Study: States with right-to-work laws experience better economic growth
A team of economists from Central Michigan University and Northwood University released a study Thursday that suggests Michigan’s economy could benefit from right-to-work laws.
Timothy Nash, vice president of strategic and corporate alliances at Northwood University, led the team in comparing existing metrics such as personal income growth, job growth and corporate tax rates against the national average and states with and without right-to-work laws.
“One of the main focuses of the study was to determine to what extent do RTW laws help the economies of different states, and how much of a state’s economic success is simply due to how business friendly it is,” Nash said.
Debasish Chakraborty, professor of economics and director of the MBA program at CMU, was a major contributor to the study and was responsible for developing strategies to compare competitiveness among different states.
“Right-to-work laws simply mean that you don’t need to be a member of a union in order to get a job. If a company has an existing union for its employees, RTW laws would protect that workers’ right to not join the union,” Chakraborty said.
Labor unions around the country oppose right-to-work laws because workers under a union-negotiated contract can enjoy the benefits that contract brings without paying their dues to the union.
However, the study suggests that states with right-to-work laws put in place had a better overall economy than states that don’t have such laws, including Michigan.
The study looked at eight different aspects of Michigan’s economy and compared them to the economies of other RTW states. Economic categories included growth in personal income, real gross state product growth, net population migration, state job growth, total government employees per 10,000 people, monthly new businesses started per 100,000 people, industrial cost of natural gas and the cost of automobile insurance.
Personal income per capita growth in Michigan grew only 20.3 percent from 2000-10, while the U.S. average income grew 36.4 percent over the same period. Personal income growth over the period grew at just under 40 percent in states that had RTW laws.
While the U.S. economy grew from an overall Gross Domestic Product level of more than $8 trillion in 1998 to just under $15 trillion in 2011 — a 71 percent increase — Michigan’s economy grew by only 26.5 percent over the same period. Gross state product grew at an average rate of 85 percent over the same period in states that had RTW laws.
Michigan’s total population migration from 2000-10 was among the worst in the United States with a loss of 554,374 people. RTW states experienced a net positive migration of just under six million people combined for the 23 states that do have these laws.
In addition, Michigan’s job growth declined 16.9 percent, while the national average grew at a two-percent rate. The average job growth for RTW states was 3.9 percent.
While Michigan was close to the national averages for total government employees per 10,000 people, monthly new businesses started per 100,000 people and the average industrial cost of natural gas, the average price for annual automobile insurance in Michigan was $4,490, while the average for RTW states was only $1,580.55.
“Michigan is headed in the right direction, and we’ve definitely made some meaningful progress over the past year,” Nash said. “Michigan received the second largest amount of bailout dollars, and now that those funds are gone, the challenge is going to be seeing if Michigan can sustain the progress it experienced without help from the federal government.”
While these results might seem as if RTW laws are a quick fix for Michigan’s economy, the results are a little misleading, Chakraborty said, since it is difficult to isolate the precise effects of RTW laws from other economic forces.
“Right-to-work laws could definitely have a positive impact on Michigan’s economy and make it more ‘business friendly,’ however, it is not by any means a quick or ‘ultimate’ fix for our economy,” he said.
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