By Adam Millsap
There’s evidence that wealth inequality is increasing, and some politicians are using this evidence as a justification for revitalizing labor unions. Many Democratic presidential candidates support the Protecting the Right to Organize (PRO) Act, which would ban state right-to-work laws that currently prevent unions and employers from mandating union membership as a condition of employment. But new evidence shows that the PRO Act is misguided—right-to-work laws increase worker satisfaction, especially among union workers.
In an upcoming study in the Journal of Law and Economics, economist Christos Makridis finds that workers report greater life satisfaction after their state becomes a right-to-work state. The study uses data on self-reported life satisfaction from daily Gallup polls and state economic data to identify how worker satisfaction responded to the enactment of state right-to-work laws between 2008 and 2017. Over this period, six states adopted right-to-work laws: Michigan, Indiana, Wisconsin, West Virginia, Missouri, and Kentucky. As shown in the map below, a total of 27 states currently have right-to-work laws.
The study finds the enactment of a right-to-work law increased self-reported current life satisfaction, expected future life satisfaction, and sentiments about current and future economic activity among workers. Moreover, the effects were especially large among union workers. For example, the increase in economic sentiment caused by a right-to-work law was nearly half the size of the increase in economic sentiment due to having a college degree. According to the author, this suggests “…that the passage of right-to-work laws fundamentally raises the optimism that union workers have about their economic prospects.”
The study explores several possible explanations for why right-to-work laws increase workers’ life satisfaction. One is the potential income effect of “free-riding”. When workers don’t have to pay dues to be union members in right-to-work states, they can use the extra money to buy other things without impacting their union status. However, this doesn’t seem to be the mechanism as there’s no evidence that workers increase consumption enough to drive the increase in reported life satisfaction.
Additionally, the idea of widespread free-riding is dubious since labor unions don’t benefit all union members equally. Younger, healthier, and less experienced workers are often harmed by union agreements that use experience as a basis for promotion or emphasize health and retirement benefits at the cost of higher wages. The recent United Auto Workers agreement with General Motors (GM), for example, kept employees’ share of health care costs at 3% as opposed to the 15% GM suggested. While this may be a win for older workers or those with children who consume a lot of health care, younger, childless workers may have preferred higher wages in exchange for high-deductible insurance plans with higher co-pays.
Another mechanism potentially driving the increase in worker life satisfaction is that there are different people in unions before and after the adoption of right-to-work laws. If the people who didn’t like the union to begin with—and thus have low life satisfaction—are the ones who opt out after the law changes, then the higher reported life satisfaction of those who remain in the union could drive the overall effect. The author finds some evidence of this, but it’s not enough to explain the bulk of the effect.
The channels that seem to best explain the increase in worker satisfaction are that right-to-work laws improve employer-employee relationships and encourage unions to better serve their members. The study finds that the adoption of a right-to-work law is associated with an increase in the probability that a worker reports that their boss treats them like a partner and creates an open and trusting work environment. Together, more attention from union leadership and workplace improvements can help explain why workers report greater satisfaction as a result of right-to-work laws.
So, if right-to-work laws make workers better off, why do so many Democratic politicians oppose them? Perhaps because right-to-work laws harm their political prospects. A study by James Feigenbaum, Alexander Hertel-Fernandez, and Vanessa Williamson finds that right-to-work laws reduce Democratic presidential vote shares and political contributions from organized labor, while also moving state policy in a more conservative direction. Thus, politicians’ self-interest rather than a benevolent concern for workers is likely a reason behind the support of the PRO Act that would ban state right-to-work laws.
Regardless of what one thinks about the importance of labor unions, the reality is unions don’t work well in a service economy. Unions standardize wages, work hours, and working conditions for the occupations they cover, and this only makes sense if the workers in those occupations have the same productivity and preferences. In many factory jobs productivity is limited by the speed of the assembly line—the faster the line, the more work everyone does. Additionally, workers can only work if everyone is in place and the line is moving. These features of assembly line production ensure that workers are equally productive.
This isn’t the case in many service-sector jobs. Some people can cut hair, cook meals, or clean houses or hotel rooms faster than others without sacrificing quality. Others may take more time but are exceptionally good. Similar variation exists among teachers, doctors, and lawyers. Standardizing wages and work hours doesn’t make sense when there are significant speed or quality differences among workers. Since most workers today are in the service-sector, it’s not surprising that labor unions are declining in importance.
While the decline of labor unions may worry some, the evidence shows that right-to-work laws that give workers the freedom to opt out of unions increase worker satisfaction. Politicians that want to help unions by eliminating such laws are fighting against economic fundamentals and aren’t doing workers any favors.