The Effect of Endogenous Right-to-Work Laws on Business and Economic Conditions in the United States: A Multivariate Approach
Review of Law and Economics, Vol. 5, No. 1, pp. 595-614, 2009
20 Pages Posted: 7 Nov 2007 Last revised: 23 Feb 2011
Date Written: November 6, 2007
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 (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 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 the legislation to be endogenous and using a Multivariate Analysis of Covariance (MANCOVA). 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. Findings are that the number of businesses and self-employed are greater on average in right-to-work states, but employment, wages, and per-capita personal income are all lower on average in right-to-work states.
Keywords: right-to-work laws, business formation, employment, Multivariate Analysis of Variance (MANOVA)
JEL Classification: C30, C50, J51, J58, K31
Suggested Citation: Suggested Citation