‘Right to Work’ Means Lower Wages

 

June 2015

 

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A new study by the Economic Policy Institute reinforces the numerous pitfalls of so-called right-to-work laws

 

According to a new Economic Policy Institute study, the most recent data confirms what the SIU and other labor unions have always known: In states with so-called right-to-work (RTW) laws, wages are lower than in states without such laws. The study concludes that the relationship between RTW states and lower wages is still statistically significant, even after controlling for various demographic and socioeconomic variables.

 

RTW laws allow non-dues-paying workers many of the benefits of representation without doing their part to help support the union. That means, for example, a non-dues-paying employee benefits from the same medical coverage negotiated by the union for everyone in the bargaining unit. Similarly, if a worker who doesn’t pay dues were to have a grievance, the union would have to take up that beef, using union resources just as they would for a dues-paying member.

 

There are 25 RTW states, primarily in the mid-west, south and south west.

 

According to the findings by Senior Economist and Director of Health Policy Research Elise Gould, Ph.D., and Research Assistant Will Kimball, wages in states with RTW laws are 3.1 percent lower than those in non-RTW states. That translates to an average of $1,558 less per year, but could mean much more in some areas.

 

As the researchers explain, “In this paper, we update that research [from a 2011 EPI study] and subject the results to a series of robustness tests. We utilize more recent data from the Current Population Survey, and employ a cost-of-living indicator from the Bureau of Economic Analysis that was only made available in the years following the release of [the older study]. Last, we subject our results to various robustness tests as suggested by Sherk (2015) regarding choice of specific explanatory variables. We find that the main results hold under any reasonable alternative specifications. Only extensive data-mining and non-standard specifications of wage equations can move the estimated RTW penalty to statistical insignificance.”

 

The findings also confirm an earlier study that proved the benefits of unions extend beyond their members. On a state-wide level, wages were higher in non-RTW states, and not just for union members. As stated in the report, “Where unions are strong, compensation increases even for workers not covered by any union contract, as nonunion employers face competitive pressure to match union standards. Likewise, when unions are weakened by RTW laws, all of a state’s workers feel the impact.”

 

In conclusion, the report found that even after factoring in all reasonably possible outside variables, the correlation between lower wages in RTW states and the law was undeniable.

 

“It’s abundantly clear that right-to-work laws are negatively correlated with workers’ wages,” says Gould. “Our model uses widely-agreed upon variables, and holds up under a series of tests to ensure that the model is sound and not being skewed by the inclusion or exclusion or particular variables or estimate technique.”

 

The study is part of the Economic Policy Institute’s Raising America’s Pay project, a multiyear research and public education initiative to make wage growth an urgent national policy priority. Raising America’s Pay seeks to explain wage and benefit patterns – and the role of labor market policies and practices in suppressing pay – and identify policies that will generate broad-based wage growth.

 

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