Tuesday, December 11, 2012

What Does "Right to Work" Mean?

The last several days and weeks in Michigan (my home state) have been intense as legislation pended regarding making Michigan a "right to work" state.  Today Michigan Governor Rick Snyder signed the legislation into law, inciting a mob scene at the Capitol in Lansing.  But what exactly is a "right to work" state and why did it spark such controversy and anger amongst many people there?

Michigan is only the 24th right to work state as of this week.  A right to work law simply prohibits union security agreements.  While the Taft-Hartley Act outlawed "closed shops" (agreements that required employers to only hire union members), it is still lawful to require employees to pay union fees if a union security agreement is in place in a workplace (the "union shop").  Despite the term, "right to work," it is not any sort of guarantee or literal right to people seeking work.  Many argue over the pros and cons of right to work laws and the jury is still out on whether it benefits the economy by being a right to work state.

Pros and Cons of Right to Work Laws

Proponents of right to work laws hang their hat on the Constitutional right to freedom of association and that it is unfair to require employees to be forced to pay union dues as a condition of continued employment.  Opponents argue that right to work laws create free rider problems whereby employees who don't pay union dues benefit from due-paying employees, essentially earning a subsidy on benefits earned under the collective bargaining agreement.  It is also arguable that right to work laws weaken unions substantially, which is typically why Republicans tend to be right to work advocates.  After all, if employees can obtain all of the benefits of a union without paying for them, why would anyone pay and this would potentially lead to the elimination of the union altogether due to lack of support. 

Economic Impact of Right to Work Laws

As mentioned above, it is still unclear precisely if right to work laws are beneficial for the economy.  However, the Economic Policy Institute (EPI)a non-profit, non-partisan think tank, says the laws and other anti-union measures lower wages—for both union and non-union workers alike—by an average of $1,500 per year, after accounting for the cost of living in each state.  Other findings from the EPI's February 2011 report found:

  • Wages in right-to-work states are 3.2% lower than those in non-RTW states, after controlling for a full complement of individual demographic and socioeconomic variables as well as state macroeconomic indicators.  
  • The rate of employer-sponsored health insurance (ESI) is 2.6 percentage points lower in RTW states compared with non-RTW states, after controlling for individual, job, and state-level characteristics. If workers in non-RTW states were to receive ESI at this lower rate, 2 million fewer workers nationally would be covered.
  • The rate of employer-sponsored pensions is 4.8 percentage points lower in RTW states, using the full complement of control variables in our regression model. If workers in non-RTW states were to receive pensions at this lower rate, 3.8 million fewer workers nationally would have pensions.

Many states justify right to work laws as a way to survive with several states in New England and in the northern Midwest are now considering right-to-work proposals.  Recognizing that businesses are magnetized to right to work states makes it necessary to revisit our country's history with the labor movement and why a trend of right to work states will set us back decades to before the New Deal.

The Workplace Pre-New Deal

Prior to the New Deal, every single state in the United States was a right to work state.  Though the free labor market was an important factor in the rapid economic growth of the union after the Civil War, many critics began arguing that employment at-will was a sham given the overwhelming bargaining power of businesses and corporations.  The disparity in bargaining power led to the uprising of labor unions who tried to reform the industrial labor-relations system.  Early efforts toward this end usually involved a a voluntary association of workers who attempted to work in aggregate to bargain with employers on conditions of employment, wages, hours, etc.  The problem was that employers didn't have to bargain with unions and could fire employees who were a part of unions.  The only other thing employees could then do was go on strike but employers could then simply replace them with other workers who needed the work.  Employees were simply unprotected and at the mercy of employers.  

As employers began using the court system to prohibit strikes, the need for legislation to address employer-labor relations became apparent.  Slowly over time, unions found their way through New Deal legislation and the 1935 National Labor Relations Act (NLRA) (or, the "Wagner Act").  The NLRA, among many other things, required employers to bargain with whatever union the majority of the employees chose and any resulting collective bargaining agreement could include requirements that an employer only hire union members (the "closed shop") or force new employees to join the union (the "union shop")--which was later made unlawful, if a state chose, with the passage of the 1947 Taft-Hartley Act.  However, at last, labor now had laws to give them greater bargaining power when approaching employers for better working conditions and terms.  But with the passage of right to work laws, currently unionized employees could find themselves virtually on-par with at-will employees all over again.

It is left to be seen the effects of the right to work law in Michigan but if the statistics hold true, Michigan employees might soon see a dip in their wages and benefits due to weakened union power.  

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