Report | Unions and Labor Standards

The compensation penalty of “right-to-work” laws

Issue Brief #299

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Recent proposals to advance so-called “right-to-work” (RTW) laws are being suggested in states as a way to boost economic growth. In this economic climate, something called right-to-work legislation sounds positive, but the name is misleading: these laws do not guarantee a job for anyone. In fact, they make it illegal for a group of unionized workers to negotiate a contract that requires each employee who enjoys the benefits of the contract terms to pay his or her share of costs for negotiating and policing the contract. This provision directly limits the financial viability of unions, reducing their strength and ability to negotiate favorable contracts, higher wages, and better benefits. Similarly, by diminishing union resources, an RTW law makes it more difficult for unions to provide a workers’ voice on policy issues ranging from unemployment insurance to workers compensation, minimum wages, and other areas. The simple reality is that RTW laws undermine the resources that help workers bargain for better wages and benefits.

This briefing paper directly examines the impact of RTW on the wages and benefits received by workers, both union and nonunion. It does this by examining differences in the wages and benefits workers receive in RTW and non-RTW states. In a regression framework, we analyze the relationship between RTW status and wages and benefits after controlling for the demographic and job characteristics of workers, in addition to state-level economic conditions and cost-of-living differences across states. We find the following:

  • Wages in right-to-work states are 3.2% lower than those in non-RTW states, after controlling for a full complement of individual demographic and socioeconomic variables as well as state macroeconomic indicators. Using the average wage in non-RTW states as the base ($22.11), the average full-time, full-year worker in an RTW state makes about $1,500 less annually than a similar worker in a non-RTW state.
  • The rate of employer-sponsored pensions is 4.8 percentage points lower in RTW states, using the full complement of control variables in our regression model. If workers in non-RTW states were to receive pensions at this lower rate, 3.8 million fewer workers nationally would have pensions.
  • This briefing paper provides the most comprehensive study to date of the relationship between RTW status and compensation. Using a full set of explanatory variables, including state-level controls, it is clear that our analysis stands apart as being more rigorous than others of this type.

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