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Compulsory Unionism Harms
Workers and State’s Economy – (Labor Freedom Is Key To Pennsylvania's Economic
Prosperity
Keystone State continues to lose ground to Right-to-Work states)
HARRISBURG, PA - Today, The Commonwealth Foundation released a report
showing that states where employees are not compelled to support a labor
union as a condition of employment (right-to-work states) grew their
economies faster than non-right-to-work states, like Pennsylvania.
"It would not be an exaggeration to characterize Pennsylvania's economic
development over the past three decades as abysmal," said Matthew
Brouillette, president of The Commonwealth Foundation. "Pennsylvania
finished in the bottom two quintiles in seven out of nine key economic
statistical measures. If we continue this trend, we'll no longer be
able to say 'At least we're not as bad as West Virginia.'"
With increasing global competition taking a toll on manufacturing jobs,
and state governments and municipalities facing declining revenues and
increasing costs, The Commonwealth Foundation-a free-market public
policy institute based in Harrisburg-suggests it is time for
Pennsylvania policymakers to look at the costs of compulsory unionism to
the state's economy.
"The evidence suggests that the Keystone State and its citizens would
greatly benefit if Pennsylvania became a 'right-to-work' state," said
author and economist Dr. William T. Wilson. The report, "The Impact of
Compulsory Unionism on Economic Development," compares economic
development results in right-to-work (RTW) and non-right-to-work
(non-RTW) states on a broad cross-section of state economic statistics
from the past three decades.
"Right-to-work" laws are state statutes or constitutional provisions
that ban the practice of requiring union membership or financial support
as a condition of employment. These laws establish the legal right of
employees to decide for themselves whether or not to join or financially
support a union.
Some of the key conclusions of the research are:
* Pennsylvania's annual economic growth was more than one-third
slower than that of RTW states. From 1977 through 1999, Gross State
Product (GSP)-the market value of all goods and services produced in a
state-increased at a rate 55 percent faster in RTW states than in
Pennsylvania, ranking it 41st in the nation in economic growth.
* Pennsylvania's employment growth was 49th in the nation.
Employment grew at a rate 45 percent faster each year, on average, in
RTW states than in non-RTW states. Pennsylvania's employment growth
rate was outpaced by RTW states, on average, by 222 percent.
* Pennsylvania's manufacturing job growth was 46th in the nation.
While RTW states created 1.43 million manufacturing jobs between 1970
and 2000, non-RTW states lost 2.18 million manufacturing jobs.
Pennsylvania lost more than 600,000 manufacturing jobs during this
period, a number exceeded only by New York.
* Pennsylvania ranked 46th in the nation in construction
employment growth. Construction employment grew at a rate 50 percent
faster each year, on average, in RTW states than in non-RTW states.
Compared to Pennsylvania, construction employment in RTW states grew at
a rate 233 percent faster.
* Pennsylvania's average unemployment rate was 36th in the nation.
Average annual unemployment was 0.5 percentage points lower in RTW
states than in non-RTW states.
* Pennsylvania's rate of increase in per-capita disposable income
was slightly lower than that of RTW states. Per-capita disposable
income in Pennsylvania was 1.49 percent higher, on average between 1970
and 2000, than that in RTW states. Although nominal per-capita
disposable income was 10 percent higher in non-RTW states in 2000,
research shows that the cost of living is also higher in these states;
so high, in fact, that after-tax purchasing power-real income-is greater
in RTW states. Between 1990 and 2000, per-capita personal income growth
in Pennsylvania ranked 31st in the nation.
* Pennsylvania had the 12th highest unit labor costs-the measure
of labor compensation relative to labor productivity-in the nation in
2000. Unit labor costs were, on average, 93.2 in RTW states and 98.1 in
non-RTW states in 2000, while Pennsylvania's were 100.8.
* Pennsylvania ranked 31st in the nation in poverty rate
improvement between 1969 and 2000. The poverty rate fell only 16
percent in Pennsylvania during this period, while poverty rates in RTW
states fell by 37 percent. Only seven states saw increases in
poverty-all non-RTW states.
* Pennsylvania's income inequality ranked 26th in the nation in
2000. While the income gap rose in both RTW and non-RTW states between
1977 and 2000, it has risen significantly faster in non-RTW states.
"The results of this analysis contradict many of organized labor's
long-standing contentions," said Brouillette. "For example, while it is
true that Pennsylvania wages are nominally higher than those in
right-to-work-states, after correcting for differences in the cost of
living, the typical family in a right-to-work state has $2,800 more in
purchasing power per year. In other words, a buck in Virginia, Arizona,
or Utah goes a lot further than a buck in Pennsylvania."
"While the 1990s brought some very modest improvement in Pennsylvania's
relative standing, it was hardly a decade of economic superiority,"
writes Wilson. "The state continued its three-decade tradition of
below-average growth in output, employment and income. Once a
manufacturing powerhouse with a per-capita income well above the
national average, the Keystone State failed to finish in the top half of
any of the nine economic statistics."
The post-World War II period has brought rapid economic globalization,
which has dramatically increased the importance of labor productivity
and of policies, such as right-to-work, that affect it. Advances in
information technology, greater capital mobility, and lower barriers to
entry for business startups are making it increasingly difficult for
businesses to pass higher costs on to suppliers and customers. The net
effect is increasing pressure for firms to seek geographical regions
with lower cost structures and higher rates of labor productivity.
Right-to-work laws increase labor productivity by requiring labor unions
to earn the support of each worker, since workers are able to decide for
themselves whether or not to pay dues. This greater accountability
results in unions that are more responsive to their members and more
reasonable in their wage and work rule demands.
"There is a clear correlation between economic growth and labor
freedom," says Brouillette. "Study after study demonstrates that the
freedom of employees to choose or not to choose union representation
increases state economic development and overall prosperity. If
Pennsylvania fails to adopt a right-to-work policy, it is guaranteed
that we will continue to fall behind economically relative to other
states."
EDITOR'S NOTE: The Impact of Compulsory Unionism on Economic Development
can be accessed at
www.CommonwealthFoundation.org/economy/s02-01.pdf.
The Commonwealth Foundation is a non-partisan, non-profit, public policy
research and educational institute based in Harrisburg, Pa. For more
information, visit
www.CommonwealthFoundation.org.
CONTACT: Matthew J. Brouillette, 717.671.1901
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