Joel Dillard & Associates

A recent study shows that right-to-work laws are no good for the economy. The only significant impact is to transfer money from both employees and taxpayers to the owners of businesses.

Today, 25 states have adopted such laws, which are designed to sap the strength of labor unions. The way these laws work is by forcing unions to provide free services, draining their financial support and ultimately decreasing membership numbers.

Representing employees can be expensive. A union not only pays for organizing and negotiating contracts, it also pays for grievances and arbitrators to decide disputes about how the contract is interpreted. The money can come from two places: member dues and non-member fees. Membership in a union is always voluntary, so no one has to pay dues who does not want to. But if your co-workers have voted to have a union, then by law the union is required to fairly represent everyone in the unit, including people that opposed the union. And so, to pay for this representation, the union charges the non-members a fee which is smaller than membership dues, and which only requires them to pay for their share of the local services they are receiving.

The anti-union laws ban unions from charging this fee - requiring them to provide free services. Over time, the effects can be serious, since members see their dues going to pay for helping non-members, and wonder what is the point of joining. The ranks of these free riders grow, ultimately impoverishing the union to the point it can't provide meaningful services to anyone.

Is this good for the economy? A recent study out of Illinois found the answer is no.

In fact, the only statistically meaningful impact of these anti-union laws on the economy was to impoverish everyone else and enrich business owners. Wages drop and the economy shrinks, causing a decrease in income tax revenue and an increase in spending on food stamps and tax credits. Business owners benefit, but the taxes they pay are inadequate to offset the losses elsewhere.

To be clear, this isn't the reason I support unions. Economic growth is not always a good thing, and I think the true value of a union is not based on its economic benefits, either generally or for the particular employees it represents. I think unions would be better served to place less emphasis on economic benefits. Still, not everyone sees it this way, and I think it is important for people to understand that the way the economy plays out in real life is far more complicated than the two or three axioms and graphs they had to memorize in Econ 101.

The report this post is based on can be found by clicking here.

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