President Obama isn’t happy about it, but Wisconsin Gov. Scott Walker just signed legislation making the Badger State the 25th state to give workers the choice of whether or not to join a union. Wisconsin joins Indiana and Michigan in recently offering workers a freedom that had long been confined to mostly Southern states. These recent enactments are probably the most important reforms, economically and politically, to be enacted in recent decades.
The labor market reforms over the past four years in the Upper Midwest, where labor unions have long dominated the political landscape, may be the most significant unintended legacy of Barack Obama’s presidency. This uncomfortable fact goes a long way to explaining the president’s very public outburst criticizing Walker’s latest action.
Right-to-Work (RTW) laws do one very simple thing; they remove the requirement that workers join a union as a condition of employment. Under RTW laws, workers have the choice of whether or not to join a union and pay the required membership dues. In a state without RTW laws, a new employee can be forced to join a union, and pay the mandated dues, if that union has already organized a company’s workforce.
No matter the alleged benefits of union membership, the notion that an individual would be compelled to join any organization as a condition of employment is an archaic concept in a 21st Century society. The idea that one is compelled to pay to join a union in order to be able to work assaults the very idea of individual freedom and choice. It is only by degrees different than an old-fashioned protection racket.
It should be noted that federal employees enjoy RTW protections, a situation that no administration, Democrat or Republican, has tried to reverse.
It also warrants pointing out that RTW laws do not eliminate or erase union membership. The choice is simply left to the individual worker. Unions have to justify the benefits of membership, and its attendant dues, to convince the worker to join. That these benefits may be hard to articulate drives much of the union anger against RTW laws.
In 2011, Wisconsin enacted RTW protections for the state’s public sector unions. In the wake of being offered a choice, more than a third workers chose to end their union membership. In some union locals, as many of 88 percent of existing union members chose to let their membership lapse. It bears overstating that these were choices made by individual workers, not a result dictated by the law.
The legislation Walker signed Monday extends similar power to all workers in the state, not just those who work for the public sector.
The drop in membership, of course, results in cuts to the union’s operating budget. Without RTW protections, unions are guaranteed a steady stream of dues from workers’ paychecks. One Wisconsin local union President complained to the New York Times that his budget had dropped from $6 million a year to $2 million.
This drop in dues also contributes to a reduction in union political spending. A significant portion of union dues go to activities beyond those required to negotiate and manage any employment contract. A large amount flows into the unions’ political coffers, fueling its political activism and outreach. This political spending is the life-blood of the modern Democrat party. This simple fact accounts for the vitriol from Democrats and the media about RTW proposals.
Since Wisconsin’s groundbreaking public sector reforms in 2011, neighboring states Indiana and Michigan took the next step on reform and enacted legislation to give RTW rights to all workers in their states. Taken together, these actions are breathtaking.
Wisconsin was the birthplace of public sector unionism, a phenomenon even Democrat hero Franklin Roosevelt opposed. Michigan is the birthplace of the private sector United Auto Workers, traditionally one of the most powerful unions in the country. Indiana is also a major home of the auto industry, with some 23 auto manufacturing facilities and tens of thousands of unionized auto workers.
By many calculations, these are the three states least likely to enact sweeping labor market reforms. For decades, RTW protections were confined to the South, the Plains states and the Mountain west. With the exception of agricultural dominated Iowa, no state above the Mason-Dixon line, or east of the Mississippi River, offered its citizens RTW protections.
Until Wisconsin began the process with the public sector in 2011, the idea that any Northern or Midwest state would enact RTW laws was a fantasy. Of course, no one fully appreciated the broad political backlash against Obama’s lurch to the left. The resulting wave of conservative legislators in these and other states made reforms possible. The Tea Party movement never mentioned RTW, but it created a political landscape that enabled the reform.
Right-to-work reform doesn’t simply alter the political landscape, though. It also promises enormous economic benefits for the states enacting the reform. The auto industry is an illustrative case in point.
The recent resurgence in the American auto industry is a story of geography as much as economics. While Michigan is by far the leading state for the industry, recent bursts of growth have occurred largely in Southern states. Alabama, Kentucky and Tennessee, with long-standing RTW protections have experience spectacular growth in auto manufacturing.
Just last week, Mercedes announced it would build a new manufacturing plant in South Carolina. This $500 million investment is in addition to the almost $3 billion investment in Southern states announced by automakers last year. The planned investments in South Carolina almost equal investments announced last year in Michigan, even though the industry’s footprint in the state is an order of magnitude larger than in the Magnolia State.
In recent years, the auto industry has been “re-shoring” jobs back to the U.S. from overseas. Rising real wages in the rest of the world have made domestic production more competitive, especially after factoring in transportation costs. It is likely, though, that states with RTW laws will benefit the most from this phenomenon.
Of the ten states with the biggest auto manufacturing sectors, seven are now RTW states. Only Illinois, Ohio and Missouri continue to force employees to join a union, even against their will. These states will likely lose out as the industry retrenches and reorients itself for future growth.
The economic benefits of RTW are pronounced for the states affording their citizens a choice in union membership. More importantly, though, the reform protects and ensures greater freedom for a state’s citizens. In no case ought an individual be compelled to join an organization as a condition of employment. In Wisconsin, just as recently in Indiana and Michigan, they no longer have to.