The Truth about Right-to-Work Laws

With Republicans in control of so many state governments and legislative chambers across the country one can expect that they will move their agenda.  Among items on their wish list will be right-to-work (RTW) legislation.  The argument will be that RTW laws will cut unemployment and grow the economy.  Ostensibly the argument conversely is that unions increase unemployment and hurt the  economy.

What do we really know about RTW laws?

 There are 24 RTW states and 26 plus the District of Columbia without such laws.  The Bureau of Labor Statistics (BLS) provides data on unionization rates, unemployment, and median family income.  Look at the October 2014 state unemployment rates as computed by the BLS.  Six of the states with the highest unemployment rates were RTW.  Among the ten with the lowest rates, five were RTW.  The average unemployment rate for RTW states was 5.5%, for non-RTW, it was 5.8%.  Since the 2008 recession, the difference in unemployment rates between RTW and non-RTW states has been minimal, revealing no clear pattern that the former has produced more jobs than the latter.

            Another way to examine the issue is by doing a statistical test called correlation analysis. Statistically, if being RTW decreases unemployment the correction is 1. If RTW increases unemployment the relationship is -1, and if the laws have no impact the relationship is 0. Is there any statistical correlation between a state being RTW and unemployment rates?  The correlation is 0.1 using 2014 data or 0.09 using 2012 data.  There is essentially no statistical relationship between states being right-to-work and unemployment rates. 

But now take a look at the differences from another angle.  There is a significant difference in median family incomes in states that are RTW versus those that are not.  Using a three year average of median family income from 2011 to 2013, RTW states have a median family income of $49,276, for non-RTW it is $55,725Ba difference of $6,449 or 13.1% per year.  Testing for the impact of RTW on median family incomes, the correlation relationship is -0.4. This means there is statistical evidence that RTW laws are associated with significantly lower incomes.  RTW appears to depress incomes.

           Now is there any statistical correlation between the percentage of the workforce in a state that is unionized and unemployment rates? Again using BLS data, one finds a correlation of 0.1  The connection is almost non-existent.  However, the percentage of the state’s workforce unionized demonstrates a positive 0.47 correlation with incomes.  Unions appear to increase family income while having no impact on unemployment rates.

Overall RTW laws have no real impact on unemployment and instead states with them have lower median incomes.  Similarly, unionization does not depress employment and instead increases wages.  Presumably more wages for workers means more consumption and a better economy in the state.  Thus, from an economic point of view, RTW laws do not appear to be a good economic deal for a state and in fact one might be able to argue that they bad policy that should be avoided.

Remembrance of Labor Days Past: The War Against Workers

Labor Day just is not what it used to be.

            Labor Day is supposed to be the American alternative to May Day--the international celebration of workers on the anniversary of the 1886 Chicago Haymarket Affair where violence ripped through a peaceful demonstration for the right to an eight-hour working day.  Labor Day is supposed to be celebration of American workers and all they have done.  It is Aaron Copeland's Fanfare for the Common Man set to the calendar. At one time Labor Day was also a celebration of and for labor unions.  But sadly there is little to celebrate today.  If anything, Labor Day, especially with so many people who work, now represents the war against unions and working class Americans.

            People forget why we have unions. The last 150 years of American history is the battle of workers and unions against corporations. America in the late nineteenth and early twentieth century was the country of  trusts.  It was the emergence of the railroads, steel, big oil, and monopolies.  It was also the era of sweatshops, child labor, adulterated and unsafe foods, and the six day, 70 hour+ work weeks.  It was also the era of piecemeal below subsistence wages, poor working conditions and high injury rates, no health benefits, no retirement benefits, and no protections against discrimination and harassment.  It was the world of Upton Sinclair’s The Jungle. Unions were illegal, and workers who stood up for their rights were beat up by the Pinkertons–company hired security–or arrested by the newly created public police forces which were created to control and brake unions. 

            No one should wax romantically for this era if you care about workers and the people.  The American economically may have grown exponentially, but it did so unevenly, producing massive fortunes for a few but significant economic inequalities for the rest.  The America of the early nineteenth century–the one that Alexis De Tocqueville so famously described in his Democracy in America as one characterized by a general equality of conditions–had vanished.  By the time the stock market crashed in 1929 the income and wealth gap in America had literally produced two Americas:  One was the country of F. Scott Fitzgerald’s The Great Gatsby, the other of the depression-era novel The Grapes of Wrath by John Steinbeck.

            The 1935 National Labor Relations Act (NLRA) or the Wagner Act brought relative peace to the labor market in that it recognized the right of workers to collectively bargain.  The NLRA established a process for how to unionize, organize workers, hold elections, and bargain for benefits.  It was a victory for workers, but also for the American people and the economy.  The Wagner Act was part of the New Deal, it was one element in a package of legislation to restructure the economy and fix the market failures in the economy.

            The NLRA had more than an economic purpose or impact.  Many of the economic problems in America are political.  They are produced by asymmetric political power between corporations, the rich, and rest of the people.  Unions at their best can be what Arthur Schlesinger, Jr., once called the countervailing power to help limit the power of businesses and corporations.  The Wagner Act thus reset the political equilibrium in American politics to help favor the people.

            And it worked.  Labor density and unionization in America dramatically increased in the United States, peaking in 1954 with over 35% of the workforce collectively bargained.  But what did unions accomplish?  There is powerful evidence first that they brought tremendous economic benefits to American workers and the economy.  They produced the minimum wage, the eight hours, five day work week.  They improved workplace safety, gave us health insurance, retirements, and workers compensation.  They raised the standard of living of most Americans, often even those not in unions. They also helped bring more economic equality to the economy, significantly erasing the disparities of the Gilded and Robber Barron eras.  Unions grew and flourished  at a time of significant economic growth, and there is little hard data to show that they caused rises in unemployment.  America's post WW II affluence is tied in with unions.

            But in addition to the economic benefits that unions bring, there was a political aspect to them.  Unions were part of the Democratic New Deal coalition.  The strength of the Post World War II Democratic Party dominance was tied to unions.  Unions got out the vote and they did so to the advantage of Democrats.

            But many employers, conservatives, and Republicans hate unions.  Even many workers, especially white collar professionals, share this animosity, thinking they are better off on their own. Almost from the day the NLRA was passed opponents sought ways to circumvent the law.  The found ways to fire striking workers and replace them.  They harassed and fired organizers, they found ways in court to delay or challenge elections.  They claimed unions hurt the economy or restricted individual freedom and passed right-to-work legislation.  Yet unions remained a potent force in American politics until President Reagan became president and signaled with the firing of the air traffic controllers in 1981 that it was okay to go to war against the unions.

            It is bad enough that a war is being fought against unions, but that battle extends to workers across the board.  The current Supreme Court in cases such as Dukes v. Walmart has made it harder for workers to sue for sex discrimination or if one is over 40, to prevail in an age discrimination case.  Companies continue to cut benefits, use part time workers, or engage in other practices to make it difficult for workers to earn a decent wage.

            As Barry Bluestone and Bennett Harrison tell in The Great U-Turn, the Reagan era war against unions was part of a strategy along with deregulation and tax cuts to restructure the economy.  It was also part of a political restructuring of American politics.  The strategy has largely worked.  Overall, less than 12% of all workers are now in unions in the United States, with only 7% of the private labor force collectively bargained. 

            The decline of the American income in the last 30 years goes part and parcel with the decline of unions. In the last thirty years the American economy has seen a dramatic increase in the gap between the rich and poor such that it now mirrors that of the 1920s.  According to the United States Census Bureau in 2010 the richest five percent of the population accounted for 21% of the income, with the top 20% receiving over 50% of the total income in the country.  This compares to the bottom quintile accounting for about 3% of the total income.

            A second study by the Center on Budget and Policy Priorities in 2010, drawing upon Congressional Budget Office research, found that income gap between the top one-percent of the population and everyone else more than tripled since 1973.  After-tax income for the top one-percent increased by 281% between 1973 and 2007, while for middle class or middle quintile it increased by 25%, for the bottom quintile it was merely 16%.  Looking beyond income to wealth, the maldistribution has not been this bad since the 1920s.  According to the Institute for Policy Studies, in 2007 the top one-percent controls almost 34% of the wealth in the country, with half of the population possessing less than 3%.

            Opposing unions and workers costs families money.  There is a significant difference in median family incomes in states that are right to work (RTW) versus those that are not.  Using a three years average median family income for 2009 to 2009, RTW states have a median family income of $46,919, non RTW it is $53,418Ba difference of $6,499 or 13.9% per year.  Testing for the statistical impact of RTW on median family incomes, the relationship is -0.4.  This means there is statistical evidence that RTW is associated with lower incomesBRTW depresses wages.  If all of this does not demonstrate a war against unions it definitely does reveal an attack on workers.

            Yet Americans have been convinced unions and workers' rights are bad.  They resent successful unions that pay better wages than they receive instead of organizing to bring themselves up to that level.  We live in a culture that worships the Donald Trumps and MBA-led management teams, yet these are the people who brought us the economic crash of 2008, gross mismanagement of the economy, and the mass layoffs that frequently dot our workplaces.  For many middle class workers, the image of a surprise visit to your cubicle by a HR person with a box telling you that you are fired and have one hour to clear out your desk is all too real.  Yet despite this, Americans continue to believe that they are better off without unions and worker protections.

            Fixing the NLRA is a must to yet again reset the economic and political imbalances in the law.  Some claim that unions are no longer relevant or that their corruption has led to their own demise.  There is no question that unions need to clean up their act and support meaningful government reform, but there is also evidence that many people do want to organize and want representation in a union.  If it were easier to organize, perhaps more people would have health care even without Obamacare, or maybe more people would have retirement pensions.

            At the federal level, unions made fixing the Wagner Act a top priority in 2008 and 2009 with the Employee Free Choice Act.  The law would have streamlined organizing and holding elections.  While initially as candidate saying he would support such changes, President Obama never pushed the Act when the Democrats had control of Congress, and now the chances for its passage are dead.  Perhaps the most important structural reform of the economy Obama could have made, he simply ignored.

            It's hard to make the case that Labor Day is a celebration of workers anymore.  Today ain't what it used to represent and that is bad for all of us.

The Presidency and Foreign Policy (plus a note on Polls and Wisconsin)

The 2012 presidential race was supposed to be about the economy.  At least that is what Mitt Romney wanted.  His goal was to emphasize this experience as a businessman in contrast to Obama’s failed leadership in an economy with still high unemployment.  If his first message was to steal a page from Bill Clinton’s 1992 campaign–“It’s the economy stupid”–his convention speech shifted it to the Reaganesque “Are you better off now than four years ago.”  Run on the economy, as the conventional wisdom would have suggested, and it should be a path to the White House since presidential re-elections are generally referenda on the economy.

Yet things have just not worked out for Romney.  First it was Obama picking up where Newt Gingrich left off, turning Romney’s Bain Capital experience into a liability and symbol of vulture capitalism.  Despite the persistence of a weak jobs economy, Romney has lost his advantage on this issue as the NY Times reports that polls now give Obama a slight nod on this issue.

The it was Paul Ryan.  Ryan diverts attention away from the economy and to budget cuts and Medicare.  Or Atkins in Missouri has pushed the agenda to abortion and social issues.  Or Obama  and the Democrats have made the campaign about gay rights.  Whatever the diversion, though, Romney has not been able to score on the issue that should have been his strength–the economy.

And now the agenda has shifted again–to foreign policy. Until now the presidential race was about domestic policy.  Yes Romney tried in his RNC speech to talk about Afghanistan and the war there, but generally the polls suggested that this is not what is driving the public or the race.  But how recent and potential events are placing foreign policy back perhaps to the center of the race, again taking the presidential contest further away from the economy.

Two events this past week were particularly important.  There is the killing of the US ambassador in Libya along with the anti-American uprisings across the Arab world, and then the demand by Israeli Prime Minister Netanyahu for the US to draw a red line for Iran regarding nuclear weapons.  Both of these events thrust foreign policy and events into the middle of the presidential race.

At first blush, Obama is coming our a winner.  He does so because of Romney’s ham-handed criticism of the president regarding Libya that was factually wrong and ill-timed, criticized even by fellow Republicans.  This is not Romney’s first mistake.  He crudely criticized the UK regarding the Olympics and also while visiting Israel his comments about Palestinians was criticized.    His views on Russia too seem antiquated.  The point here is that Romney’s lack of foreign policy experience is showing, and it creates an opportunity for Obama to look presidential and qualified.  Romney’s problem is not unusual for presidential challengers when running against incumbents–the latter always look more experienced and qualified–the big exception being Jimmy Carter and the hostage crisis in 1980.

Generally foreign policy crises work to a president’s political advantage.  It gives them the chance to look, while presidential and in control.  People rally around the flag, especially if presidents act decisively.  So far Romney has damaged himself and Obama has not hurt himself.  But that could change.

Think of worst case scenarios–all October surprises.  Israel bombs Iran.  What does the USA do?  Obama cannot ignore supporting our ally and with the Jewish vote critical to a Florida victory, he may have no choice but to intervene.  How such a war will affect the presidential election overall is unclear.  Conventional wisdom generally says the president should be helped with something like this, but America is war-weary.

A second October surprise-American hostages are taken at some other US embassy or another ambassador is killed.  Images of Carter, Iran, and 1980 are invoked here.  Carter’s impotence with the hostages–and a botched rescue mission–were not good for his image.  Obama probably now needs to take some major foreign policy action to address Libya but what?  In theory it and Egypt are our allies.  Kind of hard to bomb them.

Other October surprises are a continued erosion of stability and civil war in Syria and financial solvency of the Europe.  Overall, these foreign policy events are largely beyond control of Obama and all could dramatically change the presidential race.  They also have domestic implications–look at the price of gas.

Overall foreign policy and international events run risks for both Romney and Obama.  How these events play out are yet to be seen but they have placed foreign policy in the center of the race.  For Obama it also shifts the race again off the economy and that might be good.  For Romney, this may not be good.

Two Final Thoughts: Swing States and Labor Rights Wisconsin

Two other thoughts are in order.

Both the Financial Times and the New York Times have noted critical changes in the presidential race since the DNC.  Obama and the Democrats got a convention bounce that the GOP and Romney did not.  Obama picked up a couple of points in the polls but more importantly, he picked up some approval ratings.  This may be the “sugar high” that Romney speaks of, but it is still significant. 

But the bigger problem for Romney is that two swing states–Pennsylvania and Michigan–are no longer swing.  Romney has effectively given up on them, reducing the number of swing states to eight or nine.  The Financial Times reports nine swing states with Obama leading in eight, including a solid margin in Ohio.  Romney may be close in the national polls but he is not doing well in the critical swing states-although he has a shot in Wisconsin

Finally, on Friday a Dane County circuit judge invalidated the law that abrogated public employee rights in Wisconsin.  He did so on federal constitutional grounds (First Amendment freedom of association and Fourteenth Amendment equal protection grounds) along with state constitutional claims.  Were the decision upheld on appeal it would be a real repudiation of the Walker and perhaps more significant that had he ben recalled.

However hold on with this case.  It was not the best drafted opinion and the chances of it being upheld are iffy at best.  Moreover, Walker will move for the decision to be stayed on appeal.  It is not clear after reading it whether it restores collective bargaining rights and if so, when.  In short, lots of questions remain regarding what the decision really means.

The Economic and Political Truth about Right-to-Work Legislation

Today's blog also appeared as a Community Voice piece today in Minnpost. 

The debate over the merits of constitutional amendment making Minnesota a right-to-work (RTW) state is heating up. Proponents of RTW contend that it will make Minnesota more business competitive and produce jobs. Opponents respond that it will lower family incomes. Because the debate has taken on partisan implications with Republicans and chamber of commerce constituencies favoring RTW and Democrats and unions opposing it is difficult to separate fact from fiction. Is RTW about economics, or is politics, directed at busting unions which have historically supported Republican candidates and causes? The simple answer is that it is about both. RTW does not produce the economic benefits that its advocates claim, and instead the real justification has to rest upon its political aims.

What do we know about the economic impact of RTW? Legislative debates on the issue are generally badly informed or woefully devoid of fact-based impartial evidence. Often studies are cited by organizations with clear political agendas. Groups such as the Cato Institute, the Mackinac Center, and the Chamber of Commerce argue that RTW laws produce lower unemployment rates for states. Conversely, the generally liberal Electronic Policy Institute finds the opposite, and also asserts that RTW adversely impacts unionization and family incomes. More nuanced and independent research yields a better picture.

Right-to-Work Laws Fail to Increase Employment

In Right-to-Work Laws and Economic Development in Oklahoma Lawrence Mishel finds no evidence that RTW laws increase employment. Conversely he finds evidence that they decrease wages. Lonnie Stevans of Hofstra University in a paper entitled "The Effect of Endogenous Right‑to-Work Laws on Business and Economic Conditions in the United States:  A Multivariate Approach" reached the same conclusion on both points, while also noting that the rate of self-employment was higher and bankruptcies lower in RTW states.

Conversely do RTW laws hurt unionization? H. Craig Petersen and Keith Lumsden in "The Effect of Right‑to‑Work Laws on Unionization in the United States" find little evidence for this claim. States, for example, such as Nevada, which is RTW, have one of the higher unionization rates in the country at 16.6% in 2011. The same conclusion is reached in the article "The Effects of Right-to-Work Laws: a Review of the Literature" by William J. Moore and Robert J. Newman.

But in addition to the above research, one can also do the math to look at the impact of RTW.  There are 22 states with RTW and 29 states plus the District of Columbia without.  The Bureau of Labor Statistics (BLS) provides statistics on unionization rates, unemployment, and median family income.  What do we learn from crunching some numbers?

Fox's Bill O'Reilly asserts that RTW states have a much lower level of unemployment than the union states do. Using BLS December, 2010 data, the unemployment rate for RTW states was 9.2%, for non RTW it was 9.7%. Now look at the December 2011, BLS numbers. Supporters of the amendment can point to the fact that seven of the top ten states with the lowest unemployment rates are RTW. Conversely, five of the ten states with the highest unemployment rates are RTW. Second, the average unemployment rate for RTW states in December, 2011 was 7.6%, compared to 7.9%. Using the most recent January 2012 numbers, the unemployment rate for RTW states was 7.3%, and 7.8% for non-RTW states. Overall, not much differences here in terms of economic performance.

Another way to examine the issue is by doing statistical correlation analysis. Statistically, if being RTW decreases unemployment the correction with it is 1. If RTW increases unemployment the relationship is -1, and if the laws have no impact the relationship is 0.Is there any statistical correlation between a state being RTW and unemployment rates? The correlation is 0.09 suggests no relationship. Essentially, O'Reilly is wrong in his statement.

But the classification of states as O'Reilly does into those which are RTW versus union is too crude. Many RTW states do have unionization levels comparable to those lacking such legislation. Is there any statistical correlation between the percentage of the workforce in a state that is unionized and unemployment rates? With a correlation of 0.1 the connection is almost non-existent.

Right-to-Work Laws Depress Family Incomes
But now take a look at the differences from another angle. There is a significant difference in median family incomes in states that are RTW versus those that are not. Using a three years average median family income for 2009 to 2009, RTW states have a median family income of $46,919, non RTW it is $53,418 a difference of $6,499 or 13.9% per year. Testing for the impact of RTW on median family incomes, the relationship is -0.4. This means there is statistical evidence that RTW is associated with lower incomes BRTW depresses wages. Finally, the percentage of the state's workforce unionized demonstrates a positive 0.47 correlation with incomes unions increase income.

RTW laws are only one variable affecting the economic climate of a state. But is fair to say that these laws have no real impact on unemployment and instead states with them have lower median incomes. Similarly, unionization does not depress employment and instead increases wages. Presumably more wages for workers means more consumption and a better economy in the state.

So if economics is not really the issue (unless one wants lowers wages), then what is it is about? It is about politics. Generally advocates for RTW are Republicans who see labor unions as primary supporters of Democrats. RTW laws, along with voter identification laws are tools aimed at weakening the political support for the Democratic Party by making it more difficult for some to vote, organize, and amass political resources. Simply put, it is an effort to rig the rules of politics to favor one side by demobilizing the other.

Class divides America -- and conflicts reflect a broader battle

This blog originally in Minnpost on October 17, 2011.

A line in the sand of American politics is being drawn. It is a line that cut through Madison, Wis., last spring in the debate over unions. It is a line being cut through Wall Street over the role of banks and hedge-fund managers in destroying the American economy in 2008. And it is a line cutting though Washington, D.C., in Congress over how to produce jobs, regulate banks, reduce the deficit and debt, and provide health care to those who need it. That line is about class in America.

There is a basic belief in America that we are all in it together. We are one big happy middle class where the interests of the rich and poor are not in conflict. Rising tides lift all boats, as Ronald Reagan used to say. There are no class conflicts in this world. That what is good for GM is good for America, and that we live in a society where all of us can be winners with no losers in the economic marketplace. The promise of America is of a non-zero-sum game — some do not have to lose for others to win. The truth is far uglier.

America is a nation characterized by increasing class divides. In 2010 the Census reports the richest 5 percent of the population accounted for 21 percent of the income, with the top 20 percent receiving over 50 percent of the total income in the country. This compares to the bottom quintile accounting for about 3 percent of the total income.

Congressional Budget Office research found that the income gap between the top 1 percent of the population and everyone else more than tripled since 1973. After-tax income for the top 1 percent increased by 281 percent between 1973 and 2007, while for middle class or middle quintile it increased by 25 percent, and for the bottom quintile it was merely 16 percent.

Looking beyond income to wealth, the maldistribution has not been this bad since the 1920s. According to the Institute for Policy Studies, in 2007 the top 1 percent controlled almost 34 percent of the wealth in the country, with half of the population possessing less than 3 percent. The racial disparities for wealth mirror those of income. Studies such as the Survey of Consumer Finances by the Federal Reserve Board have similarly concluded that the wealth gap has increased since the 1980s.

Record numbers in poverty

Social mobility in America has ground to a halt. A 2010 Organization for Economic Cooperation and Development study found that social mobility in the United States ranked far below that of many other developed countries. Other studies, including those in 2005 and 2010 in the Economist, similarly point to declining social mobility in the United States that makes it difficult for individuals to rise from one social economic status to a better one. In fact, there is better than a 95 percent chance that children will not improve their social economic status in comparison to their parents. Finally, the latest Census figures point to a poverty rate in 2010 of 15.1 percent, representing a record 46 million people in poverty. The numbers are equally grim when one looks at women, children, and people of color in poverty — all record or near-record numbers. Few really can move on up to live the American dream.

The reality is that America is a zero sum game. There are winners and losers. What is good for corporate America is not benefitting most Americans, and it is increasingly clear that in simple terms the rich are getting richer, the poor poorer. The reality is, we are not all in it together and class divides America. We see the divide in where individuals live, what they eat, and the entertainment they consume. It is seen in who votes, runs for office, and in political contributions. It is reflected in our tax code, criminal-justice system, and educational opportunities.

Class exists. The problem is, few want to acknowledge it. And when someone talks of economic redistribution, bailing out homeowners and not banks, taxing millionaires, or blaming Wall Street and not the government for the economic problems that ail America, cries of class warfare are raised. Or worse — Herman Cain "McCarthyited" the Wall Street protesters as "Anti-American," invoking the ugliest of all political epithets to assail opponents.

Protests are symptoms

Yes, class conflict exists in America. Protests in Wisconsin over attacks on unions or on Wall Street to challenge the power of banks reflect this. But they are merely symptoms of the broader battle over a simple question: "Why government?" It is a debate over whether free-market fundamentalism prevails as a means to provide order and declare winners and losers in America versus letting the government correct the imperfections and errors that capitalism has produced. It is between saying that the direction of the country is decided by "one dollar one vote" or by "one person one vote." It a battle over whether the government serves the interests of corporations and the rich or the rest of us.

Class exists in America, as it does in all other nations of the world. Like it or not, there are diametrically opposed interests in this country and the real questions are whether the government and politicians should do anything about it and whose interests they should serve.