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Hand and Glove: Labor Freedom and Economic Development

By Lawrence W. Reed

If compulsory unionism were put to a moral test, it would flunk without debate.  Forcing a worker to join and pay dues to an organization he doesn't want to represent him is a manifest violation of that worker's free will and right of contract.  It so happens that it also fails the economic test, as two recent studies strongly demonstrate.

No less a figure than the American labor movement's founder, Samuel Gompers, favored freedom of choice with regard to representation in the workplace. He once told workers,

"I want to urge devotion to the fundamental of human liberty-to the principles of voluntarism.  No lasting gain has ever come from compulsion . . . the workers of America adhere to voluntary institutions in preference to compulsory systems which are held to be not only impractical, but a menace to their rights, their welfare and their liberty."

Furthermore, Gompers noted, "there may be here and there a worker who for certain reasons . . . does not join a union of labor.  It is his legal right and no one can or dare question his exercise of that legal right."  Unfortunately, that right is no longer respected everywhere and is met by most organized labor leaders with scorn and evasion.

In a genuinely free labor market, government would be neutral in labor-management relations except for adjudicating disputes, enforcing contractual obligations, and punishing deception and violence against people and property.  Individual workers would be free to negotiate directly with employers, or they could band together and offer their labor services as a group.  Government would not bless one method of bargaining over another by bestowing powers of coercion upon any parties in the marketplace.

In the past seven decades, federal and state laws have undermined the principles of a free labor market.  However, at least federal law allows states the option of adopting an alternative to full-blown compulsory unionism known as "right-to-work," under which workers cannot be compelled to join or pay dues to a labor organization as a condition of employment.  With increasing global competition taking a toll on U.S. manufacturing jobs, and state governments and municipalities struggling to achieve greater operating efficiencies in the face of declining revenues and increasing costs, the consequences of compulsory unionism are universally important.

That's the topic of a Commonwealth Foundation report by economist William Wilson, entitled "The Impact of Compulsory Unionism on Economic Development."  The report examined economic data from states with right-to-work laws and those without, including the state known as a bastion of unionism-Pennsylvania.  The results of this analysis contradict many of organized labor's long-standing contentions.

Between 1970 and 2000, Wilson found that right-to-work states created jobs at a rate 222 percent faster than did Pennsylvania. From 1977 through 1999, Pennsylvania's gross domestic product grew less than half the rate of right-to-work states.  From 1980 through 2000, the unemployment rate in Pennsylvania was, on average, 14 percent higher than in right-to-work states.  While 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.  While poverty rates dropped dramatically nationwide over the past 30 years, Pennsylvania's poverty rates dropped less than half as much as right-to-work states.

Manufacturing is one of the key segments of the economy that unions are supposed to impact an especially positive way.  But in the past thirty years, Wilson points out, the right-to-work states created 1.43 million manufacturing jobs, while the other states lost 2.18 million manufacturing jobs.  Pennsylvania's loss of more than 600,000 manufacturing jobs since 1970 is only exceeded by New York.

It would not be an exaggeration to characterize Pennsylvania's relative economic development during the past three decades as abysmal.  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 measures examined Wilson's research.

The evidence within the Commonwealth Foundation study sends a powerful message: Compulsion is costly.  Corroborated by a growing body of research conducted by many independent scholars, the compelling conclusion is that right-to-work laws increase state economic development and overall prosperity. 

Freedom in the labor market is a sound economic principle because it results in baking a bigger pie for everybody.  But for those of us offended by coercion and inspired by liberty, it's always nice to know that what makes moral sense also makes economic sense.

# # #

Lawrence W. Reed, born and raised in Beaver Falls, is president of the Mackinac Center for Public Policy in Michigan. 

(A version of this essay will appear in the February 2003 issue of Ideas on Liberty, published by the Foundation for Economic Education -

www.fee.org.)

NOTE: The Commonwealth Foundation will release "The Impact of Compulsory Unionism on Economic Development" at a news conference at the Capitol at 10:00 a.m. on Monday, November 18th.  The full report will be available on our website (www.CommonwealthFoundation.org) at that time.

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