Frank Manzo IV is the Policy Director of the Illinois Economic Policy Institute (ILEPI). Visit ILEPI at www.illinoisepi.org or follow ILEPI on Twitter @illinoisEPI.
Right-to-work has not worked in Indiana.
Nationwide, the unemployment rate has steadily ticked down and is nearing 7 percent. Last year, over 40,000 more business establishments opened than closed across America. The total number of Americans with a job is up almost 2 percent since February 2012. Employers are starting to hire again and consumer demand is slowly rising.
And with the passage of a right-to-work law on February 1, 2012 (which proponents claimed would attract businesses and create jobs), the Indiana economy has been spearheading the economic recovery, right?
An October 16, 2013 study (LINK) by the Illinois Economic Policy Institute (ILEPI), a new research and policy nonprofit, assessed right-to-work’s economic track record in Indiana thus far. Since the law went into effect, 779 more businesses have closed than have opened in Indiana, the unemployment rate has not fallen, and the total number of Indiana residents with a job has declined by 0.4 percent.
The verdict? So far the promises made by right-to-work’s supporters in Indiana have nearly all been broken.
The problem: Right-to-work is a nonfactor as an economic development incentive.
Despite claims that right-to-work entices new businesses to open up in a particular state, survey after survey of corporate executives reports that the policy is not a prevailing factor in whether a firm will locate to a state. Additionally, by limiting collective bargaining units, right-to-work laws act to take away an effective front-end solution for small businesses to hire, train, drug-test, and provide health insurance to workers. Unions have long provided these services to businesses and absorbed the costs through dues and fees. Under right-to-work, these costs shift to small businesses. Finally, right-to-work has been found to lower worker wages by around 3 percent annually. With lower incomes, workers have less money to spend. Why would a private business want to relocate to a state where consumer demand for its product or service is diminished? Continue reading “Right-to-Work’s Broken Promises”