economy has shrunk with the passage of time. Our analysis suggests that passage of a RTW law likely would slow and possibly reverse this trend.