The primary focus of a right-to-work law, or RTW, is to provide employees with options of joining or not joining a labor union within their workplace. Workers also have the choice to pay for union dues whether or not they are members of the labor union within a unionized workplace. The membership fees cover representation, regardless of an employee’s participation status. Certain groups refer to RTW laws as motivators for workplace freedom or workplace choice.
Essentially, there are a number of guarantees made by a right-to-work bill. First, it allows employees to select whether they would prefer to join a union or not. Second, unlike states that do not have RTW laws, employees are not obligated to pay union fees and dues as a term of their employment. Third, there are situations in which many of the benefits given to union members are also present for non-union employees.
As of 2021, twenty-eight states have passed right-to-work laws. The primary effect of these laws state that employees are not required to join a union or pay any fees in order to have a contract and employment. The states that do not currently employ such laws require employees to pay some form of union fees or dues as a term within a contract in order to acquire employment. Labor unions are still completely operational within right-to-work states but treat union fees as elective decisions that are not bound to the contracts of employees.
Both states with and without right-to-work laws illustrate a number of theoretical advantages and drawbacks. Right-to-work states are able to expand worker rights, hold unions accountable, and increase the financial freedom of employees. Meanwhile, they lack in a number of areas such as lessening the sense of economic competitiveness of companies, they starve unions of funds and can diminish the power of a union. While the general positive and negative aspects of right-to-work laws can be seen from the purposes of the bills, it is essential to observe the performance of states with right-to-work laws in contrast to those without them. The effects of these laws can be determined by assessing the difference in employee wages, benefits, and other gains across a number of states.
Selected qualitative data from prior studies focused on a number of topics in order to better understand the distinction between states with and without right-to-work laws. In the following study, the states that represented right-to-work law states were Nebraska, Nevada, Texas, and West Virginia while the non-right-to-work states included Colorado, Ohio, and Pennsylvania. These areas were identified as perceptions of wages, benefits, and working conditions.
Further, into the study, a number of additional themes emerged such as wage satisfaction and benefits, employee and employer relationships, feedback and worker appreciation, workplace environment and safety, anti-union sentiments, and concerns for the future of employment. Within the mechanical construction industry, the study found that union workers from right-to-work states had low perceptions of their wages (McKeever, 2018).
This notion was frequently influenced by the employee’s perception of the success of the company owners through purchases of luxuries such as good homes, vehicles, and vacations. Right-to-work states were also noted to experience higher rates of anti-union sentiment within workplace settings and in the general public. A particular finding of the study reflected that certain employees have a special appreciation for unions despite, or maybe due to, the anti-union sentiment and the legislation that was made to directly oppose mass unionization. As such, this finding can suggest that despite large support for right-to-work laws and anti-union leanings, a number of workers prefer or even require the representation of a union.
While qualitative data allows for specific and vital insight into the ways in which unions, companies, and employees operate within right-to-work states, it is also essential to consult quantitative data. A study found a number of ways in which states with and without right-to-work laws differentiated in specific financial and economic facets (Chava et al., 2019). Labor-intensive firms within RTW states, which can be determined as having a high labor-to-assets ratio, have seen a noticeable increase in profitability. Despite this increase within certain firms, especially within a close time frame of the first implementation of RTW laws, worker benefits do not always grow proportionality.
Additional tests revealed that payout policy, cash holdings, and executive compensation had also shown a significant difference between states with and without right-to-work states. RTW states depicted noticeable increases in payouts through higher dividends. The timing of the dividend payouts was determined to occur simultaneously with investment and employee growth. Additionally, RTW states also host higher payouts for employee compensation. This is often seen when executives receive increases in base salary, the value of options, and other compensation, such as pension plan contributions. Despite these improvements and growths within the overarching finances of industries and even among executives, not all the benefits are translated into other proponents of a firm.
The unemployment insurance provision between firms and workers within RTW states currently works on principles of Bailey (1974) and Azariadis (2015), which provide firms as buffers that are able to deflect certain adverse effects on behalf of employees in the trade of offering them lower wages. The theory of the right-to-work laws prior to their implementation suggested that the bargaining power shifts towards the firms which causes wages to decrease and the incentive to provide insurance also falls. The study found that firms within RTW states were truly more likely to decrease labor in circumstances that create negative industry-wide impact than firms within non-RTW states. This confirms an aspect of the theory in which firms do not hold incentives to provide employees with insurance, appropriate wages, or employment.
The combination of the increased growth within the firm stock and executive compensation and decreased employee retention within RTW states confirm the fact that such states offer workers less bargaining power. In turn, this notion has an impact on both employees and firms within right-to-work states. Workers who are covered by a collective bargaining agreement are usually those that suffer the most negative impact. The salaries of such employees have dropped after the initial introduction of RTW laws and have remained at significant lows ever since. Meanwhile, equity holders, executives of larger firms, and certain non-unionized workers gain advantages from RTW laws.
The firms within RTW states are able to affect the wages of employees based on a number of factors, including union strength. RTW laws largely reduce the strengths of unions and their bargaining power, which creates a situation in which representatives are unable to negotiate any wage increases for members or non-members alike. Union strength is not a unit that can be measured, but its prevalence within a firm can be observed through CBAs and membership rates for each state and for each year, which are substantially lower for right-to-work states.
Income inequality is a crisis that is caused by a varied number of factors, which can be observed in the intersection of states and markets, with each being influenced by government policy. Essentially, it is an issue stemming from policy-driven mechanisms, of which the right-to-work is one, to which both firms, authorities, and employees are reacting to. Though right-to-work laws cannot exclusively be determined to be the cause of nationwide income inequality, observing the wage and wellbeing statistics of workers within states that have more recently adopted RTW laws exposes it as a major cause. Other studies support that while right-to-work states develop the better fundamental ground for business, this effect does not always translate to the economic vitality of employees, in the form of ‘trickle-down’ from business owners to their workers (Kogan, 2017).
Self-employment is higher while business bankruptcy is lower in RTW states, but there is no significant difference in terms of capital formation or employment rates. Meanwhile, per capita and nominal wages are lower and proprietor wages are higher in RTW states than in their non-RTW counterparts (TK). While these results may also be influenced by factors such as geographic location, living costs, and price differentials, there has been no evidence found that such factors exclusively affect RTW states.
In terms of income inequality, no definitive statement can be made on the effects of RTW laws within workplaces. This is primarily due to the non-homogenous implementation of right-to-work laws from state to state. While certain states observed either no changes in income inequality or positive impact on income inequality after the implementation of RTW laws, others saw an increase in the gap of income, such as the state of Oklahoma. This could also be observed as the result of the ways in which RTW laws affect union strength, in this case with the non-uniform weakening of union strength and presence.
There are also a number of historical factors such as economic recessions, demographic distribution, and specific implementation of policies within RTW states that could affect the varied income inequalities. While economic shocks cannot be predicted or avoided, demographic distribution has become quite homogeneous in both RTW and non-RTW states’ workforces over the past few decades. Additionally, it is also now possible to hypothesize with greater accuracy on the effects of certain policies. Currently, the distribution on the levels of income inequality within RTW states is diverse and likely the results of both local and state-level policies as well as nationwide effects.
Other factors are that wages also display the well-being of employees within their workplaces. Such components can include financial and non-financial benefits, and very importantly, fair workplace treatment. A study observed the impact of right-to-work laws on the filing of unfair labor practice reports within the private sector. The study determined that the workers within right-to-work laws were frequently impeded when making an effort to protect collective bargaining rights. Filing ULP and NLRB reports is an action available to unions in order to ensure fair labor and any acts that stop employees or union members from forming, organizing, joining, or assisting labor organizations are in direct contradiction with the National Labor Relations Act of 1935 (Haskett, 2020).
Despite the legal requirement of protecting this particular right of all citizens, workplaces in RTW states have been displaying fluctuation in the success of union members and workers alike in filing NLRB or ULP reports. Due to the Taft-Hartley Act of 1947, employers are also able to file NLRB reports against bargaining activities, though there have been no noticeable effects of RTW laws on the effectiveness of employees filing unfair labor complaints.
The impact of NLRB or ULP reports being less seriously enforced or not implemented in a timely manner has led to a number of other effects within right-to-work states. Though the amount of jobs within RTW states is almost equal to non-RTW states, the collective impact of weak unions and often disregarded unfair labor complaints result in weaker bargaining for a number of individuals within the workplace. Essentially, it creates numerous effects on the social lives of workers within RTW states, primarily also through social stratification. Though certain RTW states do not present serious income inequality or low wages, the disproportionate difference between CEO wages and company growth and employee benefits and wages are higher than in non-RTW states.
While RTW laws have introduced a number of advantages to businesses, proprietors, and even to certain employees, they have also implemented a worrying amount of drawbacks. Workplaces within RTW states have displayed lowered wages, decreased benefits, low bargaining power, varied income inequality, and the lack of effectiveness of unfair labor reports. Certain factors also impact the social life of workers, with anti-union sentiment being a common element that influences pro-union workers within RTW states. In conclusion, the effects of RTW laws vary among states, but certain results can be especially detrimental to workers, especially those within unions, both in financial and non-financial ways.
Chava, S., Danis, A., & Hsu, A. (2019). The Economic Impact of Right-to-Work Laws: Evidence from Collective Bargaining Agreements and Corporate Policies. Journal of Financial Economics, 137(2), 451-469. Web.
Haskett, B. (2020). The Right to Work for Less: The Effect of Right-to-Work Laws on Unfair Labor Practice Filing at the NLRB (Master’s thesis). Web.
Kogan, V. (2017). Do Anti-Union Policies Increase Inequality? Evidence from State Adoption of Right-to-Work Laws. State Politics & Policy Quarterly, 17(2), 180–200. Web.
McKeever, T. M. (2018). How Do the Perceptions of Wages, Benefits, and Working Conditions Differ among Unionized Mechanical Construction Workers in Right-to-Work and Non-Right-to-Work States (Doctoral dissertation). Web.