February 6, 2014

CHICAGO (Feb. 6)—In his recent State of the State address Gov. Bruce Raunersaid he’ll seek a local option for so-called “right-to-work” (for less) legislation from the General Assembly. Rauner said the establishment of “right-to-work zones” would make Illinois more attractive to businesses.

As many know, so-called “right-to-work” laws are mislabeled because the only “right” they confer is the right to work for lower wages. Under a right-to-work regime, employees in unionized workplaces cannot be forced to pay union dues, although they enjoy full union benefits. Eventually, a union’s finances and influence erode, crippling its capacity to secure a living wage and a safe workplace for its members.

That’s the real reason why Gov. Rauner wants to seek RTW “Employee Empowerment” zones throughout Illinois, to help big business by handcuffing unions and their members. The term “Employee Empowerment” also is a deliberate mislabeling: Under “right-to-work, it’s the employers, not the employees, who gain power.

Claiming that many Illinois businesses have moved to neighboring RTW states such as Indiana and Michigan to take advantage of their RTW laws, Rauner claims that if Illinois had a local option for RTW laws the state would become “more competitive” and would do a better job of retaining its existing industries while attracting new ones.

Bold claim, but is it true? Does RTW legislation really attract more businesses and generate more jobs? Do employers really seek to locate in states where an RTW law makes it difficult for workers to join a union and for unions to collect dues from their members? Do RTW laws really make a state more “economically competitive?”

A recent study from the University of Illinois suggests the claims are bogus and that RTW legislation actually degrades a state’s economy.

The most striking conclusion in the October 2013 study is that states with RTW laws don’t necessarily generate more jobs. The research team from the U of I’s School of Labor and Employment Relations surveyed RTW states nationwide and found the results on employment “mixed:” Some RTW states experienced a slight growth in jobs, while others did not.

“In the private sector, RTW laws are associated with a 0.4 percent increase in employment each year, but the effect diminishes over time,” the researchers reported. “”The law’s ultimate effect on Illinois employment may at best be slightly positive but temporary and at worst negative.”

One thing the study made very clear is that RTW laws do succeed in lowering workers’ earnings. A typical private-sector employee in an RTW state earns about $2,000 per year less than the same worker in a state that allows unions to recruit members and collect dues.

The wage difference is even more striking in the manufacturing and construction industries. The report found that over a 10-year period a manufacturing worker in an RTW state would earn $31,000 less than his or her counterpart in a pro-union state, while a construction worker would be more than $60,000 behind over the same period. Most states experience a slight uptick in worker income immediately after a passage of a RTW law, the report said, but over time the workers’ incomes begin to degrade at an increasing rate.

Moody’s Analytics even touched on the RTW issue as well in a study it recently conducted. Moody’s noted, “Right-to-Work laws reduce union membership”, and “Since laws that hurt unions shift the balance of power from employees to owners, they tend to erode wages and lead to a more uneven distribution of the gains of economic growth.”

Moody’s concluded, “Consequently, even if the impact of right-to-work laws is positive in the short run, it can diminish over time due to the downward pressure on incomes.”

“That degradation of worker incomes is not just bad for the workers and their families but bad for the state as well,” said SMART-TD Illinois Legislative Director Robert W. Guy. “Poorly paid workers pay less income taxes to the state, and their families have less money to spend on groceries, clothing and cars, which reduces the state’s sales-tax collections.

“When the people and the state government both get poorer, who wins?” Guy said. “Not the schools. Not the highways or the transit systems. Not the police and fire departments that keep us safe. They all depend on the taxpayers, so when the taxpayers’ incomes drop, so does the state’s.

“There is a direct correlation between RTW laws and median household income,” Guy said. “Simply put, incomes are lower in RTW states, as the maps below show (RTW states on the left). The Southeastern part of the U.S. is made up of RTW states, most of which fall well below the Median Household Income average for the U.S.”

Guy said if Gov. Rauner really wants to return Illinois to economic health the fastest way to do it is to help ordinary people raise their incomes.

“And unionization is the most effective way to do that,” he said. “So-called RTW laws make it difficult for workers to organize and bargain collectively for higher wages, while unions make workers more prosperous.

“And worker prosperity is definitely the way you want to go if you want an effective and economically healthy state government,” Guy said. “When it comes to right-to-work laws, Gov. Rauner needs to be careful what he wishes for. Does he really want to transform Illinois from a prosperous Northern state into another Mississippi or Arkansas?”