WHY "RIGHT TO WORK" IS WRONG FOR ILLINOIS

PROTECTING WORKERS' RIGHTS

Local right-to-work zones would have overall negative impacts for Illinois workers.

First, workers earn more in fair-share collective bargaining economies. The preponderance of evidence indicates that incomes are between 2 and 6 percent lower in right-to-work (RTW) states. Compared to their counterparts in Indiana, a neighboring RTW state, Illinois workers earned 12.8 percent more in average hourly wages in 2014. There is also no evidence that higher unionization rates are associated with slower income growth across Illinois. Moreover, if half of Illinois’ counties adopted RTW regulations, total labor income in the economy would fall by $1.3 billion throughout the state.

Second, the impact of right-to-work laws on employment outcomes is mixed. Previous estimates suggest a marginal 0.4 percentage point increase in jobs due to RTW, but an effect of zero cannot conclusively be ruled out. The unemployment rate in western counties in RTW Indiana is higher than the unemployment rate in bordering eastern Illinois. Additionally, there is no evidence that a higher county-level union membership rate leads to smaller employment growth rate or establishment growth rate in Illinois counties. The predicted impact of 51 counties becoming right-to-work zones in Illinois is a small 2,348-job increase in the state.

A definitive consequence of enacting local right-to-work zones would be further erosion of Illinois’ middle class. Labor unions would be expected to experience a loss of 200,000 members if half of the state’s counties (excluding Cook County) became right-to-work areas. Since unions provide greater income benefits for nonwhite and female workers than for Caucasian males, this causal impact of right-to-work would increase both racial income inequality and gender income inequality. Good middle-class jobs would be replaced by low-wage openings in right-to-work counties, and employee income would be transferred to wealthy employers. As result, total economic output in Illinois would fall by $1.5 billion and cash-strapped local governments would experience a revenue loss of $80 million.

Ultimately, economic analysis reveals that local right-to-work laws would likely empower wealthy employers at the expense of employees, the middle class, and the taxpayer. Local right-to-work regulations would encourage free-riding, lower worker earnings, and reduce state and local tax revenues. The result would be a weaker Illinois economy. Improving the entire Illinois economy by increasing consumer demand, raising worker wages, and making investments in education and public infrastructure are better policy prescriptions with proven track records to help all counties in the state.

RTW Laws Have Had Negative Effects In Indiana, Michigan & Wisconsin

The movement to implement “right-to-work” (RTW) legislation has accelerated over recent years. Since 2012, RTW laws have been passed in Indiana, Michigan, Wisconsin, West Virginia, Kentucky, and Missouri. This report investigates the impact of RTW laws passed in three Midwest states for which there is available data – Indiana, Michigan, and Wisconsin – compared to a control group of three Midwest counterparts that remained collective-bargaining (CB) states – Illinois, Minnesota, and Ohio – from January 2010 through December 2016.

As of 2016, there were significant differences between the two groups of states:

  • Workers in Indiana, Michigan, and Wisconsin earned 8.0 percent less per hour on average than their counterparts in Illinois, Minnesota, and Ohio. The median worker earned 5.9 percent less.
  • The union membership rate was 11.5 percent in Indiana, Michigan, and Wisconsin compared to 13.7 percent in Illinois, Minnesota, and Ohio.
  • The unemployment rate was 4.9 percent in Indiana, Michigan, and Wisconsin, marginally lower than the 5.1 percent rate in Illinois, Minnesota, and Ohio.

These economic indicators could be due to many factors other than whether a state enacted a RTW law. Educational attainment, demographics, the higher cost of living in urban areas, occupation and industry of employment, and other regional trends could all influence outcomes. Thus, statistical analyses are performed to determine the independent effect that RTW laws have had on labor markets in the Midwest.

In Indiana, Michigan, and Wisconsin, the introduction of RTW laws has statistically reduced the unionization rate by 2.1 percentage points on average and lowered real hourly wages by a total of 2.6 percent on average.

RTW laws have varying impacts on worker wages depending on occupation. On average, RTW legislation has statistically reduced the hourly wages of:

  • Construction and extraction workers by 5.9 percent. • Workers in service occupations, including police officers and firefighters, by 3.1 percent.
  • Workers in office and administrative support roles by 2.7 percent.
  • Employees in retail and business sales by 2.4 percent.
  • Professional, educational, and health workers by 1.9 percent.
  • Modest gains for production workers of x percent were found but likely the result of increase unionization due to auto bailout

Similarly, the adverse impact of RTW on hourly wages has been largest for workers with levels of educational attainment that typically provide pathways into the middle class in the Midwest:

  • RTW has lowered the wages of low-skilled workers with high school degrees or less by 0.4 percent;
  • RTW has decreased the wages of workers with bachelor’s degrees, with associate’s degrees, and with some college experience by between 3.1 percent and 3.3 percent;
  • RTW has had no effect on the wages of workers with Master’s degrees or with professional or doctorate degrees.

Based on data over recent years, RTW has had particularly negative consequences for many middle-class workers in Indiana, Michigan, and Wisconsin. These include working-class Americans in construction, protective services, office support jobs, and those with two- and four-year college degrees.

Lawmakers in other states that are debating the merits of passing “right-to-work” laws should consider these research findings. Between 2010 and 2016, the enactment of “right-to-work” legislation reduced unionization and resulted in lower hourly earnings on average in states across the Midwest. Ultimately, “right to-work” laws have had negative consequences for many workers in Indiana, Michigan, and Wisconsin.

Analysis from the Illinois Economic Policy Institute. For further reading:

The Impact of “Right-to-Work” Laws on Labor Market Outcomes in Three Midwest States: Evidence from Indiana, Michigan, and Wisconsin (2010-2016)

The Economic Effects of Adopting a Right-to-Work Law: Implications for Illinois

The Impact of Local “Right-to-Work” Zones: Predicting Outcomes for Workers, the Economy, and Tax Revenues in Illinois

Free-Rider States: How Low-Wage Employment in “Right-to-Work” States Is Subsidized by the Economic Benefits of Collective Bargaining

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