Right-to-Work Laws and Business Environments: An Analysis of State Labor Policy

Abstract

Under our federal system, states can pursue competitive labor market strategies to attract economic development and raise levels of employment for their citizens. Differences in per capita income vary substantially across the continental United States, ranging from a high in Connecticut of $42,706 to a low in Mississippi of $22,372 (Bureau of Economic Analysis, 2003). Employment growth also shows marked disparities, increasing between May 2002 and May 2003 by over two percent in Hawaii and New Mexico but declining by more than one percent in Missouri, Massachusetts, Connecticut, and ,South Carolina (Bureau of Labor Statistics, 2003a). While various factors can influence regional economic outcomes, one of the most controversial legal policies involves right-to-work (RTW) laws which prohibit compulsory union membership. A large body of economic literature examines the effect of RTW on labor markets, growth, and wages (see Moore (1998) for a review). The analytical framework typically assumes that RTW states have lower union membership density and lower wages, and it follows on this model that lower wages will attract employment. Empirical studies find some support for the theory (Dinlersoz and Hernandez-Murillo, 2002). Conversely, other research disputes the argument that RTW produces beneficial economic results in general (Holmes, 2000). Despite the controversy surrounding RTW, 22 states have enacted such laws, and one state--Colorado--is a modified RTW jurisdiction (i.e., workers must approve union security in a special state election). Oklahoma is the most recent state to adopt RTW, which it did by referendum in 2001 (Hogler and LaJeunesse, 2002). Proposed legislation to enact a federal RTW law was introduced in the U.S. House of Representatives in January 2003 (U.S. Congress, 2003). This article explores the RTW debate from a business policy perspective. We first propose a model of union membership density on the state level. Next, we empirically analyze the different ['actors associated with membership levels, focusing particularly on the effects of RTW laws. The analysis confirms previous research that RTW laws negatively impact union density. Our findings also suggest important correlations between managerial opposition to unions and a state's level of social capital. Thus, the presence of a RTW law may indicate a conflictual labor relations environment characterized by lack of trust, cooperation, and mutual agreement about work processes and outcomes. We conclude with a discussion of the implications of RTW for managerial practices and legal policies affecting employment relations. MODELING STATE UNION DENSITY The ongoing decline of American unions has prompted speculation about the labor movement's future viability (Bennett and Kaufman, 2002; Rose and Chaison, 2001; Troy, 1999, 2001). In 2002, total membership density was 13.2 percent of the non-agricultural workforce, with only nine percent in the private sector (Bureau of Labor Statistics, 2003b). Since the enactment of the National Labor Relations (Wagner) Act in 1935, federal policy has expressly promoted collective bargaining as a means of reducing industrial conflict and promoting equality of bargaining power between employers and employees throughout the country (Kaufman, 1996). Although those policy objectives remain unchanged, levels of union influence in both regional and sectoral labor markets vary considerably and impede standardization of wages and working conditions. Indeed, one of the defining characteristics of unionization in this country is the substantial difference in density rates among states. Recent data, to illustrate, show that union membership in North Carolina stands at a low of 3.2 percent of the workforce, while the rate peals at 25.3 percent in New York (Bureau of Labor Statistics, 2003b). Such differences raise important questions about the nature of the U.S. labor relations system. One of the central is sues in that debate is the role of right-to-work laws. …

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