The Impact of Right-to-Work Laws on Wages and Employment

Author/Creator

Author/Creator ORCID

Date

2016-01-01

Department

School of Public Policy

Program

Public Policy

Citation of Original Publication

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Distribution Rights granted to UMBC by the author.

Abstract

This research focuses on whether state-level "Right-to-Work" (RTW) laws improve or worsen labor outcomes for workers. The impact of RTW laws is controversial, with proponents arguing that these laws benefit workers and opponents arguing that they harm workers. Proponents for RTW laws argue that RTW laws help workers, since these laws improve employment growth and labor market flexibility. Opponents of RTW laws have argued that RTW laws have adverse effects on worker wages and employment, since it reduces collective bargaining and increases the ease of firing. This dissertations utilizes policy changes in Indiana, Michigan, and Wisconsin for short-run analyses. Utilizing panel data on individuals derived from the Current Population Survey, the impact of RTW laws on unionization, employment, unemployment, and weekly earnings are assessed using a difference-in-difference methodology. This methodology controls for unobserved heterogeneity that may bias the impact of RTW laws. It also utilizes a policy change in Oklahoma for a long-run analysis of RTW laws. For the long-run analysis, county-level data from the Quarterly Census of Employment and Wages are used with a regression discontinuity design before and after Oklahoma'sRTW law. This methodology assesses the impact of RTW laws along Oklahoma'sstate borders before and after its law. As a comparison, the same methodology is applied to all RTW/union-shop state borders. The results find that there is support for opponents of RTW laws, while it finds little to no support for proponents of RTW laws. The results find that RTW laws do have an impact on individual outcomes in the Midwest. RTW laws are associated with a 1.4 to 2.2 percentage-point reduction in the likelihood of being a union member. Also, RTW laws are associated with a 2% to 4% reduction in earnings. The impact of RTW laws on employment and unemployment is consistent, but not always statistically significant. RTW laws were associated with an increased likelihood of being unemployed and with a decreased likelihood of being employed. For a long-run analysis of RTW laws, the research finds very limited support for proponents of RTW laws. RTW laws were associated with higher employment shares in manufacturing along Oklahoma'sstate borders before its RTW law, but these discontinuities remained after Oklahoma adopted a RTW law. However, other states that did not have a policy change in RTW laws experienced slight declines employment shares between RTW states and union shop states. These results likely point to other state policies and factors causing these discontinuities along state borders. Also, these results may have been due to low unionization in Oklahoma before the adoption of its RTW law.