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Right-to-work: Will it help or hinder Illinois' economy? Public policy thinkers weigh in

By Amanda Robert | May 5, 2015

In recent years, three of Illinois’ neighbors – Indiana, Michigan and Wisconsin – have passed statewide right-to-work laws that no longer require employees to join a labor union and pay membership dues even if that union represents workers at their place of employment.

Illinois Gov. Bruce Rauner has taken a different approach in a forced union state by proposing right-to-work zones, which would allow the state’s counties, municipalities and school districts to enact their own right-to-work regulations.

“Local communities – local voters – deserve this option so that they can compete with other states and other nations for new businesses and new investment,” Rauner said in his state of the union speech in February.

“Employee empowerment zones will increase jobs for residents, increase economic activity for local businesses and generate more tax dollars for local governments. It’s a win-win-win-proposal.”

He’s also suing and being sued by unions in state and federal court. Public employee unions want him to enforce contracts, while Rauner seeks to prohibit collection of “fair share” amounts from workers who don’t belong.

Policy experts on both sides of the issue have lined up arguments to support as well as denounce Rauner’s plan.

Frank Manzo, the policy director of the Illinois Economic Policy Institute, and Robert Bruno, a professor at the University of Illinois at Urbana-Champaign School of Labor and Employment Relations, say that right-to-work zones would have a negative impact on Illinois’ workers and economy if half of the state’s 102 counties adopted them.

Manzo and Bruno point out in their April 6 report, “The Impact of Local ‘Right-to-Work’ Zones: Predicting Outcomes for Workers, the Economy, and Tax Revenues in Illinois,” that the proposal for right-to-work zones is based on the assumption that higher unionization rates harm the economy. However, they say, they discovered that the assumption is unfounded.

“Essentially, unionization rates have no impact on employment growth, establishment openings growth, and average household income growth,” Manzo said. “The assumption that lower unionization rates will help workers and help the economy, we put that to the test. We can reject those claims, because there is no evidence, at least in Illinois.”

According to the report, workers’ incomes are two-to-six percent lower in states with right-to-work laws. As a specific example, Manzo and Bruno say, in 2014, Indiana workers earned 12.8 percent less in average hourly wages than Illinois workers.

Additionally, the researchers say, if at least half of Illinois’ counties enacted right-to-work zones, total labor income would decrease by $1.3 billion in the state.

Manzo and Bruno also contend in their report that right-to-work zones would further weaken the state’s middle class. They predict that labor unions would lose at least 200,000 members. Since unions typically offer greater income benefits for non-white and female workers, they also say this would lead to an increase in racial income inequality and gender income inequality.

As a result, their report estimates that the Illinois economy would shrink by $1.5 billion and local governments would see a revenue loss of $80 million.

“Right-to-work does not seem like good public policy, based on the available evidence,” Manzo said. “In our view, it causes a negative effect on workers and, essentially, if you lower membership in unions, you would decrease workers’ earnings, put more people on government assistance programs and end up costing the state more.”

“Local right-to-work zones would not empower workers in any way,” he added. “They would actually empower employers at the expense of the middle class, at the expense of the taxpayers, at the expense of workers.”

Michael Lucci, director of jobs and growth at the Illinois Policy Institute, disagrees with the findings in Manzo and Bruno’s report, particularly those that link right-to-work laws to a significant decrease in workers’ wages and incomes.

“They have this premise that if you enact a right-to-work law, everyone’s wages are going to fall,” Lucci said. “The reason they say that is because if you average out wages in right-to-work states and in forced-union states like Illinois, right-to-work states do have lower average wages.

“But what they also left out is a significantly lower average cost of living … if you are going to make $50,000, it is going to go a lot further in Indiana than it would in Illinois.”

Lucci points out that in neighboring Indiana and Michigan, incomes have grown faster than those in Illinois since the two states enacted their right-to-work laws.

According to the U.S. Bureau of Economic Analysis, in 2014, incomes grew 4 percent in Michigan and 2.5 percent in Indiana, but only 2.4 percent in Illinois. And in 2013, incomes grew 2.5 percent in Michigan and 2.3 percent in Indiana, but only 2.1 percent in Illinois.

Additionally, Lucci says, both states have created more manufacturing jobs – 39,600 in Indiana and 39,500 in Michigan – in the past few years, while Illinois continues to lose those jobs.

“We see that manufacturing companies are choosing not to grow in Illinois and choosing to grow in these right-to-work states,” Lucci said. “It’s nothing new, but it’s more pronounced now because these are our neighbors that have the right-to-work laws.”

When asked how Rauner’s proposal will fare in Illinois, Manzo said “it’s based on ideology, it’s based on politics.” So far, he said, only about 30 counties and municipalities across the state have voiced their support of right-to-work zones.

“It’s a small number, but that might grow,” Manzo said. “I see it playing out more in the courts, and getting political if the governor can find the votes to enact such policy.”

Lucci contends that Rauner’s proposal wouldn’t break any federal or state laws, especially since it follows a similar successful move made by Kentucky. He explains that Illinois has the same legal framework as Kentucky, where 12 counties have passed their own right-to-work regulations since December 2014.

”In Kentucky, the counties have what is called home-rule powers,” Lucci said. “It basically means you can do whatever you want for your local legal system so long as it does not violate a state law.

“There are over 200 home-rule municipalities in Illinois. Under the same powers, in the same way, these Illinois home-rule municipalities could enact a right-to-work ordinance. That might be another way the right-to-work movement comes to Illinois.”

So far, 25 states have enacted right-to-work laws, with Wisconsin passing the most recent law in March.

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