Illustration by Bloomberg View
Illustration by Bloomberg View

For the first time, supporters of right-to-work laws can claim victory in the industrialized Midwest. Indiana Governor Mitch Daniels yesterday signed legislation making it illegal to require nonunion workers to pay union dues.

Right-to-work laws have taken on oversized symbolic importance, outweighing the actual cost to unions or the real benefits to employers. Worse, the combat discourages the two sides from working together to manage cyclical ups and downs or to improve productivity, which increases profits, lifts wages and ultimately results in economic expansion.

Unions loathe right-to-work laws because they can make organizing more difficult and, they insist, lead to lower wages and less generous benefits. Some governors, on the other hand, think a right-to-work law is the best proxy for how business-friendly their state is.

Twenty-three states, mostly in the South and Southwest, now have such laws. Lawmakers in Maine, Michigan, Missouri, New Hampshire, and other states may try to follow, largely out of fear of being left behind in the race to attract companies. Republican U.S. Senator Jim DeMint of South Carolina is pushing for a national right-to-work law.

Sparse Data

A close examination shows that right-to-work laws are not as damaging to unions or as beneficial to state economies as the warring sides contend. Each wields powerful talking points, yet the supporting data is sparse.

On the union side, the big myth is that the laws bar unions from organizing. Not so. Instead, by enabling workers to opt out of union dues, they reduce the financial payoff to organizers. Over time, that may weaken a union’s ability to attract new members, put together political campaigns or pay union administrative expenses. Still, it wouldn’t prevent a union from forming in the first place.

On the right-to-work side, the big myth is that economic growth in states with the law is higher. Studies sponsored by the Mackinac Center, a think tank in Midland, Michigan, that favors right-to-work, conclude as much. But it’s not necessarily so. The Mackinac studies don’t disentangle the effect of right-to-work laws from other factors, such as a housing bust, rapid population growth (a feature of many Sunbelt states) or a robust energy sector.

Take Oklahoma, which became a right-to-work state in 2001. It has outperformed much of the country in recent years; its unemployment level, at 6.1 percent, bests the national rate of 8.5 percent. But joblessness in Colorado, Missouri and New Mexico -- Oklahoma’s non-right-to-work neighbors -- are also well below the national average.

Moral Arguments

Interestingly, some of the strongest arguments for and against right-to-work are moral -- and they exist on both sides. The personal beliefs of anti-union workers are stepped on when monthly dues are deducted from their paychecks, even though they don’t belong to the union. In right-to-work states, the same workers wouldn’t have to pay dues but would benefit from the higher wages a union might negotiate on their behalf. The unions have a word for that: free-loading.

The answer isn’t right-to-work but better labor-management cooperation. Both sides might learn a lesson from Germany, where union members often sit on corporate boards and vote on management pay (helping to keep in check excessive, U.S.-style compensation). Germany’s unions also play prominent roles when the economic cycle turns down. One example is the “Kurzarbeit” plan, or short-work system, in which companies temporarily move employees into shorter workweeks during downturns. Companies pay only for actual hours worked, and the government provides as much as two-thirds of the remainder.

Work-Time Accounts

Many German companies also use work-time accounts, in which employees agree to shorter workweeks when demand is slow, then add hours in boom times -- without adjusting wages.

Under the Kurzarbeit plan and work-time accounting, unions have gone along, knowing what’s good for the company is often good for them. At 6.7 percent, Germany’s jobless rate, a two-decade low, tells us that cooperation over conflict is worth considering.

In the 1950s, about one-third of American workers carried a union card. Today, barely 12 percent do. Union membership in the private sector is a mere 6.9 percent. The decades-long slide isn’t the result of right-to-work laws, but the loss of manufacturing jobs. In Indiana, union members made up 10.9 percent of the workforce in 2010, according to the U.S. Department of Labor, down from 15.4 percent in 2000.

It may not be culturally or politically possible for U.S. unions and executives to emulate the German model, but with manufacturing making a comeback, it’s a good time for both sides to find a better way to resolve their conflicts.

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