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Sep
2014
3

STUDY: Workers in “Right-to-Work” States Receive 24% More Government Assistance

Wherever it crops up, "Right-to-Work" sparks outrage.

Wherever it crops up, “Right-to-Work” sparks outrage.


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A new University of Illinois-Urbana study on “Right-to-Work” laws shows that collective bargaining subsidizes low-wage work in some states.  With Illinois facing the possibility of GOP nominee Bruce Rauner winning the gubernatorial race by positioning himself as “the next Scott Walker” and pushing for “Right-to-Work” at the county level, the truth about the matter and its negative effects are timely.  

From Labor and Employment Relations professor Robert Bruno and policy director of the Illinois Economic Policy Institute Frank Manzo IV:

Our study found that right-to-work laws weaken state economies and strain public budgets.  Right-to-work laws not only sap government revenue in the form of reduced tax receipts, but they also increase government spending in outlays for food stamps and the earned income tax credit.”

The argument is simple: Just as “Right-to-Work” allows some workers to freeload to the detriment of others, it also allows states to promote an anti-labor business model on the dime of those who respect workers.  Workers in “Right-to-Work” states account for 37.4 percent of federal income tax revenues, for instance, but receive 41.9 percent of non-health, non-retirement government assistance.  

“Right-to-Work” states typically receive assistance from the federal government without paying their fair share.  Workers in “Right-to-Work” states receive $0.232 in non-health, non-retirement assistance per dollar they contribute in federal income tax.  Workers in collective bargaining states, on the other hand, receive $0.187 per federal income tax dollar, or 24 percent less.

Beyond affecting individual contributions to federal assistance programs, “Right-to-Work” laws contribute to the race to the bottom promoted by business interests looking to cut labor costs.  The authors of the paper found that “Right-to-Work” laws:

• Reduce worker income from wages and salaries by 3.2 percent on average.
• Lower both the share of workers who are covered by a health insurance plan (by 3.5 percent) and the share of workers who are covered by a pension plan (by 3 percent).
• Reduce union membership rates by 9.6 percent.
• Increase the employment rate (by 0.4 percent), but at the expense of a lower labor force participation rate (by 0.5 percent).

Thought the study found that “Right-to-Work” states have seen a tiny increase in employment (0.4 percent), it does not offset the number of workers who drop out of the workforce (0.5 percent) or factor in the number of low-wage jobs the legislation brings about.  Workers who no longer participate in the workforce often begin collecting public assistance which puts an increased burden on such programs.

“Working-age residents who drop out of the labor force depend more on government assistance, which raises the poverty rate and, in turn, leads to increased government spending on food stamps, as well as a lower share of workers who are covered by a health insurance plan,” Robert Bruno writes.

Focusing the argument on their home turf of Illinois, the researchers looked at what would have happened in the Land of Lincoln has “Right-to-Work” been in effect in 2013.  The researchers found that the state’s labor income would have fallen by $12.3 billion and resulted in $4.8 billion in lost federal income taxes.  The state would have also lost more than $500 million in state income taxes.  At the same time, Illinois would have seen a $440 million increase in government assistance, a tremendous burden on its food stamp and EITC programs.  

The study makes no qualms about “Right-to-Work” being a losing policy for both states and the nation:

“The question for policymakers is whether a small increase in the employment rate is worth a significant decrease in total labor income, a considerable decline in state income tax revenues, an even larger drop in federal income tax revenues and an increased erosion of public budgets,” he said. “Ultimately, the negative impact of right-to-work laws greatly outweighs the uptick in employment rates it creates.”

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