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

55 Pages Posted: 6 Jun 2022 Last revised: 11 Jun 2022

See all articles by Nicole M. Fortin

Nicole M. Fortin

University of British Columbia (UBC) - Department of Economics

Thomas Lemieux

University of British Columbia (UBC) - Department of Economics; National Bureau of Economic Research (NBER)

Neil Lloyd

University of British Columbia (UBC)

Date Written: June 2022

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.

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Suggested Citation

Fortin, Nicole M. and Lemieux, Thomas and Lloyd, Neil, Right-to-Work Laws, Unionization, and Wage Setting (June 2022). NBER Working Paper No. w30098, Available at SSRN: https://ssrn.com/abstract=4128589

Nicole M. Fortin (Contact Author)

University of British Columbia (UBC) - Department of Economics ( email )

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Thomas Lemieux

University of British Columbia (UBC) - Department of Economics ( email )

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Neil Lloyd

University of British Columbia (UBC) ( email )

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