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Right-to-Work Laws, Unionization, and Wage Setting

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  • Nicole Fortin
  • Thomas Lemieux
  • Neil Lloyd

Abstract

This paper uses two complementary approaches to estimate the effect of right-to-work (RTW) laws on wages and unionization rates. The first approach uses an event study design to analyze the impact of the adoption of RTW laws in five U.S. states since 2011. The second approach relies on a differential exposure design that exploits the differential impact of RTW laws on industries with high unionization rates relative to industries with low unionization rates. Both approaches indicate that RTW laws lower wages and unionization rates. Under the assumption that RTW laws only affect wages by lowering the unionization rate, RTW can be used as an instrumental variable (IV) to estimate the causal effect of unions on wages. In our preferred specification based on the differential exposure design, the IV estimate of the effect of unions on wages is 0.35, which substantially exceeds the corresponding OLS estimate of 0.16. This large wage effect suggests that RTW may also directly affect wages due to a reduced union threat effect.

Suggested Citation

  • Nicole Fortin & Thomas Lemieux & Neil Lloyd, 2022. "Right-to-Work Laws, Unionization, and Wage Setting," NBER Working Papers 30098, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:30098
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    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • J83 - Labor and Demographic Economics - - Labor Standards - - - Workers' Rights

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