In an effort to deliver information to workers about the looming fiscal cliff, President Obama made a stop today in Detroit, Michigan. As part of that stop over, he made his views clear on the negative impact of Right-to-Work Laws. He said that the law pending in Michigan is essentially a “right to work for less money.” (Here’s the video:)
The question is, do these laws really result in lower wages? The answer is, yes.
First, a quick tutorial on right-to-work laws. They do not outlaw or ban unions; however, they make it harder for unions to bargain on behalf of workers. They do this by allowing workers to decide whether or not to pay union dues. In the face, this seems logical. The glitch in the law for unions is that it still requires them to advocate on behalf of all workers, including those who do not pay dues.
This affects all workers, with the result being lower wages. According to the Economic Policy Institute, wages for all workers are about $1.50 an hour lower, or $1500 per year less in wages, when comparing states with and without the law. Some supporters of the law claim that those wages are higher and not lower. The EPI found that, in fact, while a few RTW states had higher employment rates, it simply did not translate to an increase in wages when a statistical analysis was done.
Right-to-work laws also make it harder for unions to organize where there is not a union. This prevents the advantage that exists with unionized bargaining. What this means is that starting a union will become much more difficult. The fewer workers who are represented by unions, the lower their wages and benefits are. A study by the Center for Economic and Policy Research of union workers as compared to non-union workers concluded the following:
“Workers who are able to bargain collectively earn more and are more likely to have benefits associated with good jobs. Taken together these data strongly suggest that better protection of workers’ right to unionize would have a substantial positive impact on the pay and benefits workers in every state.”
The study also found that unionized workers are also more likely to have employer covered healthcare when they are unionized. This benefit further widens the gap between union and non-union workers. This means that, as time goes on, the ability of workers to stay in the middle class will erode. This is a slap in the face of workers, especially in light of the fact that as wages have been trending down, the Bureau of Labor statistics show an increase in productivity.
The difference between union and non-union workers also makes a large difference when looking at pensions and retirement plans. On average, workers are 25% more likely to receive a pension or retirement plan when they are union members. For those who aren’t in a union, this can translate to falling into the lower class, or even into poverty, once retirement age rolls around. The result, of course, is a higher likelihood of using social safety net programs; conversely, those who have retirement plans and pensions are less likely to use social safety net programs. That differential not only impacts the burden on government programs, but the ability of those former union workers to spend that money. In other words, retired union workers help support the economy even after they are retired by putting that money back into the economy, helping to support current and future jobs.
Analysis by the Economic Policy Institute concluded:
“By cutting wages, right-to-work laws threaten to undermine job growth by reducing the discretionary income people have to spend in the local retail, real estate, construction, and service industries. Every $1 million in wage cuts translates into an additional six jobs lost in the economy. With 85 percent of Michigan’s economy concentrated in health care, retail, education, and other non-manufacturing industries, widespread wage and benefit cuts could translate into significant negative spillover effects for the state’s economy.”
In other words, reduction in the union’s ability to support unionized workers negatively affects those outside their industry. The result is a shrinking middle class.
So it’s just like President Obama said. Right-to-work laws really do mean the right to work for less.