Wages, Rate of Employer Benefits Lower
In Right-to-Work States, EPI Concludes
As numerous states are considering proposals to enact right-to-work legislation, the Economic Policy Institute Feb. 17 released a report finding that both wages and the rate of employer-sponsored benefits are lower in states that have these laws than in states that do not.
In an EPI Briefing Paper titled “The Compensation Penalty of ‘Right-to-Work’ Laws,” Elsie Gould, EPI's director of health policy research, and Heidi Shierholz, an EPI economist, examined the impact of RTW laws on wages and benefits of both union and nonunion workers. Finding that these laws result in lower wages and benefits, the authors concluded that their findings should “discourage right-to-work policy initiatives.”
While right-to-work legislation “misleadingly sounds like a positive change in this weak economy, in reality the opportunity it gives workers is only that to work for lower wages and fewer benefits,” the authors said.
Right-to-work legislation prohibits employers and unions from negotiating union security clauses in contracts that require all workers who are covered by the contract and receive representation to pay their share in the administrative costs for those services.
Wages in RTW States 3.2 Percent Lower, Paper Finds
According to the briefing paper, the wages of workers in states that have right-to-work laws are 3.2 percent lower than those in non-RTW states. Using the average wage in non-RTW states ($22.11) as the base, the authors found that the average full-time, full-year worker in a RTW state makes about $1,500 less annually than a similar worker in a non-RTW state.
The rate of employer-provided health insurance is 2.6 percentage points lower in states that have right-to-work laws than in those that do not. “If workers in non-RTW states” were to receive health insurance at this lower rate, “2 million fewer workers nationally would be covered,” the report said.
In terms of employer-sponsored pensions, the rate is 4.8 percentage points lower in RTW states than in non-RTW states, the report found. “If workers in non-RTW states were to receive pensions at this lower rate, 3.8 million fewer workers nationally would have pensions,” the report said.
Looking at workers who are not represented by a union or covered by a union contract, the report found that these workers make 3 percent less than union-represented workers. The benefit “penalty” for nonunion workers is 2.8 percentage points for health insurance and 5.3 percent for employer-provided pensions, the report said.
“Our results suggest that proposals to advance RTW laws likely come at the expense of workers' wages and benefits, both within and outside unions,” the authors said.
The authors analyzed data from a sample from the Bureau of Labor Statistics' Current Population Survey that consisted of 108,627 workers, ages 18-64, who earn wages and salaries. Approximately 37 percent of the sample live in states that have right-to-work laws. The researchers also took into account some state-level variables, measured by the state unemployment rate, as well as differences in cost of living across states.
According to the report, the characteristics of these workers in both RTW and non-RTW states are similar, with the average age nearly the same as is the share of the workforce that is male and is married.
Workers in Non-RTW States More Likely to Be Unionized
“The biggest difference between workers in RTW and non-RTW states is the fact that workers in non-RTW states are more than twice as likely to be in a union or protected by a union contract,” the authors said. “Average hourly wages, the prime variable of interest, are 16 percent higher in non-RTW states ($22.11 in non-RTW versus $19.06 in RTW states). Median wages are 14.4 percent higher in non-RTW states ($17.16 versus $15.00).”
Right-to-work laws directly limit “the financial viability of unions, reducing their strength and ability to negotiate favorable contracts, higher wages, and better benefits,” the authors said. “Similarly, by diminishing union resources, a RTW law makes it more difficult for unions to provide a workers' voice on policy issues ranging from unemployment insurance to workers compensation, minimum wage, and other areas. The simple reality is that RTW laws undermine the resources that help workers bargain for better wages and benefits.”
According to the authors, the briefing paper provides the most comprehensive study to date of the relationship between a state's right-to-work status and employee compensation. “Our model controls for 42 demographic, economic, geographic, and policy factors,” they wrote.