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Right To Work states still have less debt

by Cory Eucalitto | December 10, 2012

Twenty-three states currently give workers the freedom to choose whether or not they wish to belong to an organized labor union. Michigan, home to unions like the United Auto Workers, is on the verge of becoming the 24th state to protect individual workers' rights through Right-To-Work legislation.

Right-To-Work laws allow workers the freedom to opt out of paying union dues while preserving collective bargaining rights. Proponents of Right-To-Work measures have pointed to the success of right-to-work laws at increasing wages, reducing unemployment, and attracting businesses. The Bureau of Labor statistics reports that, from 2001 to 2010, right-to-work states saw employment grow 8.2 percent, while states without right-to-work laws experienced a 0.5 percent decrease in employment.

Evidence also shows that Right-To-Work states have lower levels of state debt than their non-Right-To-Work counterparts.  State Budget Solutions' third annual State Debt Study and its per capita follow up report show that, overall, the 23 right-to-work states possess $9,456 in state debt per capita. The remaining states, on the other hand, have $16,486 state debt per capita. The gap is even larger when it comes to state debt per private sector worker. States with right-to-work legislation on the books have roughly $27,000 in debt per private sector worker. States without Right-To-Work laws have over $44,000 in debt per private sector worker.

 

Measure

Right-To-Work States

Non Right-To-Work States

Average State Debt Per Capita

$9,456

$16,486

Average State Debt Per Capita Ranking

14.8

34.6

Average State Debt Per Private Sector Worker

$26,920 

$44,399 

Average State Debt Per Private Sector Worker Ranking

16.5 

33.2 

Average Total State Debt (in thousands)

$54,001,405

$108,621,111

The figures here are in line with an examination conducted nearly one year ago which showed a similar gap in debt levels between states with and without Right-To-Work. Since that time, Indiana became the first state in over a decade to pass the legislation that guarantees an employee cannot be fired for declining to pay union dues. 

While Right-To-Work laws, which deal with the private sector, do not have a direct effect on state budgets the way that public sector unionization rules might, the correlation between right-to-work and lower debt complements existing research on the positive economic benefits of the law. As State Budget Solutions pointed out nearly a year ago,

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." 

Further, as The Mackinac Center has highlighted, private-sector employee compensation grew by 12 percent between 2001-2011 in right-to-work states. The same figure grew only 3 percent in other states. Nine of CNBC's 2012 ten "Top States for Business" were right-to-work states.

All of these positive economic indicators point to benefits of  state government finances. A bustling economy brings larger, steadier revenue streams. Each year, states have less reason to mortgage the future by issuing debt, skipping pension payments, and each of the other nefarious ways that states can saddle their citizens with debt. If right-to-work can play a role in sparking the growth necessary for states to begin reducing their combined $4.2 trillion in debt, then it should be welcomed with open arms.

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