Explaining Southern California's economy

Will California ever choose right-to-work?

UPDATE: AirTalk did a great segment on this general topic today. UCLA Economics professor Lee Ohanian outlined a "new union" strategy that I've actually explored in the context of the auto industry and its negotiations with the United Auto Workers. The idea is basically for the unions, both public and private sector, to become partners and "solution providers" for employers -- labor consultants, if you will. Could be a way for unions to re-invent themselves, amid greatly increased global competition.

California is not a right-to-work state (and neither are any of the other, un-highlighted states in the chart above). What that means is that if you belong to a union in California, you can be required by the union to pay dues. Critics of unions argue that this excludes some people from certain workplaces -- the old “closed shop” distinction. If states want to opt for right-to-work instead, they need to enact a law that enables it. The last time this happened was in

Oklahoma 10 years ago. But much of the U.S. South is right-to-work. In practice, this has meant that manufacturers ranging from Boeing to Toyota have set up factories in states like South Carolina and Alabama.

 

These states haven’t escaped the national unemployment disaster, but they’re all doing better than California, which at 12 percent is second only to the living hell of American joblessness, Nevada (12.9 percent). LA County is in between, at about 12.5 percent. Other SoCal counties are far worse.

This has stoked a debate about whether California should pass a right-to-work law. Unions don’t like it (obviously) and one of the state’s Congressmen, Brad Sherman (a Democrat who represents the San Fernando Valley), introduced a bill last year that would repeal right-to-work nationwide. The whole thing is highly politically charged: The right considers unions a Democratic bastion and an obstacle to business; the left believes that allowing a swath of non-unionized operations to take hold means that workers will move to those states and drift away from the Democratic party. 

At a less pragmatic level, many Democrats also believe that businesses will exploit workers in right-to-work states, reducing the wages and benefits that collective bargaining has brought to unionized workforces. 

There is some evidence that RTW laws do attract workers and lead to an overall uptick in earnings. The conservative/libertarian economist Richard Vedder published his findings last year in the Cato Journal. You would expect his research to cut in the RTW direction (although libertarians are tormented on the issue), but the data make a case. An example:

Without exception, in all the estimations, a statistically significant positive relationship (usually at the 1 percent level) was observed between the presence of right-to-work laws and net migration. To be sure, the results indicate that right-to work was only one of several factors explaining migration—for example, there was strong out-migration from manufacturing-intensive states, and Americans as well moved into low tax states, while the climatic variables were relatively weak and not statistically significant. Nonetheless, the findings reinforce the view that people vote with their feet to move to freer labor market environments.

We’ve already had a preview of what the political debate over this economic issue might look like: collective bargaining rollbacks for public employees were a significant part of the 2011 protests in Wisconsin. In that context, labor economist Laura Dresser presented the anti-right-to-work case for NPR:

Dresser says most businesses look at more than just labor costs.

"The broadest and strongest evidence suggests that employers are looking for good workers — that takes good schools. They're looking for good infrastructure — that takes money for roads and rails. They're looking for cities where they can have suppliers and relationships with other businesses, and all of those things tend to happen in non-right-to-work states."

In addition, the most significant job growth over the past decade has been in states with high immigration. Dresser says that includes both right-to-work states and strong union states, such as New York and California.

So this one is just getting started. With no respite for California unemployment on the horizon, we could be spending more time debating it in the months to come.

Chart: Wikimedia Commons

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