Everyone Benefits from the Right to Work

In an article the Star-Ledger posted on December 30, 2012, by Stephen Sweeney, President of the New Jersey Senate, it’s not surprising he used AFL-CIO supplied information alleging a $5,538 unfavorable differential in wages in Right-to-Work (“RTW”) States vs. non-RTW States.  After all, he is the General Organizer for the International Association of Ironworkers.  However, according to data from the Bureau of Labor Statistics (“BLS”), private-sector, inflation-adjusted compensation in RTW States increased by 12% between 2001 and 2011, while such compensation increased by only 3% in forced-union dues States during the same period.  See, “Right-To-Work Lies Fall Flat In Michigan,” Investor’s Business Daily (“IBD”) 12/12/12, p.A1.  Inflation-adjusted compensation in the RTW States was better because those states tend to attract more quality jobs and have lower living costs.                                                                                                                            

Senator Sweeney ties RTW Laws to the tea party movement.  The right of each state to pass a RTW Law was part of the Taft-Hartley Law, passed in 1947, long before the tea party movement started in 2009.  Twenty-four states have passed RTW Laws.  Tennessee was one of the first states to do so, passing its law in 1947.  As a result Tennessee has been attracting new domestic and foreign businesses for years and has become a major automobile manufacturing hub.  Nissan opened its Smyrna, Tennessee plant in 1983 and moved its US headquarters to Tennessee in the mid-2000’s.  It recently added 1,000 employees to its Smyrna plant and plans on adding 1,300 more in 2013.  Toyota has a parts facility in Jackson, Tennessee; Bridgestone Tire has its American headquarters in Nashville; and Volkswagen opened its only US plant in Chattanooga in 2010.  Even GM is reopening its old Spring Hill, Tennessee plant. Tennessee has been mainly spared the mass layoffs, plant closures and bailouts that affected the Detroit area.  Many groups credit the fact that Tennessee is a RTW State as the key advantage that saved it the pain that other parts of the country suffered.  Sean Higgins, “Tennessee Auto Industry Thrives Without Unions,” IBD, 3/5/12, p. A1-A6.

Speaking of the automotive industry, you may remember that back in the 1950’s Ford Motor Company had several assembly plants in New Jersey and nearby Pennsylvania.  However, in the mid-fifties, Ford started shutting plants.  Ford closed the Edgewater, NJ plant in 1955, the Chester, PA plant in 1961, the Mahwah, NJ plant in 1980 and the Edison, NJ plant in 2004.  It’s not that cars could not be manufactured profitably in the United States or that the US had insufficient demand for cars, because during this same time frame many automobile manufacturing and assembly plants were built by Toyota, Honda, BMW, Nissan, Subaru, and Volkswagen.  Toyota alone opened approximately eleven plants from California to Pennsylvania, while the big three were closing plants from coast to coast.  However, many of the new plants were built in RTW States, such as Tennessee, South Carolina and Alabama.

The main thrust of Senator Sweeney’s article was, without citations, that RTW Laws “can have devastating impacts on workers and a state’s economy as a whole.”  However, the facts do not support his statement.  There are advantages to the RTW Laws for both employees and employers.  News coverage usually leaves out the advantages to employees of letting employees have the choice of whether or not to join a union.  A recent survey of CEO’s ranked states in which they would like to do business on a variety of measures.  All of the states in the top 10 were RTW States.  Not one of the states in the bottom 20 was a RTW State.  In the ‘worst states for jobs’ list, New Jersey came in 45^th out of 50.   For most expensive states, New Jersey came in 5^th highest, above even New York. 

Economists have noted that RTW States have more labor force flexibility, faster economic growth, higher employment, greater inward migration, lower living costs and higher real compensation.  In the ten RTW States rated the best in the nation, private sector employment increased 10.6% from 2000 to 2010, while in the 10 compulsory-unionism States rated the worst in the nation, which included New Jersey, employment increased just 1.9% over the same period.  It is obvious the increase in employment and greater labor force flexibility, due to the absence of strict union rules, together with lower cost of living in RTW States, helps employees.  RTW Laws are win-win laws for both employees and employers.  See, “More ‘Raspberries’ For Compulsory Union Dues,” National Right To Work Newsletter (“NRWN”), June 2012, p.1.  New Jersey has suffered net outward migration and its high taxes, high living expenses, forced-union dues and excessive regulations are all part of the cause.

Overall, the Commerce Department’s Bureau of Economic Analysis (the “BEA”) reported that from 2000 to 2011 private-sector, nonfarm employment increased 12.5% in RTW States, while in forced-union dues states such employment only increased 3.5%.  Thus, the increase in employment in the RTW States was nine percentage points higher than, or over 3.5 times as great as, in forced-union dues states.  “Right to Work States Have Superior Job Growth,” NRWN, Oct. 2012, p. 6.  All of the bottom ten states in job creation in that period did not have protection for their employees from forced-union dues and monopoly union representation.  Id.

The benefits of the new RTW Law in Indiana are already showing up in a stronger economy.  When Indiana was a forced-union dues state, it had one of the worst economies in the country.  From 2000 to 2010 the BLS determined that Indiana’s private-sector payroll employment declined by 9.1%.  Just two other states, both forced-union dues states, did worse during that time period.  The Midwest’s forced-union dues states as a group experienced a dismal decline of 9.8% during that period.  However, during the same decade, the five Midwestern states with RTW Laws actually experienced a slight increase by an average of 0.5%.  “’We’re Absolutely on the Right Track,’” NRWN, August 2012, p. 5.  By September 2012, six months after Indiana’s RTW Law went into effect, Labor Department data showed that the number of new private-payroll jobs in Indiana increased by nearly 100,000 or 4.1%.  “Indiana Right to Work Statute Is Working,” NRWN, Sept. 2012, p.5.  Furthermore, the job growth is likely to continue. The Indiana Economic Development Corporation, reported that fifty-seven companies have Indiana investment projects in the pipeline, which will bring $1.6 billion in new investment into the state, and many companies indicated RTW was a factor in their decision. Id.  In fact, in signing RTW Laws in Michigan, Governor Snyder cited the favorable results in Indiana, including Indiana’s increase in new jobs and its newfound ability to attract businesses.  Matthew Dolan and Kris Maher, “Unions Dealt Blow In UAW’s Home State,” The Wall Street Journal, 12/12/12 p. 1.

RTW States not only have better job creation, they also have better compensation growth for employees.  According to Commerce Department data, private-sector compensation (wages, salaries, benefits and bonuses) fell by 0.7% from 2001 to 2011 in then forced-union dues Indiana, while it rose by 6.4% nationwide.  Indiana and the six other Midwestern forced-union dues states experienced an aggregate real private-sector compensation decline of 2.7% during the same period.  During the same decade, the five Midwestern RTW States achieved an increase in real private-sector compensation of 13.0%. “Indiana Right to Work Statute is Working,” Id.  Superior job growth and superior compensation growth in the RTW States equals a double win for employees.  Effectively, under current Federal Law, an employer in a unionized company cannot offer merit-based pay increases or bonuses unless the union gives its permission or there is a federal finding of an “impasse.”  Mark Mix, “Union boss bargaining hurts our most productive workers,” The Washington Examiner, May 11-12, 2012.   In a rare occurrence, Governor Christie and the Newark Teachers Union recently agreed to permit merit bonuses in the Newark schools.  It would be good to see more of this type of cooperation.

Right to Work Laws even affect the number of school-aged children.  Apparently, parents would rather raise their children in RTW States for a variety of reasons, including more job opportunities, better compensation, work force flexibility, better chances for job advancement, lower cost of living, better living environment, schools without forced-union dues and lower taxes.  Whatever the reasons, the top seven states with the biggest gains in school-aged population from 2000 to 2011 were all RTW States.  Six of the seven states that lost the most school-aged children were forced-union dues states.  Katrina-ravaged Louisiana was the only exception of a RTW State that lost school-aged children.  In the aggregate, RTW States’ K-12 populations increased by 1.87 million or 9.2% since 2000, while forced-union dues states have seen their school-aged populations drop by 1.21 million or 3.7%.   Naturally, states that are losing school-aged children are also providing fewer opportunities for teachers to obtain employment, keep their jobs and achieve career advancement, and vice-versa in states that are experiencing growth in the population of school-aged children.  “Right to Work = Teacher Job Opportunities,” NRWN, Sept. 2012, p.3.

Senator Sweeney made several other bogus claims, including, among others, that unions are “the reason a strong middle class is even possible in our country.”  Contrary to Senator Sweeney’s spurious claim, it was hard work, economic freedom and the constitutional protection of personal property rights that created the middle class, not unions.  The American middle class actually started during the colonial period by applying the principles of life, liberty and property espoused by John Locke, the Protestant principles set forth in the 1599 Geneva Bible that the Pilgrims carried with them in 1620 on the Mayflower, and the Protestant work ethic.  These principles were set forth in The Declaration of Independence, The Constitution and the Bill of Rights, and they allowed America, including the middle class, to continue to flourish.

The only way an economy can increase the average living standards of its workers is through increased productivity.  This productivity is derived partly by the workers developing their own skills that lead to careers and upward mobility.  In addition, productivity increases have derived primarily from entrepreneurs and inventors developing new productivity-enhancing equipment and production processes.  The progress in inventing production-enhancing machinery and procedures has been going on for hundreds of years, without the help of unions.  The list of inventions that have increased worker productivity is long and storied.  The list includes Eli Whitney’s cotton gin in 1793, Cyrus McCormick’s reaper, developed by 1831, Henry Leland’s contributions to standardized and interchangeable parts and his design and development of the Cadillac and Lincoln automobiles, Henry Ford’s production line and affordable Model T Ford, Thomas Edison’s 1,200 patents including the light bulb, John D. Rockefeller’s improvement of the cracking tower, and continued down to Bill Gates’ operating systems and Steve Jobs’ long list of products at Apple Computer.  If anything unions have hindered this process of improving worker productivity through resisting productivity-enhancing equipment.  For an example of how a union can hurt an economy, just look at what the UAW has done to Detroit.

Senator Sweeney implies that unions represent workers; however, unions represent only about 7% of workers and even fewer in the private sector.  If unions were as great at representing employees as Senator Sweeney claims, then why would the evidence show that, when employees are given a free choice as to whether or not to join a union, many of them choose not to join a union.

The facts clearly indicate that RTW Laws are win-win for the employees, the employers, jobs creation, increased real compensation, and general economic health of the states that have such laws.  Senator  Sweeney should have a more open mind on the advantages to employees and the health of the economy that are provided by permitting employees the freedom to choose whether or not to join a union.