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The Effect of Endogenous Right-to-Work Laws on Business and Economic Conditions in the United States: A Multivariate Approach

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  • Stevans Lonnie K

    (Hofstra University)

Abstract

A state's right to prohibit unions from compelling employees to pay dues even when they are covered by a collective bargaining agreement has its basis in the 1947 Taft-Hartley amendments to the National Labor Relations Act (1935). After the amendment's passage, twelve states passed "right-to-work" laws--as did ten more states in the intervening years. Although there has been considerable research on the effect of right-to-work laws on union density, organizing efforts, industrial development and some study of wage differences, there has been little or no examination of the legislation's influence on business and economic conditions across states. In this paper, the average differences in business conditions, employment, personal income, wages and salaries, and proprietors' income across states that have enacted right-to-work laws versus those states that did not, are examined assuming that the legislation is endogenous and controlling for state real economic growth, region, and year. Although right-to-work states may be more attractive to business, this does not necessarily translate into enhanced economic verve in the right-to-work state if there is little "trickle-down" from business owners to the non-unionized workers. While the number of self-employed is higher and business bankruptcies lower on average in right-to-work states, there is no significant difference in capital formation or employment rates, ceteris paribus. In addition, per-capita personal income and wages are both lower, yet proprietors' income is higher in right-to-work states.

Suggested Citation

  • Stevans Lonnie K, 2009. "The Effect of Endogenous Right-to-Work Laws on Business and Economic Conditions in the United States: A Multivariate Approach," Review of Law & Economics, De Gruyter, vol. 5(1), pages 595-614, October.
    • Handle: RePEc:bpj:rlecon:v:5:y:2009:i:1:n:25
    DOI: 10.2202/1555-5879.1352
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    References listed on IDEAS

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    1. Kyung-nok Chun, 2023. "What do Right-to-Work Laws do to Unions? Evidence from Six Recently-Enacted RTW Laws," Journal of Labor Research, Springer, vol. 44(1), pages 94-144, June.
    2. Michael J. Hicks & Michael LaFaive & Srikant Devaraj, 2016. "New Evidence on the Effect of Right-to-Work Laws on Productivity and Population Growth," Cato Journal, Cato Journal, Cato Institute, vol. 36(1), pages 101-120, Winter.
    3. Thomas E. Lambert & Gary A. Mattson & Kyle Dorriere, 2017. "The impact of growth and innovation clusters on unemployment in US metro regions," Regional Science Policy & Practice, Wiley Blackwell, vol. 9(1), pages 25-37, March.
    4. Cebula, Richard J. & Connaughton, John E. & Swartz , Caroline, 2020. "Right-to-Work Laws as Economic Freedom: Their Role in Influencing the Geographic Pattern of Manufacturing Jobs, Incomes, and Finances," American Business Review, Pompea College of Business, University of New Haven, vol. 23(2), pages 431-450, November.
    5. Stephen R. Porter, 2013. "The Causal Effect of Faculty Unions on Institutional Decision-Making," ILR Review, Cornell University, ILR School, vol. 66(5), pages 1192-1211, October.

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