Thursday, February 2, 2012

Was the Right-to-Work Bill a Victory for Indiana?

As of yesterday, Indiana became the first state in the "Rust Belt" to enact right-to-work (RTW) laws, as well as the 23rd state in the Union to do so. It's the first time in about a decade that such a bill has been passed. One thing is for certain: Big Union is throwing a hissy fit.

Although the bill has become law in Indiana, it begs the question of whether Indiana did the right thing.

Unions complain that it will cause a "free rider" issue. If such an issue exists, then union members would be disincentivized to pay union dues, thereby causing erosion of unions. However, it does not seem out of the realm of possibility, especially in a policy-making sense, to create some sort of mechanism in which non-union members would not derive benefit from any union negotiations. Plus, the Supreme Court prohibits free riding under Consolidated Edison Co. v. NLRB (1938). 

I have this bigger issue with forcing people to be part of a union. It's a violation of freedom of association, as well as dictating whether someone should have their hard-earned cash go towards union dues. If there is a reason that an individual does not want to be a part of a given union, they would either have to "grin and bear it," leave their profession, or leave their state to find a job in a right-to-work state. There might be a reason why nearly three in four Americans have a problem with it.

There are also questions to consider that go beyond fairness, mainly that of efficacy and whether this causes more [economic] harm than good.

The unions complain that workers make less than non-union workers, thus making a "right-to-work" bill a "right-to-work-for-less" bill. The Economic Policy Institute, a Left-leaning think tank, argues that it also has detrimental effects, particularly in private-sector pension funds. Do keep in mind that only 6.9% of private sector workers are in unions, not to mention the average American's propensity towards dissavings, so it's hard to see how that has much bearing. Interestingly enough, their 2011 study shows that states with RTW laws have lower levels of unemployment than states without such laws (8.6% and 9.6% respectively), as well as lower costs of living.

The libertarian think-tank Cascade Policy recently just put out a study as to how implementing RTW laws would be good for Oregon, although much of the data would be relevant for any other non-RTW state. The study looks at various macroeconomic effects of RTW laws, including impact on employment and income growth.

Looking at the data, I think that Indiana will be better off for enacting RTW laws. But it'll depend on what your take on the data is or how you perceive unions. Either way, it'll be interesting to see if Indiana's economy improves.

1 comment:

  1. Yes it was a victory and way passed due. What a bastion of Americanism -- Indiana is.