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The Effect of Right-to-Work Laws on Business and Economic Conditions: A Multivariate Approach

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  • Stevans, Lonnie

Abstract

The 1947 Taft-Hartley amendments to the National Labor Relations Act (1935) authorized a state's right to prohibit unions from requiring a worker to pay dues, even when the worker is covered by a collective bargaining agreement. Within a short time of the amendment's passage, twelve (12) states passed "right-to-work" laws, as did ten (10) more states in the intervening years. Although there has been considerable research on the influence of right-to-work laws on union density, organizing efforts, industrial development and some study of wage differences, there has been no examination of the legislations’ effect on business and economic conditions across states. In this paper, the average differences in business conditions, personal income, and employment across states that have enacted right-to-work laws versus those that do not have this legislation are examined using a Multivariate Analysis of Variance (MANOVA). Our most notable result is the finding that although right-to-work states may be more attractive to business, this does not necessarily translate into enhanced economic viability for all sectors in the right-to-work state. Not only are personal income and employment lower, but there are no significant differences in the number of firms and business formations between right-to-work and non-right-to-work states.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 5638.

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Date of creation: 06 Nov 2007
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Handle: RePEc:pra:mprapa:5638

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Keywords: right-to-work laws; business formation; employment; Multivariate Analysis of Variance (MANOVA);

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  1. Kennedy, Peter E, 1981. "Estimation with Correctly Interpreted Dummy Variables in Semilogarithmic Equations [The Interpretation of Dummy Variables in Semilogarithmic Equations]," American Economic Review, American Economic Association, American Economic Association, vol. 71(4), pages 801, September.
  2. William J. Moore & Robert J. Newman, 1985. "The effects of right-to-work laws: A review of the literature," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 38(4), pages 571-585, July.
  3. W. Robert Reed, 2005. "How Right-to-Work Laws Affect Wages," Labor and Demography, EconWPA 0506005, EconWPA.
  4. DuMond J.M. & Hisch, B.T. & Macpherson, D.A., 1996. "Wage Differentials Across Labor Markets and Workers: Does Cost of Living Matter?," Working Papers, Department of Economics, Florida State University 1996_08_01, Department of Economics, Florida State University.
  5. Henry S. Farber, 2005. "Nonunion wage rates and the threat of unionization," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 58(3), pages 335-352, April.
  6. David G. Blanchflower, 2004. "Self-Employment: More may not be better," NBER Working Papers 10286, National Bureau of Economic Research, Inc.
  7. Halvorsen, Robert & Palmquist, Raymond, 1980. "The Interpretation of Dummy Variables in Semilogarithmic Equations," American Economic Review, American Economic Association, American Economic Association, vol. 70(3), pages 474-75, June.
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