Worker freedom leads to higher incomes. This according to the Competitive Enterprise Institute (CEI), which recently published a paper on the effects of right to work (RTW) laws in different states.
In their analysis, CEI found a substantial loss in per capita income for those states that lack a RTW law. Their results show that the total estimated income losses in 2012 amounted to $647.8 billion or “more than $2,000 for every American, including those in RTW states.”
Astoundingly enough, more than half of the economic damage occurred in just five non-RTW states, with Pennsylvania as one of the leaders. In fact, Pennsylvania ranked 13 out of 30 states in estimated income losses with a total of $3,373 lost per person. On a state-by-state level, RTW states’ growth was substantially higher (165 percent) than non-RTW states (99 percent).
Why do RTW laws increase income? The study explains labor unions raise labor costs, which reduces the capital resources available for workers to increase their productivity and their income.
CEI does take into account other factors that could affect economic growth. Using the example of New England, they show that states can prosper without a RTW law. Though their statistics show that these states could be doing even better if RTW legislation were in place. Overall, if non-RTW states had adopted RTW laws 35 years ago, “income levels would be on the order of $3,000 per person higher today,” according to the Institute.
The evidence provided by CEI’s report is an indicator of the major benefits of RTW laws. With states already experiencing a sharp decline in union membership, RTW legislation is a common sense way to bring prosperity to the states.