Right-to-work laws associated with lower levels of state debt

by Cory Eucalitto | January 10, 2012

The last state to enact right-to-work legislation was Oklahoma in 2001, when it joined 21 others.  Some in the Indiana legislature hope the Hoosier state becomes the first  in more than a decade to pass right-to-work legislation in the coming week. A State Senate committee passed a right-to-work bill this past Friday, and a full House vote on the issue is expected before the week's end. While debate on the merits of right-to-work legislation has largely focused on the policy's ramifications for economic growth and union membership, the potential impact on state budgets should also be considered.

Right-to-Work and State Debt

A look at the numbers suggests at least some correlation between the existence of right-to-work legislation and a healthy state budget. State Budget Solutions compiles an annual state debt report, and overall, right-to-work states fare much better in terms of absolute state debt and state debt per capita. 

Measure Right-to-Work Non Right-to-Work
Average state debt per capita $9,849.27 $16,653.96
Average state debt per capita ranking 15.2 33.5
Average total state debt (in thousands) $55,328,109.73 $107,896,010.46

On average, state debt in both absolute and per capita terms is much lower in right-to-work states. When state debt per capita is ranked from 1-50, with 1 representing the lowest state debt per capita, the distinction is similarly clear. The average ranking of a right-to-work state was 15.2, compared to 33.5 for non right-to-work states. 

Right-to-Work and the Economy

Right-to-work laws deal exclusively with the private sector, so they do not have the direct impact on state budgets that public sector unionization does.  However, a correlation is hard to ignore. Instead of directly attributing right-to-work to a lack of state debt, it can be argued that right-to-work protections play a vital part in a strong state economy, which in turn serves as a key driver of state budget health. 

One example of this is in state private industry gross domestic product, as reported by the Bureau of Economic Analysis. In the ten-year period from fiscal year 2000-2001 through 2009-2010, private industry in the 28 states without right-to-work protections grew an average 3.82 percent. Right-to-work state economies, by comparison, grew at a pace of 4.69 percent. Employment statistics similarly favor the existence of right-to-work laws. According to the Washington Post, right-to-work states created 3.6 million net jobs over the past decade. States without right-to-work saw a net loss of 900,000 jobs. 

Population migration over the last several decades shows that millions of individuals and families have fled to states with right-to-work protections on the books. According to the economist Dr. Richard Vedder, since 1970, "the population living in right-to-work states more than doubled, compared with a modest 25.7 percent increase in non right-to-work states." In the shorter period from April, 2000 to July, 2008, "4.7 million Americans moved from the non-right-to-work states to right-to-work states."

Although a direct connection cannot be made between right-to-work laws and the well being of a state budget, the case can be made that right-to-work has played a substantial albeit not exclusive, role in promoting economic expansion. Further, none of this suggests that a strong economy and sound state budget cannot exist without right-to-work legislation. Indiana for example, even without right-to-work laws, ranks third in state debt per capita. 

With the protections afforded to individual workers under right-to-work legislation, however, millions are able to hold onto thousands of dollars a year that would normally be taken out of their paychecks in the form of union dues. Right-to-work laws afford businesses a level of certainty not as prevalent in non right-to-work states, as the potential for forced unionization and employee strikes is lowered. These factors feed broader economic expansion, including increased employment and productivity, that can increase state revenues and eliminate dependency on state government as a basic provider of services.