Quick Hit Ellyn Fortino Thursday September 11th, 2014, 6:04pm

Report: Right-To-Work Laws Strain Public Budgets & Would 'Weaken' Illinois' Economy

Workers in collective-bargaining states "are subsidizing the low-wage model of employment" in states with so-called right-to-work laws that limit union power.

That's one of the key takeaways from a new report by researchers at the Illinois Economic Policy Institute and the University of Illinois at Urbana-Champaign's School of Labor and Employment Relations.

“Our study found that right-to-work laws weaken state economies and strain public budgets,” said the report's co-author Bob Bruno, a labor professor at the University of Illinois at Urbana-Champaign. “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.”

Right-to-work policies generally look to ban unions and employers from negotiating contracts that require workers to pay union dues or fees when they take a job covered by a collective bargaining agreement.

"On a microeconomic level inside a workplace or a firm, especially if it's a unionized firm, employees under right-to-work regulations are allowed to basically just free-ride on the efforts of their peers — people who fight for a higher wage and health benefits," said the report's co-author Frank Manzo, policy director at the Illinois Economic Policy Institute. "It's not just that microeconomic level. It's a macroeconomic level. States are free-riding on the efforts of collective-bargaining states."

There are currently 24 states with right-to-work legislation on the books, including Indiana, Michigan, North Dakota and Texas, to name a few. Twenty-six states, including Illinois, and the District of Columbia have non-right-to-work laws.

The study examined the effects of right-to-work policies on worker earnings, employment, tax revenues and government assistance. For the report, the researchers also tackled this question: What would have happened locally if Illinois became a right-to-work state in 2013?

First, the study detailed the non-hypothetical impacts of right-to-work measures.

The researchers found that right-to-work laws decrease wage and salary income for workers by an average of 3.2 percent. They also lower "both the share of workers who are covered by a health insurance plan by 3.5 percentage points and the share of workers who are covered by a pension plan by 3.0 percentage points," the study reads.

"So called right-to-work actually means work for less," SEIU* Local 1 President Tom Balanoff told Progress Illinois. "The facts show that workers make less money in right-to-work states. Right-to-work is bad for workers, bad for families and bad for America."

Additionally, right-to-work regulations reduce union membership rates by 9.6 percentage points, on average, and increase poverty rates among workers by 0.9 percentage points. 

Although right-to-work policies "are correlated with a minor 0.4 percentage point increase in the employment rate" they reduce the labor force participation rate by an average of 0.5 percentage points, according to the study.

Among other key findings, workers in right-to-work states "contribute just 34.8 percent of all state and federal taxes" after credits and deductions, yet they "receive 41.9 percent of all non-health, non-retirement government assistance provided to the employed population in America."

In a right-to-work state, 9.3. percent of the average worker's income comes from non-health, non-retirement government assistance. By comparison, government assistance represents 7.4 percent of the average worker's income in a collective-bargaining state.

The Rev. C.J. Hawking, executive director of the workers' rights group Arise Chicago, called the report "insightful, yet startling."

"Bruno and Manzo have pointed to the core issue that, while the unionized middle-class is shrinking, more is being asked of them," she said. "Right-to-work has created unnecessary earthquakes in local economies, created false fault lines between workers and continually proves itself to be morally bankrupt."  

Illinois Republican candidate for governor Bruce Rauner, who takes issue with “government union bosses,” is a supporter of bringing right-to-work policies to the state, but claims the issue is not among his biggest priorities

His website states that he favors "right-to-work zones" allowing "local communities to decide whether workers must join a union in order to get a job." 

Rauner also pushed the idea of letting counties in Illinois "decide for themselves whether to embrace right-to-work" in a State Journal-Register opinion piece back in December of 2012.

"Illinois need not adopt the exact reforms found in Wisconsin, Indiana, or Michigan. But we sure need to move in that direction if we are going to compete for jobs," Rauner wrote in the op-ed.

"Why not empower Sangamon County, or Effingham County, or any of our other local governments, to decide for themselves if they would like to compete for the jobs that come with new manufacturing plants or transportation facilities built by the many hundreds of companies that will only consider expanding in flexible work areas," he asked in the piece.

The report's researchers, meanwhile, took a look at the potential impact right-to-work legislation would have in Illinois if it were adopted in 2013.

Although "employment and the quantity of labor would have been slightly higher" in Illinois, the state "would have been worse off" if it implemented a right-to-work policy in 2013, the researchers conclude.

In a hypothetical right-to-work Illinois, total employment in 2013 would have ticked up by about 46,600 workers, "while labor market participation would have fallen by about 57,600 individuals, artificially lowering the unemployment rate."

Wage and salary income would have been $2,444 lower for the average worker in a right-to-work Illinois, and the state's annual labor income would have declined by a total of $12.3 billion, according to the researchers' estimates. 

Illinois would have also lost more than $492 million in state income tax revenue. And federal income tax revenues would have fallen by nearly $4.8 billion.

Additionally, the report found that "health insurance coverage, pension coverage, and labor union coverage would have respectively been 4.1 percentage points, 4.2 percentage points, and 9.6 percentage points lower in the state."

The poverty rate among Illinois workers would have jumped up 1.2 percentage points, and spending on food stamps and Earned Income Tax Credit benefits would have increased by $159 million and $307 million, respectively.

“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,” Bruno stressed. “Ultimately, the negative impact of right-to-work laws greatly outweighs the uptick in employment rates it creates.”

*The SEIU Illinois Council sponsors this website.


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