Right To Work: A Failed Policy: A New Hampshire update

In 2011, New Hampshire legislators spent several months debating so-called “right-to-work” (RTW) legislation. To inform the discussion, the Economic Policy Institute issued a study that found that RTW has failed as an economic development strategy and is particularly unsuited to New Hampshire (Lafer 2011).

This report seeks to update legislators revisiting the RTW question on the evidence published since the last report. The new evidence strengthens the earlier findings: A right-to-work law could lower New Hampshire workers’ wages, reduce benefits, and threaten the state’s small business and health care sectors while doing nothing to boost job growth.

What the new evidence shows

Significant new information since the last report confirms that RTW legislation is harmful:

• Independent economists confirm that RTW lowerswages for nonunion workers.A new study by a team of economists from the University of Nevada and Claremont McKenna College (Eren and Ozbeklik 2012) estimates that the damage that RTW inflicts on nonunion employees is even greater than earlier research suggested. The authors estimate that wages of nonunion workers in Oklahoma fell 4.3 percent as a result of RTW. The wage losses of nonunion workers could even be higher in states such as New Hampshire, where a higher share of the workforce is unionized than in Oklahoma.
• Employers say RTW is less meaningful than ever. In the past year, Area Development magazine updated its annual survey of manufacturers—focused on small manufacturers, which make up roughly three-fourths of the survey sample. RTW, which had never ranked in the top 10 factors influencing location decisions, ranked 14th in 2009 and slipped to 16th in 2010 (Area Development 2011).
• Oklahoma think tank reports that RTW has failed to create the predicted jobs. The Oklahoma Council on Public Affairs, a think tank that played a leading role in promoting Oklahoma’s RTW law, reports that the state has lost manufacturing jobs (Moody and Warcholik 2011) and become a net job exporter (Moody and Warcholik 2010), with jobs leaving the state to almost all of Oklahoma’s neighbors, including non-RTW Colorado.
• Study shows RTW increases construction fatalities.A new study shows that, in addition to its negative impact on wages and benefits, RTW also makes for less-safe workplaces, including increased fatalities for construction workers (Zullo 2011). This fact is unsurprising given that unions spend significant resources on occupational safety and negotiate job safety procedures beyond those contained in OSHA regulations. Since both the stated goal and the clear impact of RTW are to undermine union strength, it is only logical that job safety would suffer as a result.
• Data show New Hampshire continues to outperform RTW states.As of December 2011, unemployment in New Hampshire was lower than in all but three of the 22 states that had right-to-work laws at that time (U.S. Bureau of Labor Statistics 2012).
• Signs of weakness appear in the “South Carolina model.”Both the American Legislative Exchange Council (Laffer, Moore, and Williams 2011) and the U.S. Chamber of Commerce (Eisenach et al. 2011) issued reports promoting South Carolina as a model of economic development due, in part, to its RTW law, with the Chamber praising the Palmetto State for its “strong pro-employment policies” (Eisenach et al. 2011, 11). But at the end of 2011, South Carolina’s unemployment rate was 9.5 percent—nearly double that of New Hampshire. South Carolina’s poverty rate was also double that of New Hampshire, while its median household income in 2010 was almost $25,000 lower. The rate of new business openings was 25 percent greater in New Hampshire than in South Carolina. When it comes to “new economy” firms—the high-tech, high-wage employers that every state seeks—New Hampshire is ranked the 11th most attractive in the country, while South Carolina ranks 39th.

What misleading claims on behalf of RTW fail to show

The past year also produced evidence that sheds light on several highly misleading claims that have been put forth on behalf of RTW:

• Job growth in Texas was entirely in the public sector, unrelated to RTW. In its Rich States, Poor States report, the American Legislative Exchange Council (ALEC) noted that RTW Texas has added more jobs in the past decade than any other state, declaring Texas “the state with the best policy to emulate” (Laffer, Moore, and Williams 2011, 13). What ALEC didn’t tell readers is that for the last four years, the state’s job growth has come entirely through government jobs, while the private sector shrank—clearly a trend that cannot be credited to RTW (Fletcher 2011).
• Claims that RTW influences corporate location decisions were based on 37-year-old evidence.A 2011 PowerPoint presentation by The National Right to Work Committee quotes an executive of Fantus, a site-location firm, warning that “approximately 50 percent of our clients … do not want to consider locations unless they are in right-to-work states” (National Right to Work Committee 2011). The committee neglected to mention that the quote comes from a 1975 report, and that by 1986, the firm’s executive vice president reported that the figure had fallen to 10 percent (Warren 1986).
• Population growth is unrelated to labor laws. ALEC’s report argued that faster population growth in the 22 states with RTW laws at that time showed that “people … want to move to places where workers have the freedom to decide whether they would like to join a union” (Laffer, Moore, and Williams 2011, 13). But national data show that most people move from one state to another to find more-affordable housing, to meet certain family needs, to retire, to move to or from college, to access better weather, or for other reasons unrelated to work (Schachter 2001; Molloy, Smith, and Wozniak 2010). There is no evidence that Americans move because of labor laws. In Texas, the largest RTW state, population growth was driven by “retirees in search of warm winters [and] middle-class Mexicans in search of a safer life,” explains Paul Krugman (2011), a winner of the Nobel Prize in Economics and columnist with the New York Times. Indeed, Texas experienced a greater influx of undocumented workers than any other state over the past decade (Pew Hispanic Center 2011). None of these dynamics is related to RTW.

Fifty years ago, Martin Luther King Jr. warned against “false slogans such as ‘right to work’…[whose] purpose is to destroy labor unions and the freedom of collective bargaining by which unions have improved wages and working conditions of everyone” (Economic Policy Institute 2012). His advice remains as timely today as when it was uttered— particularly for states like New Hampshire that have already charted a more successful path to economic growth.

—Gordon Lafer is an associate professor at the Labor Education and Research Center at the University of Oregon. His work concentrates on labor law and employment policy issues.

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