Economists: Right-to-work states have lower-income residents, poor labor relations

State Annual Personal Income & Employment

Just last month, the voters of Michigan rejected by a wide margin a Big Labor-backed ballot measure designed in part to prohibit state legislators from ever enacting a Right to Work law. Current polling indicates a majority of Michigan citizens support the Right to Work principle, which states that no one should ever be fired or denied a job simply for refusing to pay dues or fees to an unwanted union. And elected officials in Lansing now appear poised to defy Big Labor and give final approval next week to a measure making Michigan America’s 24th Right to Work state.

However, the Right to Work movement has yet to win over most of Michigan’s professional journalists and academics, who as a group remain far more supportive of compulsory unionism than the public at large. Journalists and academics are entitled to have and voice their own opinions, of course, but they also have a professional obligation to do their best to tell the truth and acknowledge important relevant facts, even if they undermine the viewpoint they are trying to advance.

Unfortunately, a number of Big Labor-“friendly” journalists in Michigan who are covering the campaign to prohibit compulsory union dues and fees have so far failed to meet that obligation. One example is Detroit Free Press business writer John Gallagher, who cited an array of ferocious Right to Work foes in a column late this week while giving barely any space at all to proponents. (See the first link above.)

Mr. Gallagher’s column left out several obvious and relevant facts. For example, he suggested Right to Work laws somehow lower incomes without acknowledging the basically undisputed fact that on average the cost of living is significantly lower in Right to Work states than in forced-unionism states.

As the National Institute for Labor Relations Research pointed out in a fact sheet published last month, in 2011 the cost of living in states where forced union dues are permitted was nearly 20% higher than in Right to Work states. (See the second link above for more information.)

The fact sheet added:

When 2011 disposable personal income (personal income minus taxes) data, as reported by the U.S. Commerce Department’s Bureau of Economic Analysis (BEA), are adjusted for differences in living costs, the results show that all of the seven states with the lowest real, spendable disposable incomes per capita in 2011 (Alaska, California, Hawaii, Maine, Oregon, Vermont, and West Virginia) lack Right to Work laws.

Of the nine states with the highest cost of living-adjusted disposable incomes in 2011, Iowa, Kansas, Nebraska, North Dakota, South Dakota, Texas, Virginia and Wyoming all have Right to Work laws. The sole exception among the nine is forced-unionism Illinois. While the Prairie State’s relatively high spendable average income is a positive, it should be noted the state is at the same time plagued by high out-migration of families with children and extraordinarily poor job creation.

Overall, the cost of living-adjusted disposable income per capita for Right to Work states in 2011 was more than $36,800, or roughly $2200 higher than the average for forced-unionism states. (Footnotes omitted.)

In addition to misleading his readers about Right to Work laws and average per capita personal income, Mr. Gallagher quotes an unsupported assertion by one academic implying that a higher share of the income distribution in Right to Work states goes to the wealthy. In fact, a disproportionately large share of tax filers reporting annual adjusted gross income of $200,000 or more live in a handful of forced unionism states:

Nine of the 10 states with the highest shares of tax filers reporting an AGI of $200,000 or more are forced-unionism states California, Colorado, Connecticut, Illinois, Maryland, Massachusetts, New Jersey, New York and Washington). The sole exception is Right to Work Virginia.

U.S. Commerce Department data also show that, when retiree-heavy Florida is excluded, dividends, interest, and rent make up a significantly higher share of all personal income in forced-unionism states than they do in Right to Work states. With the exception of Florida, dividends, interest and rent constituted 14.8% of all personal income in Right to Work states in 2011. In the 28 states that lacked Right to Work laws at the time, 16.1% of personal income consisted of dividends, interest and rent.

Right to Work supporters don’t begrudge any shareholder, bondholder, or real estate property owner the right to make a good return on his investment, but the fact is that Right to Work laws offer no special protection for the owners of capital. Rather, they protect the freedom of individual employees to refuse to bankroll a union that they sincerely believe doesn’t act in their best interest. What is Mr. Gallagher’s big problem with that?

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