Richard Vedder and Jonathan Robe - An Interstate Analysis of Right to Work Laws

4. Percentage of the nonagricultural working
population in manufacturing (“Average
Manufacturing”); and
5. Rate of population growth.
As Table 1 shows, our regression results indicate
that states with RTW laws, on average,
saw higher growth rates than did states without
such a law. Our results suggest that the
overall effect of a RTW law is to increase economic
growth rates by 11.5 percentage points
(for example, from 40.0 to 51.5 percent). This
result is significant at the 99 percent confidence
level.
Not surprisingly, we also see a positive relationship
between economic growth and increases
in both the employment-to-population
ratio and the proportion of adults with college
degrees. We see a negative relationship between
manufacturing and growth, indicating that
states that are more manufacturing intensive
have seen lower levels of growth over the past
30 years. Similarly, states with higher levels of
population growth have seen, on average, lower
levels of real per capita income growth, though
this relationship is not significant even at the 90
percent confidence level.
Although the relationship between RTW and
economic growth in Table 1 is statistically significant
and positive, is it meaningfully large
From the statistical results described earlier, we
can provide insight into an answer to this question:
“What would have happened to income
levels over the 35-year period of 1977–2012 in
states that did not have an RTW law in 1977
had they, in fact, adopted one by 1977”
We converted per capita income levels in 1977
dollars to 2012 dollars and then calculated the
actual rate of growth. We then calculated what
per capita income would have been—based on
the estimation in Table 1—if those states had an
RTW law. We made the calculations based on
the coefficient on the RTW variable in Table 1;
specifically we assumed that the presence of an
RTW law would add 11.49 percentage points
to the observed rate of growth.
Next, we ranked the states by the lost per
capita income associated with the absence of an
RTW law (see Table 2). Excluded from the table
are 20 states that already had RTW laws in
1977 (they had no income loss in the subsequent
period). Two states, Idaho and Oklahoma, adopted
RTW laws during that time span and, we
estimate, faced some loss of income from not
having adopted the laws earlier. Although Indiana
and Michigan have adopted RTW, that
adoption came at the very end of the period,
so they did face full economic losses associated
with the absence of a law allowing workplace
freedom.
Most non-RTW states had an estimated
loss in per capita income between $2,500 and
$3,500. Idaho and Oklahoma had lower numbers
because they had RTW laws in place for
part of the period. Those numbers are large
for all affected states. The median figure for all
states, $3,278, implies an income loss per family
of four of more than $13,000 a year ($3,278
times four). That is the difference between, say,
living in a three-bedroom home with one car
and taking only one, short, nearby vacation to
living in a larger four-bedroom home with two
cars and taking a longer European vacation or
a cruise. It is the difference between sending
your children to a low-cost nearby community
college and sending them to live four years at
the state’s flagship university or even a private
college.
The total estimated income loss in 2012
from the lack of RTW laws in a majority of U.S.
states was an extraordinary $647.8 billion—
more than $2,000 for every American, including
those in RTW states. Table 2 fails to account for
vast variations in population between the states.
Table 3 lists the 30 non-RTW states by the
estimated annual income loss in total dollars,
taking into account the population differences
between the states.
More than half of the estimated economic
damage from the absence of RTW laws, as
measured by personal income, occurred in just
five states: California, New York, Illinois, Penn-
16 An Interstate Analysis of Right to Work Laws