The Effect of the “Right to Work” Law on Unions and Union Workers in the United States

8/12/2019 The Effect of the Right to Work Law on Unions and Union Workers in the United States

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Prepared by: Lisa Fell

The Effect of the Right to Work Law on

Unions and Union Workers in the United States

Capstone Co-ordinator: Ted Seath

Faculty Advisor: Gary Gannon


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Table of Contents

CHAPTER I ................................................................................................................................................... 1

DEFINITION OF THE PROBLEM .............................................................................................................. 1

Background Statement .............................................................................................................................. 1

Problem Statement .................................................................................................................................... 2

Purpose Statement .................................................................................................................................... 3

Limitations of Study .................................................................................................................................. 3

Reliability .............................................................................................................................................. 4

Availability ............................................................................................................................................ 4

Timeliness ............................................................................................................................................. 4

Precision Error ...................................................................................................................................54

Researcher Prejudice ............................................................................................................................ 5

CHAPTER II ................................................................................................................................................. 5

LITERATURE REVIEW ................................................................................................................................ 5

Selected Review of Literature ................................................................................................................... 5

The Effect of Right-to-Work Laws on Workers and Wages ................................................................... 5

Right-to-Work Laws are Beneficial to Unions and Union Workers.................................................... 10

Right-to-Work Laws Negatively Affect Unions and Union Workers................................................... 16

Free-Riders are the Cause of Union Demise ...................................................................................... 23

Free-Riders Make Unions More Accountable .................................................................................... 26Results Summary ..................................................................................................................................... 28

Right-to-Work Laws Weaken Labor Unions ....................................................................................... 28

Workers Gain Fewer Benefits from Economic Growth under Right-to-Work Laws............. .............. 28

The Broader Economic Effects of Right-to-Work Laws are Difficult to Separate .............................. 29

CHAPTER III .............................................................................................................................................. 29

CONCLUSIONS AND RECOMMENDATIONS ......................................................................................... 29

Conclusions ............................................................................................................................................. 29

Recommendations ...............................................................................................................................3130

WORKS CITED ........................................................................................................................................... 32


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CHAPTER I

DEFI NITI ON OF THE PROBLEM

Background Statement

The typical factory worker in the late nineteenth century worked ten hours a day, six days a

week. Unskilled workers were paid between $1.00 and $1.50 per day. Children were a significant

part of the labour force after the Civil War. Workplace accidents were common, and the idea of

compensating workers injured on the job was unheard of at that time. Unemployment was a

problem for unskilled laborers and it was not uncommon for a worker to be out of a job at least

part of a year. These statements refer to the working conditions of Americans prior to the labour

movement.

Although the idea of unionization was realized as early as 1648, it wasnt until 1903 that

congress enacted the Department of Labor and Commerce which separated ten years later and

became the United States Department of Labor.

Almost twenty years later, the National Recovery Act was passed by Congress which gave

most private sector workers the right to join a union and bargain collectively with their

employers. Subsequently, in 1935, the National Labor Relations Act (Wagner Act) established

the National Labor Relations Board.

In 1947 the Taft-Hartley Act was passed amending the Wagner Act by reducing rights of

workers to organize labor unions. Since then, between 1947 and 1985, twenty-one states have

enacted the law. It wasnt until sixteen years later that Oklahoma became a right-to-work state,

and most recently Indiana in 2012 and Michigan in 2013. In view of the fact that twenty-one

states had adopted the law over the past sixty-six years, the controversy between union and non-

union supporters of the law is fairly recent. For the purposes of this paper I think it is important


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to understand the original purpose of the Taft-Hartley Act, and its limitations compared to the

interpretations of the act today.

Problem Statement

The purpose of the Taft-Hartley Act was to decrease the gains being made by the labor

movement and to impose limits on labors ability to strike. Subsequently, amendments were

enacted which added to the National Labor Relations Act a list of unfair labor practices on the

part of the unions, which previously only prohibited unfair labour practices committed by

employers. The individual states were now free to pass right-to-work laws, one of which that

would prohibit closed shops. By definition a closed shop is a place of work where membership

in a union is a condition for being hired and for continued employment.(Merriam-Webster

Dictionary). The act also included the provision that even if a worker opts out of the union they

are entitled to full union representation.

This raised the argument by union members that non-union workers were receiving

representation for free, (hence the free-rider phenomena). Opposingly, non-union members did

not want to pay for causes the union supported. The solution was the agency fee. Agency fees

were pro-rated union dues in the amount unions would spend on advocacy for employee

grievances, minus the political activism non-union members didntwant to pay for.

Over the years apparent loop holes were found, none of which I was able to identify through

any research, that have allowed states that have adopted the right-to-work law to not only opt out

of union membership, but the choice to opt out of paying agency fees. In the non-right-to work

states the agency fee as mentioned above is still in effect.

There are three parts to the right-to-work law.

1.

Workers have been given the choice to opt out of the union.


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2.

Workers who have chosen to opt out do not have to pay union dues.

3.

Union leaders are still required to represent a worker who has opted out in the same

manner as they would represent a union worker who supports their union by paying their

union dues.

Pur pose Statement

The purpose of this study is to investigate the cause and effect of adopting the right-to-work

law in the United States and the effect it has on unions and union workers. The hypothesis is that

the right-to-work law is detrimental to the United States labour force and their unions. The

sources and reviews in this paper are primarily from refereed journals;written by Professors in

the field of Economics who have obtained their Ph.D.

During the literature review, five groups emerged. Group one, non-union supporters, upheld

the position that right-to-work laws increased worker wages. Group two, union supporters,

opposed the right-to-work law maintaining that right-to-work states showed no added economic

value to the individual or the economy of that state. The third group suggested that the right-to-

work laws were neither the reason for a statesstatesdecline or uprisal in economic conditions,

nor the demise of unionization. The fourth group explored the accountability the free-rider

phenomena had on union accountability. The last group saw free-riders as the cause of the union

demise.

Limitations of Study

This paper is based on secondary research, with the majority obtained from scholarly journals

written by experts in the field of Economics, and statistical information taken from the United

States Labor Bureau. The limitation of a literature review of this nature is the complete reliance

Comment [EU1]: ok

Comment [EU2]: good summary


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on previously published research. Additional limitations were reliability, availability, timeliness,

precision error and researcher prejudice.

Reliability

New and innovative data processing techniques have made the studies carried out in the

past obsolete therefore the data might not be as reliable and accurate as current research.

Secondary research does not allow the researcher to examine the primary source first hand;

therefore the researcher is exposed to another person's analysis and opinions, which may not

be as close to the truth as a primary source would be.

Availability

Most academic work is published in a journal article, book or thesis form. The availability of

these publications is not always free of charge. In this paper, only publications that could be

obtained free of charge were used. Although most of the journal articles in this paper have been

peer reviewed, some may be considered grey literature of which is informally published. The

limitation is that since it is not commercially published it is not as widely accessible. Another

reason that makes it difficult to determine cause and effect is that about 7 percent of private

sector United States workers are currently unionized.

Timeliness

Secondary research can be found on the subject of right-to-work laws as far back as 1947.

Due to significant changes in economic trends some of the research found would be considered

out-of-date and would be better used as a historical reference than a comparison to current

conditions or possible outcomes.


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Precision Error

There is always a possibility of calculation errors which can only be identified by the

person responsible for the primary research. The limitation occurs when using the secondary

research as the error(s) may not be identifiable.

Researcher Prejudice

The prejudice of the original researcher is an important factor to take into account when

conducting secondary analysis. The prejudice and the motivation of the primary researcher

will influence the outcome either positively or negatively.

CHAPTER II

LI TERATURE REVIEW

Selected Review of Literature

The Effect of Right-to-Work Laws on Workers and Wages

Keith Lumsden, Ph.D. and Professor of Economics, Stanford University and Craig Peterson,

Ph.D. and Professor of Economics, University of Utah researched the benefits non-union

member have by simply working in a unionized environment as opposed to a non-unionized

environment.

A unionized worker can easily see that unions usually deliver on their word in the form of

increased wages, benefits and a voice on behalf of the worker when interacting with

management. (Lumsden, Petersen).

Lumsden and Petersen suggest that the threat of unionization that looms over the head of the

employer benefits the non-union worker just as much as if they were working in a unionized

environment; but not as much as if they were a union member. The authors also suggested that

whether the employee works in a right-to-work state or not, the threat of becoming unionized is

Comment [EU3]: Limitations section

well done


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almost as powerful as being unionized. Further suggesting those right-to-work states are not the

cause of the union demise; the attitudes of the workers today, and their belief that they can do

better or just as well without unions are the root of the problem.

A population survey compiled by Henry S. Farber, Ph.D. and Professor of Economics,

Princeton University refutes Lumsden and Petersens claims that the threat of unionization

translates into increased wages. From 1977 through 2002 the authors investigated the extent to

which the threat of union organization had on increasing non-union wages. Using data from two

states that introduced the right-to-work laws showed that the threat of union organization had no

impact on wages and disputes the theory that right-to-work laws increase wages and quality of

life.

Benjamin Collins, Analyst, Labor Policy for the Congressional Research Service compiled

empirical research on the employment trends between right-to-work states and union security

states. His findings were that unionization rates in right-to-work states are less than half of what

they are in union security states. In the past decade, aggregate employment in right-to-work

states has increased while employment in union security states has declined. Finally, wages are

lower in right-to-work states than union securitystates. Collins states that historical research has

suggested that right-to-work laws have little influence on these differences.

Joel Seidman, Ph.D. and Professor of Economics, University of Chicago, and Bernard Karsh,

Ph.D. and Professor of Sociology, University of Illinois surveyed 114 members of the United

Steel Workers of America and asked the question Why did you join the union? The response

was that not one of the 114 union workers surveyed said to have joined the union to get higher

wages (Seidman and Karsh).


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Contrary to the belief that right-to-work laws decrease wages, or that union security states

increase wages, or that workers join unions largely to maximize their income may rest on a

misunderstanding of workersmotivations. If the motivation is not related to wages, then the

negative effect on wages in the right-to-work states may not present a realistic view that quality

of life for union workers is determined by wage alone. Other factors such as worker morale, and

promotion based on merit may be more significant drivers.

Further research conducted by William Moore, Ph.D. and Professor of Economics, Louisiana

State University agrees that there is debate as to the magnitude of influence the right-to-work

laws exert on unionization levels. There is little debate that there has been a long-term decline in

unionization that is independent of right-to-work laws. As shown in Table 1, union density has

declined in both right-to-work and union security states since 1983 (CPS). The share of workers

covered by a collective bargaining contract (i.e., union members plus covered workers who are

not members) has followed a similar trend.

Table 1. Union Membership Rates in Right to Work and Union Security States

1983 1991 2001 2011

Total 20.1% 16.1% 13.5% 11.8%

Right-to-Work 11.6% 8.5% 6.8% 5.7%

Union Security 24.3% 20.2% 17.5% 15.8%

Source: Current Population Survey. State-level data were developed by Barry Hirsch and David

Macpherson. In this presentation, CRS has divided the data into right-to-work and union

security states.

Note: 1983 is the first year for which state-level data are available. Data are limited to wage and

salary workers.


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passage of time, the proportion of Americans working for very large corporations has actually

declined as a percentage of the labor force due to the rise in globalization and huge growth in

international trade. This made it difficult for high-cost labor monopolies within a single nation to

sustain themselves against the forces of international competition.

Thus, the relative decline of manyof Americas heavy industries (automobiles and steel) is

often attributed to the high costs of labor arising from labor agreements dating back to an era

when international competition was far less intense. All of these changes in the labor market

environment serve to reduce the attractiveness of unions, and result in more employees and

employers opposing a union environment and accepting the right-to-work law.

Henry Farber, Ph.D. and Professor of Economics, Princeton University prepared a model of

the union status of workers. The model was used to determine reasons for the decline in

unionization; and possibly the reason for the right-to-work laws being so readily accepted.

The central findings were that the decline in unionization since 1977 was accounted for by an

increased employer resistance to unionization, probably due to increased product market

competitiveness resulting in a decrease in the supply of union jobs relative to demand. It also

showed that a decreased demand for unionization by non-union workers was due to an increase

in the satisfaction of non-union workers within their jobs. As well as a belief in non-union

workers that unions are not able to improve wages and working conditions (Farber S75).

Farbers findings suggest that the right-to-work laws are not the main reason for the decline in

unions; but merely a natural progression towards de-unionization based on negative pre-

conceived perceptions of the employer and the worker towards unions.

Further studies support the theories that suggests union members are generally less satisfied

with their jobs than non-union members. In a paper written by Nattavudh, Powdthave Ph.D, he


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states that since unionism leads to more bargaining power and improved working conditions,

one would expect it to lead to greater, rather than less, job satisfaction.

Freeman and Medoff (1984) argued that the negative relationship between unionism and job

satisfaction is a reflection of the role of unions as a voice for workers. According to Freeman

and Medoff unionized workers are encouraged by their union to express their discontent and

grievances to the management, thereby raising the level of apparent job dissatisfaction among

union members during contract negotiations. This is reflected in the finding that union members

often express lower job satisfaction than non-union members but express relatively high

satisfaction with their unions.

Duncan and Borjas proposed that unionized jobs are inherently unpleasant; thus, a union

wage effect can be viewed as a compensating differential for decreased job satisfaction overall.

Richard Vedder who initially conducted a study that concluded that the right-to-work law was

not the leading cause of the union demise, also conducted another study that supports Freeman

and Medoffsconclusions. Vedder concluded that right-to-work states have experienced above

average economic growth while states without such laws have seen below economic growth.

These two theories combined further support the positions of the three authors that worker

fulfilment and employee/employer engagement may be more important than unionization, and

lack thereof may be the underlying cause of the decrease in unionization.

Right-to-Work L aws are Beneficial to Unions and Union Workers

Thomas J. Holmes Ph.D. and Professor of Economics, University of Minnesota conducted a

study to determine if right-to-work laws were responsible for attracting manufacturing industry.

Holmes findings indicated that there was a substantial difference in states that had adopted the

right-to-work law.


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Manufacturing employment in the security states had virtually stayed the same since 1947.

However, manufacturing employment had increased 150 percent in the right-to-work states. Of

the ten states with the highest manufacturing employment growth rates, eight are right-to-work

states; and of the ten states with the lowest growth rates, none are right-to-work states. (Holmes

48).

The increase in manufacturing employment would account for the results of a study done in

2003 by W.R. Reed, Ph.D. and Professor of Economics, University of Canterbury. He examined

the wage effects of states with the right-to-work law. Using state-level data, Reed found that

right-to-work states have average wages that are significantly higher than security states. An

important distinction of this study was that it controlled for state economic conditions at the time

states adopted the right-to-work law. States that adopted right-to-work laws were generally

poorer than other states and the failure to control for these initial conditions may have been the

reason why previous studies had not identified a positive wage impact for right-to-work states

(Reed). Reeds study did not indicate the reason for the increase in wages in right-to-work states

or if the adoption of the right-to-work laws played any part in the increased wages compared to

security states. This would be an area of study that requires further investigation.

A statistical study to determine the effects the right-to-work law had on Oklahoma when they

adopted the law in 2001. The study was conducted by Stan Greer BA, MBA Senior Research

Associate University of Pittsburg. His findings were that prior to the adoption of the right-to-

work law Oklahoma had fallen behind security states in terms of average increases in income.

Following the adoption of the right-to-work law, The National Institute for Labor Relations

Research of the United States Census Bureau data revealed that of the fifty states Oklahoma was

the only state to have had a statistically significant increase in real household income of 3.7


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On December 11, 2012, Michigan become the 24thstate to adopt the right-to-work law.

However, enough time has not elapsed to conduct research to support the claim above made by

Greer.

The National Right to Work Committee, established in 1955, a non-profit, non-partisan,

singlepurpose citizens organization dedicated to the principle that all Americans must have the

right to join a union if they choose to, but none should ever be forced to affiliate with a union in

order to get or keep a job. Mark Mix, President stated in a newsletter people cannot afford to

ignore the fact that compulsoryunionism hinders economic growth. Trends in employee

compensation from 2000 to 2010 increased by an average of 11.8 percent in right-to-work states.

That increase is nine times as great as forced-unionism states.

In 2010 the average compensation per private sector employee in a right-to-work state was

$56,830. Thats roughly $1,100 more than the average for security states (Bureau of Labor

Statistics and Quarterly Census of Employment and Wages). These numbers would suggest that

employers and employees are able to negotiate better wages and benefits without union

involvement.

Eric Fruits, Ph.D., economics, finance and statistics expert and Randall Pozdena, Ph.D.

performed a comprehensive study that covered all fifty states and the District of Columbia.

Their findings were that states with right-to-work laws grew faster than states with forced

unionism. They then in turn attempted to do a comparison and predict what would have

happened to state employment and income growth in Oregon had they enacted the right-to-work

law in 1985, the same year as Idaho.

The data used was employment statistics, wage statistics and regional economic and

demographic characteristics of the states. The study employed regression analysis which


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measured the relationship between employment growth and income growth for a given state at a

given point in time and the explanatory variables including right-to work status in each of the

various states. Their findings were that if Oregon had enacted the right-to-work law in 1985

employment would have been 14 percent higher (233,000 more jobs), personal income would

have been 10 percent higher ($14.6 billion) and wage and salary income would have been 13

percent higher ($9.7 billion) (Fruits, Pozdena).

The common theme that appears in all studies done on the benefits of the right-to-work laws

is that individuals will enjoy increased economic gain. This is further enforced by the following

two statistical studies.

Amy Payne, Assistant Director of Strategic Communications at the Heritage Foundation

commented on a recent poll that showed that a quarter of Michigans government employees

would opt out of unions under a right-to-work law. Losing those members would cost

Michigans unions more than $100 million annually (Sherk)

Workers have so much to gain: right-to-work would let Michigans workers keep that

$100 million for themselves and their families. Making union dues voluntary makes

union organizers less aggressive, they get less financial benefit from organizing new

firms, because they cannot force workers to pay them. Union organizing attempts drop 40

percent to 50 percent after states pass a right-to-work law. That in turn attracts business

investment. Employers want to know unions will leave them alone if they treat their

workers well. As a result, right-to-work states have lower unemployment rates and more

manufacturing jobs(Payne).

Gerald Lutkus, Partner at Barnes and Thornburg LLP and member of the firms Labor and

Employment Law and Litigation Department stated that early statistics indicated that Indianas


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passage of right-to-work laws is already showing benefits to the state(Indiana Economic

Development Corporation (IEDC).

The IEDC has reported that ninety-one companies have told the agency that right-to-work

laws have been a factor in their decision making process on the location of new projects. Out of

that group, the IEDC says that sixty-four companies are well along in the development process

and are projected to have the potential of more than 8,390 new jobs and more than $2.7 billion in

investments if they come to realization.

The IEDC report also indicated that thirty-nine companies have committed to new projects in

the state since right-to-work laws came into effect. This is estimated to produce more than 4,500

new jobs and an investment of more than $1.6 billion. Information from the IDEC can be found

in the latest issue of BizVoice published by the Indiana Chamber of Commerce (38 & 39).

In addition, statistics recently released by the United States Bureau of Labor Statistics

indicated that the percentage of Indiana private sector employees who were members of unions

dropped from 11.3 percent in 2011 to 9.1 percent in 2012. In actual numbers that translates to a

drop from 302,000 to 246,000. In addition, the percentage of public sector workers represented

by unions dropped from 12.4 percent to 10.0 percent.

The material presented thus far has been limited to the examination of the monetary effects

and behavioural effects that right-to-laws have had on non-union workers in unionized

environments. The following comprehensive list provided by the Joint Economic Development

Council of Obion County provides further information to support the benefits for an employer

and an employee in a state that adopts the right-to-work law.

Benefits to an Employer in a Right-to-Work State

Free to manage a company without outside interference.


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No assets devoted to labor negotiations or matters such as mandatory disciplinary

procedures.

Increased flexibility to establish wages and compensation levels.

Increased flexibility to control workforce.

Increased opportunity to compete for quality employees.

Increased opportunity to compete for business.

Benefits to an Employee in a Right-to-Work State

Free to decide how to spend own money, earnings not spent on union dues and expenses.

Free to decide own representation.

Overall higher standard of living.

Greater employment opportunity.

Employment protections are governed by state law, not by union decisions.

Preserves employees choices.

Right-to-Work Laws Negatively Aff ect Unions and Union Workers

Columnist Harold Meyerson, named one of the top fifty most influential columnists in the

nation compared the wage gap between right-to-work states to a non-unionized environment in

China. Since China has a communist government, unionization was not probable, however; Qi

Jingmei, a fellow researcher for a government think tank said that the gap between profits and

wages in China is soaring; however, if China permitted the establishment of unions, wages

would rise. Meyerson stated that the right-to-work laws are diminishing the number of workers

who can bargain for a raise. In an already stagnate environment, with a large wage gap, right-to-

work laws just widen the gap. The similarities showed that both scenarios led to a decrease in

wages, suggesting that in a country where unionization is prohibited, the inequality is very clear


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and much the same as right-to-work states. This would suggest that without unionization workers

would be negatively impacted through wages, benefits, health and safety, and being heard by

their employer.

Gordon Lafer, Ph.D. and Political Economist, and Associate Professor of Economics,

University of Oregon and Sylvia Allegretto, Ph.D. Labor Economist, University of California

conducted a study using the exact same data Richard Vedder used to substantiate his claim that

right-to-work laws were not the leading cause of union demise. The difference was that rather

than using the overall average, the growth rates for each individual state were shown with the

right-to-work states shown in gray.

The data showed that there was no clear relationship between income growth and right-to-

work laws. The two fastest growing states were Massachusetts and Connecticut, both union

security states with relatively high rates of unionization. At 88.9 percent, Massachusetts growth

rate was almost 50 percent higher than the average of all right-to-work states. The results of the

data found that ten of the union security states, nine states plus the District of Colombia, all

experienced income growth over this period that was greater than seventeen of the twenty-two

right-to-work states (Economic Policy Institute).

Lafer and Allegrettos findings were basically identical to Vedders, although they had taken

different positions on the benefits or lack thereof of the right-to-work laws. All authors came to

the conclusion that right-to-work laws were neither the cause of union demise nor the reason for

income growth.

Richard Freeman, Ph.D. Harvard University and James Medoff, Ph.D. Harvard University

both agreed that positive attributes of unions included beneficial economic and political effects.

According to the authors, industrial relations experts have debated the ways in which collective


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bargaining can induce better management and higher productivity. Unions can increase the

development and retention of skills, improve morale and become the voice of the people so that

management cannot arbitrarily make bias decisions.

David Ellwood Ph.D. and Professor of Political Economy and Glenn Fine, Inspector General

of the United States Department of Justice examined the impact on right-to-work laws on union

organization. Using detailed annual data the authors were able to estimate an accelerator model

of the flow into unionism. The results signified an immediate reduction in union organization of

approximately five to ten percent with the induction of the right-to-work law (Ellwood & Fine).

Based on Ellwood and Fines study, a reduction in union organization due to the adoption of

the right-to-work law would have a negative effect on the positive outcome mentioned below by

Thomas Murphy. If union membership is correlated with health and safety, addiction and quality

of life, then one could assume that a decrease in unionization would be detrimental to not only

unions, and union workers, but society as a whole.

A statement by the Chairman of General Motors, Thomas Murphy, provides a positive

outlook on unionism.

The United Auto Workers (UAW) may have introduced the sit-down strike to America,

but in its relationship with General Motors (GM) management it has also helped

introduce mutually beneficial cooperation. What comes to my mind is the progress we

have made, by working together, in such directions as providing greater safety and health

protection, in decreasing alcoholism and drug addiction, and in improving the quality of

work life(Murphy).

S.E. Abraham Ph.D. and Professor of Marketing, State University of New York and Paula

Voos, Professor of Economics, Rutgers University conducted an empirical examination of


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whether or not stockholder wealth rises in response to passage of a right-to-work laws.

Stockholder wealth rose when Louisiana passed such a law in 1976 and when Idaho did so in

1985-1986 (Abraham, Voos). Presumably this occurred because investors anticipated higher

future profits with weaker labor unions or a lower probability of future organization. The results

from this study showed that these laws indeed hampered labor union activity, but increased

investment for the employer, which in turn aids in economic growth.

However, it also indicates that the employer may not have had the best interest of the

employee in mind when supporting the right-to-work law. Investors affect a companys bottom

line, and if a right-to-work state is an attractive option for most investors it would only make

sense that a company would want to adopt that law; regardless of the impact on employee wage,

benefits and quality of life.

Supporting this theory isLawrence Mishel, Ph.D. and President of the Economic Policy

Institute. Mishel completed a study in 2001 which found that the nominal effect of working in a

right-to-work state results in a six percent to eight percent reduction in wages. After controlling

for cost of living differences, there was still a 3.8 percent wage penalty for living in a right-to-

work state.

The Economic Policy Institute receives their funding from unions, mainly the American

Federation of Labor and Congress of Industrial Organizations (AFLCIO) so this review may be

considered biased.

Another study with similar findings was conducted by Mishel. The study was based on a

sample of approximately150,000 salaried workersbetween the ages of 18-64, with average

hourly wages of $15.54 and median hourly wages of $12.25. What made this analysis unique is

that it used a regression model to pair and then compare the wages earned by similarly situated


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workers in right-to-work and non-right-to-work states. The study used the workers industry,

occupation, and demographic information to group workers into comparable groups. The study

clearly showed that by adopting the right-to-work law workers were impacted by lower wages

thus reducing overall morale, and quality of life.

Lonnie Stevens, Ph.D. and Professor of Economic, Hofstra University conducted a study that

examined the differences in business and economic conditions across states that had enacted

right-to-work laws versus those states that had not enacted them. Pooled data over the periods

1990, 1995, 2000 and 2005 were used for the study. The hypothesis was that right-to-work laws

would increase a states economy because businesses would be more likely to move to states

with right-to-work laws. The reason for this would be that employers would have more

flexibility and control over their business decisions. The results were measured by the number of

business and the ratio of new firms to total firms there was no evidence that existing companies

or new companies had moved from non-right-to-work states to right-to-work states.

The study also concluded that from a states economic standpoint right-to-work states have

little or no gain in employment or real economic growth. It was also found that personal income

and wages are lower in right-to-work states and employers incomes were higher (Stevens). It

was also found that there was more self-employment in right-to-work states, which could be

viewed as positive, however, the reason for entrance into self-employment was considered.

Some feel that people chose self-employment because of the independence, and self-

development. Others feel that people have been pushed into self-employment because of

restructuring, downsizing and dissatisfactiondirectly related to the demise of unionization,

which had effected their wages, and general fulfillment they received in their positions.


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Based on statistics from the U.S. Bureau of Labor, Chris Edwards, BA, MBA and top expert

on federal and state tax and budget issues for the Cato Institute determined that unionized public

sector workers have much higher average wages and benefits than non-unionized public sector

workers. The Bureau of Labor Statistics data (see Table 2) shows that union members have a

thirty-one percent advantage in wages and a sixty-eight-percent advantage in benefits.

Table 2. State and Local Workers, Union vs. Non-union, 2009

Average Compensation in Dollars per Hour Worked

Union Non-Union Ratio

Total compensation $47.46 $33.33 1.42

Wages and salaries 29.90 22.86 1.31

Benefits 17.57 10.47 1.68

Health Insurance 5.91 3.07 1.93

Defined-benefit pension 3.98 1.94 2.05

Defined-contribution

pension

0.25 0.36 0.69

Other Benefits 7.43 5.10 1.46

Source: U.S. Bureau of Labor Statistics. Data for June 2009.

This information would support the hypothesis that the right-to-work law is detrimental to the

United States unions and union workers by proving that without a union, total compensation is

$14.13 less per hour than a union worker. That figure translates to $113.04 per day, $565.20 per

week, $2,260.80 per month and $27,126.60 less per year (U.S. Bureau of Labor Statistics). Such

a drastic difference in pay would definitely have a negative impact on the non-union workers

quality of life.


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Roland Zullo, Ph.D. Research Scientist for the Institute of Labor and Industrial Relations at

the University of Michigan researched the impact of right-to-work laws on states that have

recently adopted them.

Zullo begins with the premise that any collective endeavor needs resources, and that social

scientists that study collective behavior often refer to this as the collective action problem.

Workers who reap the benefits of union representation without having to pay union dues have an

incentive to avoid those contributions if they believe the movement will succeed without their

support.

Union security provisions are the rules that resolve the collective action problem such as

mandatory union dues. Right-to-work laws allow open shops that are problematic because they

present incentives for workers to free ride. Ultimately the financial support necessary to

operate a union is undermined.

Zullo predicts that if Michigan becomes a right-to-work state, the unions and the union

workers will be detrimentally affected. Zullos first example examines the role that unions play

in the economic system as a bargaining agent for workers. Unions use their collective power to

gain a more equitable share from production and negotiate rules that improve the level of justice

at work. Under right-to-work laws, existing unions would direct resources toward internal

member mobilizing in an effort to retain this role. This redirection of resources would mean

fewer funds for new member organizing, and Michigan would likely experience a diminished

threat effect.

Labor unions have a long history of pursuing legislation that benefits all wage earners with

higher minimum wage laws, universal health care, and health and safety protections. The unions

leverage to obtain these gains is directly related to their ability to mobilize support during the


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political cycle. Under right-to-work laws it is expected that the resources for these activities will

diminish, resulting in lower voter turnout among the working class and a political system that is

less responsive to Michigans non-rich. Finally, labor unions are active in civic affairs such as

charitable organizations, and funding popular community activities. This is another area that

under the right-to-work laws that should be expected to decline.

Findings by Carroll, Stevens and Murphy were similar, but also included the addition of the

free rider phenomena which has had a drastic effect on the unionsability to organize and

acquire new members due to lack of funding.

Zullos concludes that the right-to-work laws take away mandatory rules that unions need to

maintain their financial positions by allowing free riders. This in turn affects not only the union,

their workers, but the community and their families.

Free-Riders are the Cause of Union Demise

G.A. Garofalo, Ph.D. and Professor of Economics and D.M. Malhotra Ph.D. and, Professor of

Economics both at the University of Akron derived an empirical model in 1992 which traced the

effect of right-to-work laws on the workers decision to join the union. Their findings were that

right-to-work states generally had lower union membership. This is caused by outlawing agency

shops where non-union workers can still benefit from union representation without bearing any

cost, and thus have an incentive to become free-riders. As a result it becomes more costly to

organize and sustain union membership (Garofalo & Malhotra). This in turn results in less

unionized workers and less negotiating power.

Russell Sobel, Ph.D. and Professor of Economics, West Virginia University did a study in

1995 where he divided free riders into two categories. The first category he called true free-

riders and the second induced free-riders. The difference between the two was that a true free-


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rider valued union representation, and would join the union if dues were compulsory. An induced

free-rider did not value union representation and would rather seek alternative employment

before paying union dues. Standing alone, this information does not really conclude anything.

However, when Sherks research is taken into consideration which found that in right-to-work

states, approximately 70 percent of free-riders were induced free riders; which would indicate

that only 30 percent of non-members were true free- riders. Therefore, this suggests that the

actual negative impact of the free-rider phenomena is not a direct result of the right-to-work law,

but a result of the negative connotation workers have in general towards unions.

The differences suggested that if required, a commitment to join the union by the true free-

riders could suggest that this leads to a decreased number of employees paying dues, and an

increased due for those who do pay. Alternatively, remaining workers may decline to pay higher

dues, which may restrict the representation services available to them. The share of covered non-

paying workers compared to paying workers is higher in right-to-work states.

Another school of thought is the bargaining power hypothesis which is also related to the

free- rider phenomena. It suggests that right-to-work laws reduce the bargaining power of unions

and lead to reduced membership in unionization (Mishel). Under this theory, unions have less

incentive to organize since they know only a portion of the workers covered by the collective

bargaining contract will pay the agency fees. This reduces organization and in the long run, the

prevalence of union jobs. Empirical support comes from a 1987 study by Ellwood and Fine,

which looked at changes in new union organizing efforts after the passage of right-to-work laws.

The study found that in the five years after states passed a right-to-work law, union organization

fell 28 percent and union organizing success fell 46 percent.


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Russell Hardin, Ph.D. and Professor of Politics, New York University provided two view

points from two respected professors on the effect of free-riders.

Free riding on the provision of a collective good is often characterized as morally

wrong. If others are cooperating for mutual benefit and one benefits from their

cooperation, then one has an obligation to do their share(H.L.A. Hart 185-6).

Unlike public officials who have taken an oath, citizens have no obligation to obey the

government, although they surely can benefit substantially from its actions(Rawls).

Harts view point suggests that by not contributing to the collective good, an act is being

committed, which could have negative effects on the morale of the rest of the group.

Substituting government for unions, Rawls contends the act of not contributing to the collective

good is the right of the party and they have no obligation to proceed any differently, and should

not feel pressured to do so.

Both viewpoints present valid points; however, further study would be beneficial to answer

the question what is less detrimental to the union and union worker, the decrease in morale or

freedom of association?

John Moorhouse Ph.D. and Professor of Economics, Wake Forest University conducted a

study regarding the free-rider phenomena. He was quoted saying Section 9(a) of the National

Labor Relations Act of 1935 provides that a union, established by a majority vote of the

employees in a bargaining unit, must accord all employees in the unit the benefits of union

representation.

Many students of the American union movement interpret this legal obligation as potentially

threatening to union security because of the free-rider phenomenon. Typically, they argue that

since an employee receives union benefits regardless of his membership status, economic self-


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interest will lead him to accept the benefits without incurring the pecuniary and non-pecuniary

costs of joining and supporting the union and the employee becomes a free-rider.

From the individual employees viewpoint, he can be in one of three situations from best to

worst; (1) a free-rider in an organized shop; (2) join and support the union; or (3) work in an

unorganized shop. The free-rider has an incentive to vote for the establishment of a union, but no

incentive to support it. In other words, the individual employee has little incentive to consider the

costs he imposes on fellow workers when he becomes a free-rider. He looks only to his self-

interest, which is served by avoiding union affairs and paying dues.

Further statistical studies have supported this theory. In 2012, 15.9 million wage and salary

workers were represented by a union (Bureau of Labor Statistics). This group includes both

union members, 14.4 million and workers who report no union affiliation but whose jobs are

covered by a union contract, 1.6 million. Private- sector employees comprised about half,

814,000 of the 1.6 million workers who were covered by a union contract but were not members

of a union. These statistics prove that many workers do not join their union but gain by receiving

representation.

Free-Riders Make Unions More Accountable

James Sherk, Senior Policy Analyst for Labor Economics at the Heritage Foundation suggests

the right-to-work laws benefit both non-union and union workers. In the article Sherk states that

without right-to-work laws unions are able to negotiate contracts that require employees to pay

union dues or be fired. Workers have a right to unionize if theychoose, but if workers dont

support a union, the law shouldnt force them to pay dues(Sherk).


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Sherk also stated that by giving workers the option to opt out of union dues holds unions to a

higher standard. When laws force workers to pay union dues, unions have less of an incentive to

represent workers well.

Supporting this theory, a recent news article in the Maine Public Broadcasting Network cited

unions as being similar to a monopoly, which is being broken down by the right-to-work laws,

and benefits the employee and the employer. The article suggested that breaking down the

monopoly would force unions to compete in the marketplace to gain the support of people, and

allow the people to decide if the union is offering a service of value that they want to pay for.

By forcing unions to become less aggressive and more competitive the worker and the

employer will receive better representation from the union; as they will have to prove themselves

and their worth. In turn, society will also benefit from higher productivity, and fewer strikes.

In a case study, the United States Supreme Court upheld a decision that workers were

responsible to pay only the portion of the agency fee that accounted for union representation.

Case studyCommunication Workers vs. Beck

A decision by the United States Supreme Court held that in a union security agreement unions

are authorized by statute to only collect from non-members those fees and dues necessary to

perform its duties as a collectivebargaining representative. This became known as Beck

Rights. In 1968 the Communications Workers of American (CWA) used union members dues,

in part, to support Vice President Hubert Humphreys campaign for President of the United

States and Senator Joseph Tydings re-election campaign.

Harry Beck was a maintenance worker who protested the use of his union dues for a political

cause he did not believe in and asked for a refund of his union dues. The union refused arguing

that using union dues for political expenditures was appropriate and legal. In right-to-work states


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the Beck case has made it more difficult to isolate and harass people for deciding not to pay

union dues.

Resul ts Summary

Once the research was completed a few broad assumptions emerged. Right-to-work laws do

weaken labor unions. The laws appear to tilt the balance of power so that workers reap fewer of

the gains from growth. It is still difficult to find definitive evidence that right-to-work laws help

or hinder a states overall economy.

Right-to-Work Laws Weaken Labor Unions

This is one thing the left and right agree on. If unions are barred from requiring workers to

pay for the cost of representation, there becomes a free-rider problem. Eventually, unions are

drained of funds and cant launch as many organizing drives or wield influence.

A 1998 survey of the econometric literature by William J. Moore found that right- to-work

laws lead to more free-riding behavior among employees. That in turn leads to a decline in

unionization drives, in organizing successes, and ultimately in overall union density.

Overcoming this adversity seems unlikely. One of the most powerful unions in the country,

Culinary 226 in Las Vegas operates in a right-to-work state and receives close to 100 percent

compliance of dues (Yeselson). However, the research suggests this is an exception, not the rule.

Workers Gain Fewer Benefits from Economic Growth under Right-to-Work Laws

Supporters argue that the right-to-work law will attract more businesses to a state. Opponents

retort that weakening unions will lead to an erosion of wages. The research suggests that after

controlling for a host of factors, right-to-work states have lower wages on average than union

security states.

Comment [EU4]: Very good observat


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Both arguments might be correct. A study included in this paper suggested that right-to-work

laws do help boost the number of businesses in a state, but the gains mostly went to owners,

while average wages went down. Although right-to-work states may be more attractive to

business this does not necessarily translate into enhanced economic verve in the right-to-work

state if there is little trickle-down from business owners to the non-unionized workers.

The Broader Economic Effects of Right-to-Work Laws are Difficult to Separate

When studying the effects of the right-to-work laws the research showed that there is

difficulty in distinguishing the effects of the right-to-work laws from state characteristics, as well

as other state policies that are unrelated to these laws. For instance, in 2001, Oklahoma passed a

right-to-work law and soon saw its manufacturing base shrink. However, how much of that was

due to right-to-work, and how much as a result of globalization? The bottom line is that the

strength of unions isnt the only factor.

Setting all the research aside, the right-to-work law in Michigan is an indicator of a broader

trend in the United States. Michigan is one of the most heavily unionized states in the country,

with 17.5 percent of workers belonging to a union. The United Autoworkers is one of the most

storied unions in the country. If Michigan, of all places, is no longer safe from widespread

revisions to its labor laws, then none of the remaining union security states are immune.

CHAPTER I II

CONCLUSIONS AND RECOMMENDATI ONS

Conclusions

After reviewing the literature it is apparent that the real controversy over the right-to-work

law is not the workers fear of earning less, it is the unionsfear of becoming obsolete. The right-

to-work law prohibits closed shops, which in turn prohibits the union from forcing a worker to

Comment [EU5]: Good concluding st


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join the union. However, the Charter of Human Rights and the Freedom of Association also

protect workers from reprisal for not joining a union. The idea that adopting the right-to-work

law is the only way to avoid union membership is furthest from the truth.

The only real difference is that if a state decides to adopt the right-to-work law non-union

workers do not have to challenge the agency fees. If a worker decides to work in a right-to-work

state, that step has been done for them through the provisions of the law. If a worker decides to

work in a security state, they still have the right to challenge the fees and become free-riders.

The research supports that the unions claim the right-to-work laws influence free-riders,

which in turn weaken the unions. To some extent that is true, however, it must be considered that

if all workers could opt out of agency fees as easily as they could in right-to-work states there

would be more workers who choose to not support the union.

Like many economic issues, right-to-work has been endlessly debated with various data

available to either prove that the law bolsters or hinders economic growth. The studies done and

presented in this paper try to isolate right-to-work from the myriad of other cultural, political,

geographic and economic factors that affect growth have yielded conflicting results. For

instance, it is hard to argue that Mississippi is the poorest state in the country simply because of

its right-to-work law, just as it is hard to argue that West Virginia, the second poorest state is

languishing simply because it lacks on.

This nationwide decline in union density further complicates analysis of right-to-work laws.

For example, a right-to-work states decline in unionization could be attributable to the right-to-

work law, other state-level factors or it could be influenced by a broader decline in unionization

across the country (Moore 450).

Comment [EU6]: Good point


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Recommendations

Further primary research is needed to examine the effects of the right-to-work law using the

three most recent States, Michigan, Oklahoma and Indiana. This would present a more accurate

picture of the cause and effects of the right-to-work law on states that had adopted the law within

the last fifteen years. Environmental trends have significantly changed in the past fifty years,

which signifies that most of the empirical evidence used is out-dated based on changing

economic conditions. From a human resources perspective a recommendation for researchers

would be to first complete an environmental scanning of the global environment which includes

environmental monitoring, forecasting and assessment. Byscanning the global environment,

which comprises industries, markets, companies, clients and competitors a more concise analysis

can be conducted on the impact of the right-to-work laws by removing other environmental

trends that may affect the results either positively or negatively.

Furthermore, regardless of whether or not a state decides to adopt the right-to-work law, one

thing remains the same; unions are being unfairly targeted and deprived of their fees needed to

sustain a healthy union environment due to government interference. One should have the

freedom of choice, but that choice should not come at the expense of another. What if anything

in our society today is free? Is it right to accept a service and not pay for it? Would you go to

work every day and not expect a pay cheque at the end of the week? The agency fee should be

re-instated for those who do not want to join the union but are willing to accept representation if

required. The free-rider problem is ruse to weaken the unions until they cease to exist.




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Documents

The Effect of the “Right to Work” Law on Unions and Union Workers in the United States