Will Michigan’s Right to Work Law Attract Employment?

Economists are sometimes useful players in the policy debate.   While some of us rubber stamp ideas that politicians are eager to implement, there are other economists conducting applied research just because we seek to know the intended and unintended consequences of government regulation.  The latter group hopes that our work will be read by powerful people who seek to implement efficient policies.   We hope that there are government leaders who “know that they don’t know” how the world works and that this group trusts economists to generate credible empirical models.

With this preamble now completed, here is my recent paper (joint with Erin Mansur) on Right to Work Laws and their consequences for employment.  We document that labor intensive industries are attracted to the Right to Work side of the state border.

For those RBC readers who read Cato Institute material, here is a simplified version of Tom Holmes’  paper that started this “border pairs” literature.

Author: Matthew E. Kahn

Professor of Economics at UCLA.

91 thoughts on “Will Michigan’s Right to Work Law Attract Employment?”

      1. Did we not already know that, ceteris paribus, management will choose to locate jobs where employee bargaining power is weaker? Isn’t that…kind of obvious?

        The relevant question is: what is the effect of such laws on social welfare? And I see no hint of an answer in this paper. I can easily believe that now now some company will open their plant in Michigan instead of Indiana*. But for all I know, that means 200 crappy jobs for Michiganers instead of 200 decent jobs for Indianans. Since there’s lots of unemployed people in Michigan, that might still be a great deal for Michigan, but that doesn’t make it a great deal for people as a whole.

      2. Knowing nearly nothing about economics, I cannot competently write a critique of the article linked to, but I can spot one important feature in the tables, namely the means and standard deviations that report the degree of uncertainty in the outcome measures. This is an valuable protection against charlatanism, which often puts on a mask of certainty where certainty is not warranted. The tables also report the R-squares which also reflect the amount of variation that remains unexplained by the variables in the model, and show that the authors are not claiming to know more than they do.

    1. gee Chris do you want to never ever read anything which doesn’t make you comfy and confirm your going-in assumptions? Kleiman’s slogan is: Everybody’s inclined to his own opinion, but not his own facts. My guess is, Matthew E Kahn is here to provide facts.

      So there is some factual basis for describing employment effects on each side of a right-to-work border, and you don’t want to hear about it?

      Most of the reports on RTS laws suggest that the effects on pay are not very large, but they clearly have a large effect on the ability of unions to use employee dues to advocate politically. There’s a discussion to have there: ought union workplace workers who are Reeps, or right-to-lifers, be forced to pay money to the Dem party? ought union management, which is charged to work for worker interests, be able to have a relatively free hand in deciding what those interests are and advocating for them? That’s a pretty good opinion argument to have. But, what are the effects on wages in communities on one side or the other of a RTW state line? That should be assessible as a ‘fact’ question, and we should welcome facts.

      1. ¨.. they clearly have a large effect on the ability of unions to use employee dues to advocate politically.¨ How is this supposed to work? My distant understading is that unless stymied by RTW laws, American unions try to get employers to levy charges from non-unionised workers beefiting from the negotiated labour contract to cover the union´s costs of representation and organising, but not lobbying and advocacy. What is your claim: that this is wrong, or that unions cheat and divert the dues?

        The term used by European unions and social democrats for the unremarkable process described in the paper is ¨social dumping.¨

      2. Unions can only use nonunion employees’ dues for the direct costs of negotiating with employers. Lobbying, campaigning, and all other extraneous activities have to be paid for out of members’ dues.

        1. Unions are only supposed to use nonunion employees’ dues for direct costs of negotiating with employers. There’s substantial evidence they routinely cheat on this score, and to a very substantial degree.

          1. And companies are _supposed_ to be precluded from retaliating against union organizers. There’s substantial evidence they routinely cheat on this score, and to a very substantial degree.

      3. Dave,

        ought union workplace workers who are Reeps, or right-to-lifers, be forced to pay money to the Dem party? ought union management, which is charged to work for worker interests, be able to have a relatively free hand in deciding what those interests are and advocating for them?

        ought corporate shareholders who are Democrats, or pro-choice, be forced to pay money to the Republican party? ought corporate management, which is charged to work for shareholder interests, be able to have a relatively free hand in deciding what those interests are and advocating for them?

        The Supreme Court answered “yes” to my question, to the cheers of conservatives, so I guess using other people’s money to support candidates you like is OK.

        1. Byomtov, do you seriously think that requiring a factory worker to lose his livelihood if he doesn’t want his money – deducted from his wages – to go to advocating abortion, or the Democratic party, is even of a similar magnitude of imposition as telling a plutocrat that he ought to pull his money out of the shares of a company with which he disagrees politically and invest with someone whose viewpoint is more to his liking? Myself, I think the worker is facing a huge quandary, and the guy who pulls his money out of Cypress Semiconductors and puts it into Aloha Air or Costco has a minor inconvenience.

          1. As noted above … Unions can only use nonunion employees’ dues for the direct costs of negotiating with employers. Lobbying, campaigning, and all other extraneous activities have to be paid for out of members’ dues. If you know of any union that is using non-member employees’ dues for political activism, I’m sure there is no shortage of well-funded right-wing organizations that would be happy to go to court on the employees’ behalf.

          2. Most, if not all, unions have religious exemptions to paying union dues. Many will divert the union dues in these cases to a charity chosen by the worker.

  1. So what you’re saying is that we need a strong federal government that regulates these things nationally rather than giving states an incentive to have a race to the bottom?

    1. I’d agree with that. Not that anybody seems to be willing to act on it.

      On balance, I think that closed shops are a bad thing. They may currently be a necessary evil given the state of our labor laws, but they still infringe upon the right of association and have plenty of downsides. But because apparently both state and federal government seem to be unwilling to enact labor laws that provide adequate protection for employees, this means that it’s up to employees and their organizations to protect their interests with whatever means they have at hand.

      Absent that, while Matthew Kahn may likely be right that employers are attracted to states with a documented preference for stone-age capitalism, this is likely to cement America’s status as one of the leading nations in terms of absolute poverty further, as it is well documented (and not really surprising) that right-to-work laws [1] (absent stronger labor laws) depress wages.

      [1] And let me add that I find the term “right-to-work” positively Orwellian and creepy, despite my instinctive dislike for closed shops.

      1. Katja,
        I’m not used to disagreeing with you, but I do here.

        There may be good reasons for being opposed to closed shops, but right of association is not one of them. Right of association implies governance implies dissent. Dissenters may exercise exit or voice. If dissenters have a third option, governance is impossible, and right of association becomes meaningless. (Yes, this infringes on the employer’s right of association, but that’s inherent in unions.)

        It’s the same thing with corporate actions. A dissenting shareholder cannot avoid a stock call just because she disagrees with the policy choice that motivated the call. She can only sell or pay.

        1. Ebenezer,

          we may have different definitions of what the right to freedom of association means. I am using it in the same way as Wikipedia, which describes it as “the individual right to come together with other individuals and collectively express, promote, pursue and defend common interests”. Implied in that is the negative version, i.e. the freedom not to be forced to join a given group.

          A good example is the case of Sorensen and Rasmussen v. Denmark decided by the ECHR in 2006. The ECHR found the case of Rasmussen particularly concerning in that he was a gardener and the vast majority of jobs open to him were covered by closed shop arrangements, making it very difficult for him to find a job if he was unwilling to join the major union. This is highly problematic, because Rasmussen had the choice of giving up his chosen profession or being forced to join a union that he disagreed with.

          Note that the employer’s right to freedom of association is not being infringed upon. He or she is free to associate with other employers or not to associate with them.

          Also, governance does not become impossible. Following Rasmussen and Sorensen v. Denmark, closed shops became infeasible in Europe, and most European countries didn’t have closed shops beforehand, anyway; yet, right of association did not become meaningless as a result.

          The fundamental problem that organized labor in the United States faces is that positive freedom of association is not guaranteed; employers have plenty of legal (and some not-so-legal) ways to undermine or sabotage it. At-will employment also is a major contributing factor, both directly and indirectly. Closed shops are a hack to work around the government’s failure to properly safeguard the rights of employees in that they allow unions to do what the government won’t. Unfortunately, in some cases they can be a cure that’s worse than the disease.

        2. Why can’t the unions negotiate higher wages for their members and let the others go hungry? I realize that would cause problems but afterall FREEDOM!!!!

        3. I think that our disagreement is in the meaning of “not to be forced to join a given group.” A worker is not forced to join a union in a closed shop. The worker is free to offer her labor to anybody. It is the employer who is forced to reject such a worker: forced by its union contract. If you and I compete for a single job and you get it, are you forcing me not to work at the job?

          RTW, in contrast, interferes with the freedom of contract between the union and the employer.

          I can see why you might view this argument as a bit formalistic and unreal. I could see why you might do so, since Europe has a high union density. My freedom to shun another individual becomes much more sinister if I make a shunning pact with everybody else in town. But if my shunning density is low, the freedom to shun is very much part of freedom of association.

          1. The lines of thinking here between ES and Katja seem to me a lot more fundamental than MK’s original post. Given the recent passing of Albert Hirschman the debate couldn’t be more timely. I am curious myself how Europe (well, Germany) thrives with high union participation, while the situation couldn’t be more different in the US. I hope you all carry on.

          2. Except when, as in the case from Denmark, there is no other “anybody” for the worker to offer her labor to.

            If you recognize that freedom of association is a fundamental right, then making hiring decisions based on membership in a union (or lack thereof) is not all that much different from making them dependent on race or gender. It’s a discriminatory hiring practice. This is fundamentally different from competing for a job based on proficiency and experience.

            Worse, agreeing to a supremacy of contract law over fundamental rights in the end works against employees and unions. If you agree that employment can be made conditional on union membership, then you basically also agree that an employer should also be free to only hire non-union members. You weaken the provisions of the NLRA against unfair labor practices (which are already pretty toothless these days) even more. You strengthen the case for at-will employment also. And, in practice, for every union shop, how many businesses are there were unions can’t even get a foot in the door (see the failed card check legislation)?

            As a result, I see closed shops strictly as a “lesser evil” kind of thing. They are probably unavoidable for the near future, but that doesn’t mean that I have to like them.

          3. Russell, the short answer for Europe (or, well, much of it, there are plenty of exceptions) is simple: labor laws that are strictly enforced.

            The long answer, as always, is a bit more complicated.

            We can talk about Germany in this context specifically if you wish, but the principal issues are not all that different in most other continental EU countries.

            In Germany, Union membership is strictly off-limits in hiring and firing decisions in the same way that race, gender, pregnancy, etc. are. This, as well as other labor laws, is enforced by the labor courts. Bringing a suit before the labor courts is free (though you have to pay for your own lawyer if you do not represent yourself), and if you are a union member, the union will also generally provide free legal advice and representation and cover the cost of an appeal.

            The right of employees to form and join unions (and for employers, to form and join unions of their own), to bargain collectively, as well as the right of employees to strike and the right of employers to lock them out in response, is enshrined in the constitution.

            In addition, German firms generally have works councils. Works council members are frequently union representatives that work for the firm, and campaigning for unions in work council elections is explicitly permitted.

            Germany’s unionization level is currently at 25%. While that’s quite a bit higher than in America, it’s middle-of-the-road internationally. The reasons for that are a bit complicated:

            First, joining a union in Germany is easy and you don’t have to fear retaliation from your employer for being a union member. And for most employees in larger firms, unions are a pretty good deal: collective bargaining is good for wages and job security (especially the latter) and the legal protection is a nice benefit, too. So, there are lots of workers (especially the blue-collar kind) who will join a union. For example, 97% of all Volkswagen employees in Germany are members of IG Metall (one of the bigger German unions). And normally, you’d expect a fairly high unionization level under these circumstances.

            However, there are some countervailing effects. Like much of Europe, Germany’s business landscape is dominated by small and medium enterprises. And unions are often less attractive for many SME employees. Furthermore, Germany’s comparatively strong labor laws and works councils (which exist regardless of unions) provide a solid baseline protection against unfair labor practices, so there is less of a need to be represented by a union.

            Finally, the right to strike has some exceptions. German civil servants, for example, are not allowed to strike. Traditionally, that has not been a problem, because civil servants enjoy good pay and additional privileges (for example, they cannot be fired). Also, until a decision by the Federal Labor Court last month, employees of churches and their affiliated religious organizations were not allowed to strike. They could still join unions, but there was little that the unions could do for them.

          4. @Katja: it is complicated, thanks for the intro. I see I need to understand how union dues and political advocacy work. It seems odd that there is (apparently) so little strife. And looking at that wikipedia page on works councils, it is amazing how much top down planning structure exists. According to Matthew Kahn, this isn’t a comparative advantage.

          5. Russell, I’d have to guess a bit as to why there’s relatively little strife in German labor disputes, but here’s my understanding from what I know:

            First of all, there’s very little written law regarding labor disputes in Germany; it’s almost entirely judge-made — basically, a common law enclave in a civil law country.

            When it then came to adjudicating labor disputes, the labor courts (they’re actually a separate judicial branch, with their own supreme court) had to make things up as they went along. Apparently, they looked to the concept of “labor peace” in neighboring Switzerland and adopted it, making strikes and lockouts the ultima ratio (even though unions and employers have constitutionally guaranteed rights to use them). That means that if there’s a labor dispute, employers and unions will have to go through several negotiation rounds; these are often overseen by a specially appointed negotiator and discussed in the news if a sufficiently big union or corporation is involved.

            In practice, that seems to lead to compromise more often than not, if only because both sides know that a strike or lockout will hurt them both and most likely lead to a compromise, anyway. In any event, the credit for this most likely belongs to the Swiss. 🙂

            That said, an additional factor may be co-determination, which is a very German thing (I’m not really sure why it works to begin with, and I’m pretty sure that it’s one of these things that you just can’t export to other cultures).

        4. Katja,
          I’d say that this colloquy is a perfect example of the very real difference between Continental and Anglo-American legal thinking. Your point on contractual fetishism is spot-on. That’s how we do things here–contract rights are the norm and other rights are exceptions to this norm. These other rights can sometimes trump this norm, but contract remains the norm. That’s not how a German would think.

          1. Well, culturally I’m still American first, despite having a German mother and a Russian first name and living in Scotland; America is where I grew up and where I lived most of my life. While these others factors influence me, they are not the primary source of my preferences.

            Primarily, my preferences come from my background as a former human rights activitist. As a result, I naturally prioritize fundamental human rights, including economy-related ones (which is also why I tend to rail against poverty so much). Anti-unionization efforts that deny people their freedom of association or to choose an occupation are not limited to the United States and almost invariably are defended on grounds of property rights and contract law. This is why I think embracing contracts as a rationale is ultimately a dead end; strategically, unions are fighting on the ground that their enemies chose for them. For every business that is unionized, there will be one or more where unions are shut out; for every Meijer, there is a Walmart. The current unionization level in the United States is not a success story, I’m afraid.

  2. First thought: …and your next paper will show that the slave-based economy was attracted to states that allowed slavery.

      1. The authors of the paper appear to be doing normative economics under the guise of positive economics. If Kahn didn’t want to spread this as propaganda, he could easily have mentioned in his post if not the paper the negative effects of the race to the bottom style economics he prefers. Selective reporting is biased reporting, and this is his whole shtick now.

  3. If there is anybody who needs a translation from econobabble into English: “labor intensive” generally means “low wage.” Translation being made, it’s hard to see how a low-wage labor force is not an intended consequence of right-to-work.

    Kahn’s paper may well be technically useful. However, he starts from a shaky premise: that there are politicians who care about the consequences of their policy choices but don’t know what they are. This may have been true once upon a time (ahh, rent control!) But we’ve all learned–or over-learned–Econ 101. Most politicians these days are very aware of consequences of their policy choices, even though you might not be able to infer this from their rhetoric.

    The problem is that these consequences often have little to do with economic efficiency. Consider the low-wage model of development. It is a consciously maximizing policy, but the independent variable maximized is not wealth. Instead, it is forelock-tugging.

  4. ok, good comments, i was worried before i looked at them that there might be some agreement with this twaddle.

    “your next paper will show that the slave-based economy was attracted to states that allowed slavery”


      1. I really wish the evidence didn’t suggest that was an accurate, if not seriously intended, response.

        1. Oh, please. Spare us the Drama Queen act.

          What’s next? This:

          [Troll] “Can we at least agree that gun owners shouldn’t murder strangers at the shopping mall?”
          [Sarcastic response] “No, Jane, we’re libertarians. Guns are for killing people.”
          [Troll] “I really wish the evidence didn’t suggest that was an accurate, if not seriously intended, response.”

          Or perhaps this:

          [Troll] “Can we at least agree that conservatives shouldn’t walk into Unitarian churches and massacre people attending a children’s performance?”
          [Sarcastic response] “No, John, we’re conservatives. Slaughtering liberals in cold blood is what we do.”
          [Troll] “I really wish the evidence didn’t suggest that was an accurate, if not seriously intended, response.”

          1. Brett, sorry but I have to ask: How do you even stand up after someone nails your ass the floor as thoroughly as J just did?

          2. Without the slightest difficulty. Yes, I agree gun owners shouldn’t murder strangers at the shopping mall. Now, do you care to agree that union employees shouldn’t assault people, such as happened here?

            I’m originally from Michigan, got to see the Detroit newspaper strike first hand. (One of their printing plants wasn’t far from my home.) Violence is a routine part of labor unionism in Michigan, and I must assume elsewhere.

            Can we agree this shouldn’t be so?

          3. Brett, your first comment was a silly little piece of trollery. But your second comment, in which you tried to claim that an obviously over-the-top sarcastic response was “accurate” … that was loathsome.

            Go wash your mouth out with soap. Then find a piece of paper and write, 10 times, “I will not be a troll.”

          4. If it isn’t accurate, why the refusal to just say, “No, union representatives should’t assault people. The attack shown on that video was wrong.”?

            Violence is a routine part of labor unionism. Why do you suppose that people who’ve been given no choice about joining a union don’t cross picket lines? Do you really think it’s out of a sense of solidarity? No, it’s because they fear for their safety.

            Was it a shock to anyone when stores that sold the newspapers in Michigan got bricks hurled through their windows? That union employees were found with caltrops in their car?

            Violence is a routine aspect of unionism in America. Approve of this, be appalled by it, but don’t be so silly as to deny it. The attack in that video might shock some people’s consciences, but whose expectations did it shock?

            Let’s not be so mindless as to discuss unionism without mentioning the thug in the room.

          5. @Brett, if you want to start off a reasonable discussion, start with a statement that does not insult the folks you’re trying to influence.

          6. This is what Brett claims is an accurate representation of the opinions of people on this blog:

            “We’re liberals. The enemies of The People should be beaten in the streets.”

            Everyone except Brett understands that this statement was pure sarcasm.

            That makes Brett incompetent to engage in useful discussion here.

            No one here should have to stoop to this grade-school level of handholding, but since it’s apparently necessary, let me explain things in very simple terms for our simple-minded friend:

            1. I do not generally approve of violence by union members, nor of violence directed at union members. I suspect virtually everyone posting here would agree with that.

            2. Posting deliberately provocative, passive-aggressively framed questions like Brett’s first one on this thread (“Can we at least agree …”) constitutes trolling. It might be entertaining on other sites, but it’s not wanted here.

            3. The fact that people here resist being bullied by trolls, and refuse to cooperate in your trolling or to sign your little loyalty oath, does not contradict (1) above. When people respond to your demands that they sign your loyalty oath with appropriately dismissive sarcasm, you are not justified in accusing them of disloyalty.

          7. “If it isn’t accurate, why the refusal to just say, “No, union representatives should’t assault people. The attack shown on that video was wrong.”?”

            as a regular commenter on this blog once said– “The existence of an ‘argument’ doesn’t obligate you to take it seriously.”

          8. Still, conspicuously, waiting for anyone here to just say, “Of course union employees shouldn’t commit assault.” What’s so hard about saying it? Would it hurt to say it?

            At some point I’m entitled to conclude that you won’t say it, because you don’t think it.

          9. “Still, conspicuously, waiting for anyone here to just say, “Of course union employees shouldn’t commit assault.” What’s so hard about saying it? Would it hurt to say it?”

            once again, as a noted commenter here once said–“The existence of an ‘argument’ doesn’t obligate you to take it seriously.”

            oh, and for the sake of accuracy i would like to point out that j paraphrased the statement you’ve been asking for in his comment that appeared 58 minutes before your most recent comment which leads me to wonder whether the problem is that you aren’t reading the comments before you make a new comment or if there is something magical about the phraseology you keep fishing for. there is definitely something conspicuous about you but i’m not sure it’s your waiting.

          10. Let’s also correct this misstatement:

            Violence is a routine part of labor unionism.

            That’s backwards. Historically in the US, and in most parts of the world, violence is a routine tool used by the rich and powerful to prevent workers from unionizing.

            Nowadays, unions in the US are so weak, and there are so many other obstacles that well connected corporate managers can count on to keep unions largely toothless, that direct violence against union organizers is only rarely needed. But when unions were strong enough to stand up for workers, the plutocratic elites that Brett Bellmore shills for would routinely unleash hideous acts of violence against unions.

            Not that Brett Bellmore knows or cares anything about that. As far as he’s concerned, money makes right.

          11. Of course union employees shouldn’t commit assault. I deplore violence of any kind.

            Happy now?

            The reason why you’re getting pushback is that this is a version of LBJ’s “let’s make the bastard deny it” approach. People recognize it and recoil.

            The purpose of your question is not to get an answer, but to establish a framing that allows you to pretend that union violence is a systemic problem. This, in turn, allows you to shift the conversation away from things you don’t like. Like, all the blood that anti-union employers and libertarians have on their hands.

            You want to talk about violence, so violence it is. Let’s talk about the atrocities committed by greedy, selfish employers. We can perhaps start with the Triangle Shirtwaist Factory fire and how greed and anti-unionization efforts were responsible for the deaths of 146 innocents who were burned alive, suffocated from smoke, or falling to their deaths. And let’s not forget what a great day for libertarianism that was, proving decisively how we don’t need regulations, because inefficient enterprises will just make short work of themselves in the free market (at the cost of a mere 146 lives, but libertarians never had problems with breaking a few human eggs to make a free market omelette).

            We can continue the history lesson if you wish. That was neither the first nor the last atrocity committed by greedy employers.

          12. “And, you STILL can’t bring yourselves to say it.”

            at this point you are either lying because you want to provoke the rest of the commenters or you’re lying because that’s just the kind of person you are. i repeat your own words back to you for the third time in this post–“The existence of an ‘argument’ doesn’t obligate you to take it seriously.”

          13. Katja writes: The reason why you’re getting pushback is that this is a version of LBJ’s “let’s make the bastard deny it” approach. People recognize it and recoil. The purpose of your question is not to get an answer, but to establish a framing […]

            Yes. This. In my case, I wasn’t thinking of LBJ’s quote, but more of the Great Loyalty Oath Crusade from Catch-22. I don’t sign loyalty oaths.

            If this kind of disruption is going to become a regular feature of the RBC, include me out.

          14. welcome to the standard rhetorical style of brett bellmore. if you are a relative newcomer to the site you may not have been exposed to much of it allow me to provide links to some of the more “entertaining”(?) examples of the bellmore mode–




          15. “but to establish a framing that allows you to pretend that union violence is a systemic problem.”

            It’s quite possible you don’t consider it a systematic problem, but it is most assuredly systematic. As I said, I was present to see the Detroit Newspaper strike, and the violence involved. (Which was all on the part of the union.)

            There is a history of employer violence against unions. It’s history, and not all that recent. Union violence is not history, it is the present.

            Crowder went, in the nature of a journalist engaged in a sting, to demonstrate how easy it was to provoke violence by union representatives. All it took was daring to disagree with them, and they assaulted him, assaulted the people in that tent, destroyed property, and engaged in a bit of theft while they were at it.

            This is the real face of union violence, and it is widely understood. This, not solidarity, is why people don’t cross picket lines. I don’t know that unions wouldn’t be viable in this country without violence, but the truth of the matter is that it IS central to the way they currently function.

            And it’s no use pretending otherwise. They certainly proved that in Lansing, whatever they thought they were proving.

          16. huffmaster and vance international are not ancient history and were responsible for plenty of violence that occurred during that strike. does that bother you at all?

          17. let me put it another way, since you assert that all of the violence was on the part of the union, how do you account for arrests for assault on strikers by strikebreakers from vance international and huffmaster hired by the newspaper? was that a mistake on your part? or are you just making s**t up because you don’t think anyone will go to the trouble to check the record?

          18. brett, i just realized that you’ve mentioned the crowder incident but what you’ve failed to mention is that the editing of crowder’s tape was very selective and that less edited versions show the man that hits him getting up off the ground after being pushed there. the complete video has yet to be released but the version on o’reilly’s show leaves open the possibility that crowder knocked the guy to the ground before the guy got up and hit crowder. nice try brett.

    1. Again, where is the evidence that this is some widespread problem as opposed to something far more isolated?

  5. I mean, this isn’t really all that surprising. Of course industries are “attracted” to right to work states, because then they can pay workers less. Does that stop them from relocating plants to other countries?

    I think the question is does the fact that “labor intensive industries are attracted” to unfriendly states mean they actually relocate there en mass. Another important question to ask is whether adopting such laws actually improve a state’s economy. Some of the poorest states in the country (Mississippi, Alabama, Arkansas) are right to work states. How’s that working out?

    1. I think I find the “attraction” less obvious than other posters. I had some hope that industries would be attracted to states that were well run with well-trained, well-educated, well-fed workers. Guess not.

  6. Matthew,

    Some direct questions, since I don’t have the time or the technical expertise to really read and assess these papers in depth.

    1. “Labor intensive industries.” By this I assume you mean, low-wage industries. If not, please explain. Are labor intensive but highly compensated industries involving people with high degrees of education and talent differentially attracted to “right to work” states bordering states that support collective bargaining rights more aggressively? E.g, higher education; medicine and health care; finance; law; etc.?

    2. Are wages (total compensation) in the same industries in fact lower in so-called “right to work” states than in bordering states that support collective bargaining rights more aggressively?

    2. Use of border states as a control. I take it for granted that labor-intensive industries not requiring high degrees of training or talent will gravitate towards places where wages are lower. The barrier to such movement will then be other factors — location near resources, suppliers, transportation, markets, etc. So now the question is, assuming bordering states are similar in these regards (e.g., Indiana v. Illinois in the Chicago area), would overall employment in these industries be significantly different in these regions if they all uniformly supported collective bargaining rights more aggressively? I.e., forget about robbing Peter to pay Paul. How much do the lower wages matter vis a vis these other factors — obviously if they were entirely dispositive, the jobs would all move to Mexico (or Thailand or South Carolina or Texas). The point being, if overall employment in the US wouldn’t be much affected, why do we care?

  7. Once all entry level “jobs” in labor intensive industries are years long unpaid internships, Matthew Kahn’s vision of paradise will be partly achieved. Full achievement of his paradise requires that all those “jobs” be filled by people whose historical geographical homelands have been inundated by climate-change induced sea level rise. This provides the motivation, you see, to accept work for no pay, but might start paying at some date suitably far in the future. The title of his magnum opus will be: “Climate Change Induced Migration: Its Beneficial Effects on Corporate Profits”. I’m guessing MK is not a big fan of demand explanations for poor economic performance.

  8. Matthew, what would be the effect if every state in the union enacted RTW laws? Where would labor-intensive manufacturing be inclined to locate then?

  9. “Right to work” is an absurd misnomer. They are “right to freeload” laws. An individual worker cannot be discriminated against in his pay and/or benefits simply because he does NOT belong to the union that negotiated those benefits. Thus, in the cost/benefit calculation of an individual worker, the dues he might pay to a union accord him no extra benefit, so it is a negative-value choice to pay dues. Consequently, if the state has a law saying he doesn’t have to belong to the union to get the benefits accorded union members, it is a “right to freeload” law.

    I hope the Cato Institute did not pay a lot of their hard-earned Koch money to prove scientifically that industry tends to go where the business environment favors their profitability. It would have been just a guess, of course, lacking all this very scientific-looking R-squared stuff; but I might have guessed that result before studying the data.

  10. Early this morning I saw a graphic that depicted the states with RTW laws. Looked very similar to states that voted R in the last few Presidential elections. Therefore it is unsurprising to me that a corporation would want to relocate to a place where the labor was cheaper.

    Again, I’m reminded of the title of a small Wendell Berry book: “What are People For?”

  11. I have two problems with this thread:

    1. Matthew doesn’t defend himself against a number of attacks that are pretty good. As far as I know, he never does. Most of the other people with posting privileges occasionally wade in; not Matthew.

    2. There is a big disconnect between Matthew’s paper and the topic of this thread. Matthew describes his paper as stating that labor-intensive firms are attracted to RTW states. This doesn’t mean that RTW is a good (or bad) idea. There are–broadly speaking–two schools of economic development in the US: “good business climate” and “cheap labor.” The good business climate states stress their business infrastructure: educated population, good schools and government, physical infrastructure, Florida hypothesis, whatever.* The cheap labor states stress cheap labor and low taxes. (Ed Kilgore calls this the “Moonlight and Magnolias” strategy.) RTW is a good idea for the cheap labor strategy. RTW is somewhere between neutral and affirmatively bad for good business climate states.

    If one wants to argue against RTW as an economic proposition, one must believe that cheap labor is an inferior school of economic development. I believe that this is true for advanced jurisdictions, and even the Chinese seem to be coming to this view. I’d like to know what Matthew thinks of this.

    * Until recently, “good business climate” was a bipartisan position, with “cheap labor” an exclusively Southern-fried approach. The good business climate Republicans differed from the Democrats in that they did not believe in redistribution, except such incidental redistribution as resulted from good schools and roads and the like.

    1. “This doesn’t mean that RTW is a good (or bad) idea.”

      Indeed, I think that’s exactly why this post is so objectionable. If it had consisted of “Hey, here’s a paper which evaluates the effects of RTW laws as a econometric exercise.” then I wouldn’t have thought twice about it. Frankly, it would have been slightly boring since the paper consists of a confirmation of what one should have expected intuitively.

      Instead Matthew Kahn makes a big to-do about how legislators should listen to economists and take their input on policy. But since I think the only real conclusion we can draw about policy from this paper is “State legislators likely have an incentive to pass RTW laws”, how are we to interpret the preamble then? Who exactly is supposed to be taking policy advice from this paper besides those state legislators whose incentives in this case may well be working to the detriment of humanity?

  12. Are there any studies on business location? Are labor-intensive businesses more likely to locate closer to the border between RTW and non-RTW states? Do RTW counties, with manufacturing plants relatively close to the borders of non-RTW states, find their employees more likely to live in the non-RTW states?

    I think these are more interesting questions than the one Matthew sets out to answer in his “safe” study.

  13. We hope that there are government leaders who “know that they don’t know” how the world works and that this group trusts economists to generate credible empirical models.
    I’m sure you hope that, but why should anyone trust economists? You’re a fine example of someone who has risen to a high position in your field by the easy trick of repeating right-wing mantras (“Free market solves all. Free market solves all.”) in place of thought.

  14. It seems to me that this paper shows that the “race to the bottom” among states is a reality, along dimensions that include environmental regulation, including GHG reduction, and RTW laws.

    That strikes me as a recipe for catastrophe.

  15. States enact right to work laws in an effort to counterbalance the federal thumb on the scales by putting their own thumbs on the scales. Would be nice if government at all levels would just keep its thumb off the scales.

      1. Federal law(NLRB) requires that union shops be closed shops unless individual states opt out with right to work laws. Would be better if employers and unions were allowed to negotiate whether shops are open or closed rather than having either one or the other mandated from on high.

        1. Charles, your interesting comment would be cogent, and directly on point, if it were not COMPLETELY WRONG.

          The law is the EXACT OPPOSITE of what you wrote. Not only does a union shop NOT have to be a closed shop, but even after going to work in a union shop, the worker does not have to join the union. Rather, as specified in the National Labor Relations Act, and clarified in the Taft-Hartley Act, the worker does not even have to pay full union dues; merely the fraction of the dues that go towards the expense of collective bargaining and provision of services to all represented employees.

          And furthermore, closed shops don’t even EXIST in the USA. They were outlawed in the USA in 1947 by the Taft-Hartley Act.

          You should note the title line of this blog. I, among many others, would be interested in your opinions even if they differ from my own, but I am not interested in “facts” that are no more than figments of your fertile imagination.

          1. See! The layering of laws and regulations on top of laws and regulations confuses everyone. The Democrats pass NLRA. The Republicans counter with Taft-Hartley. States pass RTW laws. At some point every new law and regulation just makes things worse no mater how well intended.

          2. taft-hartley was 65 years ago. unless you’re considerably older than that, there should be no confusion about “new” laws.

          3. I should have said “union shops,” instead of “closed shops.” Taft-Hartley disallowed closed shops, but allowed union shops. RTW laws disallow union shops.

          4. “Federal law(NLRB) requires that union shops be closed shops unless individual states opt out with right to work laws. ”
            “Federal law requires that union shops be union shops unless individual states opt out with right to work laws. ”

            Perhaps a better statement is:
            “Federal law allows union shops unless individual states disallow them.”

  16. There’s a hidden assumption here that no one has tackled, namely that the managers and owners of relatively labor-intensive companies are thoughtful, foresighted Uebermenschen who never make decisions with unintended adverse consequences for themselves.

    As a parable, I offer the extruded-aluminum shelving standards down in my basement. Beautifully polished metal, ingenious support fittings, not cheap but sturdy and worth every cent of the original price. A few years later I went to get more, but they weren’t available. The guy who ran the high-class shelving place explained that the owner of the company had gotten tired of dealing with unionized workers, so he’d moved the whole plant with all its equipment to a right-to-work state down south. Alas, he’d also gotten tired of the idea that you have to train your workers. The new hires had gone through a couple million dollars worth of extrusion dies in less than six months, and the company was out of business. But I’m sure they showed up briefly in the state’s job-creation stats.

  17. This study does not document that “labor intensive industries are attracted to the Right to Work side of the state border.” The study does not compare states with different right-to-work laws. Nor does it look at changes over time in states that adopted right-to-work (because no states adopted the law over the time period in the study). Either of these analyses would be interesting, but they aren’t in the study.

    The authors give the game away (at least to those who know how to read these kind of econometric study) when they admit that “the direct effect of Right-to-Work states cannot be separately identified given the inclusion of state-year fixed effects.”

    In fact what the study calls the “right-to-work effect” is completely screwy. They find that, *within right-to-work states*, industries that increase their labor-to-capital ratios tend to increase their labor force. Why the authors think this has anything to do with right-to-work laws is beyond me.


    Take back the language! Start calling these laws what they are: “Right-Wing Work Laws.”

  19. This conversation needs the obligatory Jefferson quote! Here it is, from the Monticello website: “To compel a man to subsidize with his taxes the propagation of ideas which he disbelieves and abhors is sinful and tyrannical.” This quotation comes from Jefferson’s Virginia Statute for Religious Freedom, although it is slightly misquoted. The original reads, “…to compel a man to furnish contributions of money for the propagation of opinions which he disbelieves and abhors, is sinful and tyrannical…”

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