Back in November, the Business Bureau of Economic Research at West Virginia University released a study by John Deskins that concluded that the adoption of a “Right-to-Work” (RTW) law in West Virginia would boost employment and GDP growth, have no discernible impact on wages, and reduce unionization rates.
The problem with the WVU study – and many studies that look at the economic impact of RTW laws – is that it is very difficult to untangle the impact of RTW laws on a state’s economy from other important factors (e.g. air-conditioning, infrastructure, quality of life, etc.). Another problem in teasing out the effects of RTW laws is that there are not a lot of natural experiments where you can look at the before and after impact of RTW on a state’s economy.
While Indiana (2012), Michigan(2012), and Wisconsin (2015) have recently adopted RTW laws, only two states since 1980 have done so – Idaho (1985) and Oklahoma (2001) – that provide an opportunity to provide some significant correlations between RTW laws and state economic performance. This is precisely why state economic development expert Tim Bartik found that the WVU RTW study offered no conclusive evidence that RTW would boost economic development.
There are only two recent peer-reviewed academic studies (non-think tank studies) that examined the effect of RTW laws in Idaho and Oklahoma – both by Ozkan Eren (Louisiana State University) and Serkan Ozbeklik (Claremont McKenna College). Eren and Ozbeklik’s most recent study (2015) on the effects of RTW in Oklahoma found that it decreased private sector unionization and had no impact on employment, private sector wages, or the manufacturing sector. And unlike the WVU study that did not include any caveats about the impact RTW would have on West Virginia, Eren and Ozbeklik conclude that even with these results in mind, that there is “still no clear consensus among policy makers and researchers” of RTW laws on state economies.
An earlier study (2011) by Eren and Ozbeklik that looked the effects of RTW in Idaho and Oklahoma found similar results for Oklahoma (no impact on manufacturing wages or employment or per capita income) while in Idaho it found that RTW increased manufacturing employment but had no effect on per capita income.
These findings are illustrative of why we should always proceed with caution in expressing certainty over the impact of RTW laws on state economic outcomes. This is one of the major shortcomings of the WVU study by John Deskins. For example, the WVU study concludes that RTW “would lead to a decrease in private-sector union membership, and an increase in employment and output growth in West Virginia.”
As Yogi Berra said a long time ago, it is difficult to make predictions, especially about the future. And this conclusion illustrates why this study does not rise to the level of scholarship found in peer-reviewed academic journals.
Another problem with the WVU study is that its own analysis seems to contradict its conclusion that passing RTW in West Virginia “would” increase the state’s job growth. As economist Tim Bartik notes:
The West Virginia study includes information that undermines the claim that adoption of RTW laws “certainly” increases job growth. The study includes some information on trends before and after RTW adoption in 10 states that adopted RTW laws after 1950. In 5 of these states, job growth increased after adoption of RTW, and in 5 states job growth decreased after adoption of RTW. This very mixed and uncertain result is representative of the overall findings of RTW research. Based on current evidence, it is highly uncertain whether RTW laws have any positive effects on job growth.
Despite promises from RTW supporters in Oklahoma that the law would boost manufacturing job growth, the opposite has happened. Since the adoption of RTW in 2001, Oklahoma has lost over 38,000 manufacturing jobs. While the adoption of RTW in Oklahoma most likely did not cause these manufacturing job losses, claims that RTW would boost manufacturing employment clearly did not materialize.
While the debate about whether to adopt a RTW law is mostly about political power and the ability to “free ride” on the benefits provided by union representation, the economic research – as we highlighted in this earlier report – shows that RTW is unlikely to boost economic growth and it could, as Bartik suggests in this State Journal article, pave the way for a lower-wage economy in the Mountain State. This means less freedom for working families and more economic stagnation.
