The first is a report released over the weekend by the Wisconsin Contractor Coalition, who directs you to a paper by Marquette University economist Abdur Chowdhury. Chowdhury compared Wisconsin’s situation with (right-to) work-for-less states, and found that the state would definitely lose out. Here’s the executive summary of Chowdhury’s study.
A national assessment of the effect of RTW [right-to-work] laws on important labor market outcomes, such as, unionization, wages, employment, inequality and job-‐related injuries reveal some important findings. First, unionization rates in RTW states are less than half of what they are in Collective Bargaining (CB) states. Second, aggregate employment in RTW states has increased modestly while employment in CB states has declined. Third, wages are lower in RTW states than in CB states. Fourth, RTW increases gender and racial wage inequality and also makes for less safe workplace.But other than that, no problems, right? :P The lost income tax revenue and increased mop-costs are interesting to note in light of this state having $2.3 billion in budget deficits already- we can’t afford to make that go even higher through acts like (right-to) work-for-less.
The potential net loss in direct income to Wisconsin workers and their families due to a RTW legislation is between $3.89 and $4.82 billion annually. Using a conservative estimate of an impact multiplier of 1.5, the total direct and induced loss of a RTW legislation is estimated between $5.84 and $7.23 billion annually. Based upon the two estimates of lost incomes and an overall effective tax rate of 4.0%, the economic loss in state income taxes is estimated between $234 and $289 million per year.
While considerable efforts are being made by certain legislators to pass the RTW law in Wisconsin, the empirical evidence on the effect of adopting such a law does not support prescribing it as an economic policy tool. Overall, this study shows that RTW legislation would provide no discernible economic advantage to Wisconsin, but would impose significant social and economic costs. Low wages would weaken consumption. Higher rates of labor turnover and adversarial labor-‐management relations would decrease productivity. It would also burden the state with higher ‘mop-up’ costs [costs for social programs such as child care and food stamps].
Chowdhury goes on to explain the factors that does seem to encourage business development and growth, and it doesn’t seem to have much to do with the lower wages that (right-to) work-for-less would result in.
Studies examining why firms locate where they do have consistently found that there are several key factors that business decision-‐makers consider and compare when deciding among alternative investment sites. These include proximity to markets for their products; access to the raw materials and supplies that firms need; access to quality transportation networks and infrastructure; quality of life characteristics (e.g., good schools, health services, recreational facilities, low crime rates, quality housing, and weather); regulatory environment; the cost and reliability of utilities, etc. Stevens (2009) report that there is no more business capital formation in right to work states, as measured by the number of businesses and the ratio of firm formations to total firms. In addition, recent studies of high-tech firms indicate that they often seek out areas with highly skilled labor and proximity to universities and research centers.Hmm, that doesn’t really seem to follow the defunding of education and lowering of public services that has become a central strategy in Wisconsin during the Age of Fitzwalkerstan, now does it?
Another release came out from the Wisconsin AFL-CIO today using information from the Economic Policy Institute, which shows that (right-to) work for less laws makes all workers worse off, not just those that are in unions.
These laws lower wages, for both union and non-union workers, by an average of 3.2 percent, reduce the odds of getting health insurance through one’s job by 2.6 percent, and reduce the odds of getting a pension through an employer by 4.8 percent.The AFL-CIO then continued by comparing what we have here in Wisconsin with what people in (right-to) work-for-less states have. As the full EPI paper notes, states with (right-to) work-for-less states have higher poverty rates, higher rates of violent crime and lower levels of educational achievement, among other quality-of-life drawbacks.
Bruce Thompson of Urban Milwaukee performed a similar evaluation last week, which also shows that (right-to) work-for-less states generally have lower pay. As part of the article, Thompson supplied this graph, where the green squares are work-for-less states in the former Confederacy, and the blue triangles are work-for-less states in other parts of the country. Compare and contrast those states with where the orange circles are, which represent states that don’t have such union-busting laws. You will notice that Wisconsin is smack dab in the middle of this graph, with per capita income just below $43,000 in 2013.
Thompson also points out that promoters of work-for-less often point to the gains in income in work-for-less states while not mentioning that the wages are still much less than in non-work-for-less states. And I will add that those work-for-less honks NEVER bring up the lower social conditions in work-for-less states that the EPI study mentions, such as more people without health insurance and higher poverty and crime rates.
As a group, these (non-RTW) states have somewhat higher income but lower growth than either group of RTW states. It is perhaps telling that Indiana and Michigan, the two states that recently adopted RTW, are at the low end of the non-RTW states in average income and the growth of income.
Other statistical measures support these generalizations. Southern states have the lowest mean income and the lowest standard deviation suggesting that there is a commonality among them. The Western RTW states have the highest growth and the highest standard deviation of growth, reflecting their volatility. (I did not weight these calculations by populations). The southern RTW states are growing faster than the non-RTW states, but at the present rate it would take 50 years for the southern states to catch up in income.
So really the question you want to ask yourself is this. Does lowering wages and quality of life make for a worthwhile trade-off to “compete” with the states that have (right-to) work-for-less laws, or is keeping wages high and maintaining a good quality of life the better way to economic success in the 2010s? It certainly seems like the Walker/WisGOP administration is pointing to the first strategy, but a whole lot of evidence indicates that it’s probably not the right strategy.