Real Earnings Higher In Right to Work States

On January 1, 2001, in Uncategorized, by NILRR Staff

A Study By Stan Greer
Senior Research Associate

Big Labor propaganda against Right to Work legislation and laws rarely
focuses on the principle at stake: freedom of association.

The fact is, Right to Work laws safeguard employees’ freedom of association
evenhandedly: They prohibit the firing of employees for refusal to join
or pay "fees" to a union, and they also prohibit termination
for joining or financially supporting a union.

Union officials naturally have no problem with the second prohibition.

Where their difficulty lies is in explaining why they believe the law
should protect one employee’s right to support a union, but at the same
time authorize the firing of another employee who chooses not to support
the same union.

Eager to dodge a debate over principle, union officials like to pretend
that the Right to Work battle is only about economics. But union bosses’
economic indictment against Right to Work keeps getting less and less
plausible.

AFT Study Shows Employees in Right to Work
States Enjoy Lower Living Expenses

Ironically, one of the most devastating blows against this indictment
has been dealt by F. Howard Nelson, a veteran researcher for the 1.3 million-member
American Federation of Teachers (AFT) union.

The AFT union is one of the largest and most powerful affiliates of
the vast, 13 million-member AFL-CIO empire.
More than a dozen years ago, Dr. Nelson created a cost-of-living index
that confirms what top union officials shrilly deny: that employees’ real,
spendable earnings are higher in Right to Work states.

Dr. Nelson calculated and periodically updates his "Interstate
Cost-of-Living" Index (whose latest version can be downloaded at
www.aft.org/research/survey01/tables/

tableI-7.html) because it is sometimes in the AFT’s interest to make accurate
comparisons of teachers’ earnings in different states.

Drawing on data from both government and private sources, this index
compares the cost of housing, food, clothing, transportation, medical
care, and other necessities in the 50 states.

In this index, a state whose average cost of living is exactly equal
to the U.S. average would score 1.00. If the average cost of living within
a state is 10% higher than the national average, it will score 1.10. If
living expenses are 10% lower than the national average, it will score
.90.

The index for 2000, the most recent one now available, shows that living
expenses for employees in non-Right to Work states are overall 4.4% higher
than the national average. Overall living costs in Right to Work states
are 7.1% more affordable than the national average. (See Table I.)

Impact of State Income and Federal Taxes
Widens Right to Work States’ Advantage

Of course, neither Dr. Nelson nor AFT President Sandra Feldman intended
for the index to be used to calculate relative living costs in Right to
Work states, where employees may not be fired for refusal to join or pay
dues to a union, and non-Right to Work states.

But the data speak for themselves.

When the 2000 mean weekly earnings for full-time wage and salary employees
in the 50 states, as published on pp. 30-35 of the 2001 edition of the
Bureau of National Affairs’ Union Membership and Earnings Data Book, are
adjusted for differences in living costs, the real earnings of employees
in Right to Work states are shown to be higher.

In 2000, employees in Right to Work states earned a mean of $638 a week,
after adjusting for the cost of living, compared to $632 in non-Right
to Work states. (See Table II.)

But this comparison actually understates, in two ways, the advantage
employees in Right to Work states have in real, spendable income.

First, the prices incorporated by Dr. Nelson in his cost-of-living index
include state and local sales and real estate taxes, but do not reflect
state income taxes, which are on average significantly lower in Right
to Work states.

Second, the Nelson index does not account for the disparities in the
federal tax burden carried by employees in different states.

Progressive federal income tax rates are levied on nominal, rather than
real, incomes. According to the Nelson index, the average employee in
non-Right to Work California would have to earn nearly $65,000 a year
to enjoy the same pre-tax earning power as an employee in Right to Work
Florida who earns $50,000 a year.

However, other things being equal, the California employee would have
to fork out a significantly higher share of his or her nominally higher
income in federal income taxes. As a result, the Californian’s real, after-tax
living standards would actually be lower.

After subtracting state income taxes and all federal taxes, the 2000
cost-of-living-adjusted mean weekly earnings of employees in Right to
Work states was $484, compared to just $468 in non-Right to Work states.
(See Table III.)
Where forced dues are legal, union officials use their power to dislocate
labor markets, jack up costs, and bankroll Tax-and-Spend, regulation-happy
state legislators and governors.

Right to Work Laws Fundamental Purpose
Is to Protect Freedom of Association

Not just the Nelson index, but also other nationwide comparative cost-of-living
indices such as the one supplied in David Savageau and Ralph D’Agostino’s
Places Rated Almanac, show that living costs are significantly higher
and, consequently, real incomes are lower where Big Labor wields forced-dues
power.

But Right to Work laws are not merely or even primarily an economic
development tool.

Right to Work laws and legislation are really a matter of freedom, not
economics. The question is: Should labor law respect the ability of each
employee to choose intelligently whether or not to furnish financial support
for a union?

In many cases, forced-dues treasury money goes to support not only bargaining
positions, but also political candidates and causes that many or most
forced dues-paying workers oppose.

Poll after poll has shown that nearly four out of five Americans support
the individual employee’s Right to Work regardless of his or her union
affiliation.

Union officials who disagree should at least be willing to offer a straightforward
explanation why that’s based on principle, instead of making unsupported
and false claims about Right to Work laws’ economic impact.

TABLE I:

Average Cost of
Living Index in 2000:
     
Right to Work vs.
Non Right to Work
     
       
Non-Right
to Work
States
2000 AFTCost
of Living
Index
Right
to Work
States
2000 AFTCost
of Living
Index
       
Alaska 1.230 Alabama 0.910
California 1.219 Arizona 0.959
Colorado 1.081 Arkansas 0.891
Connecticut 1.087 Florida 0.942
Delaware 0.970 Georgia 0.938
Hawaii 1.312 Idaho 0.938
Illinois 0.992 Iowa 0.921
Indiana 0.924 Kansas 0.921
Kentucky 0.910 Louisiana 0.936
Maine 0.992 Mississippi 0.896
Maryland 1.009 Nebraska 0.927
Massachusetts 1.144 Nevada 0.934
Michigan 0.974 North Carolina 0.931
Minnesota 0.989 North Dakota 0.924
Missouri 0.930 South Carolina 0.930
Montana 0.979 South Dakota 0.917
New Hampshire 1.062 Tennessee 0.915
New Jersey 1.057 Texas 0.904
New Mexico 0.962 Utah 1.017
New York 1.070 Virginia 0.954
Ohio 0.964 Wyoming 0.997
Oklahoma* 0.898    
Oregon 1.036 Average 0.929
Pennsylvania 0.937    
Rhode Island 0.987    
Vermont 0.999    
Washington 1.073    
West Virginia 0.907 Sources:
U.S. Census Bureau, Statistical Abstract
 of
the U.S., 2001; U.S. Bureau of Labor Statistics,
 Employment
& Earnings, May 2001; AFT Survey &
 Analysis
of Teacher Salary Trends, 2001.
 
Wisconsin 0.964
   
Average 1.044
*
Oklahoma became a Right to Work state in September 2001.
   
       
In the
AFT’s index, a state whose average cost of living is exactly equal
to the
U.S. average would score 1.00. If
the average cost of living within a state is
10%
higher than the national average, it will score 1.10. If living expenses
are
10% lower than the national average,
it will score .90.
   

TABLE II:

2000 Mean Weekly
Earnings
        
Adjusted for Cost of Living:  
Right to Work vs. Non Right to Work        

         
Non-Right
to Work
States
Weekly Earnings
Adjusted for
Cost of Living   
Right
to Work
States
Weekly Earnings
Adjusted fo
r
Cost of Living   
       
Alaska 600 Alabama 610
California 567 Arizona 630
Colorado 648 Arkansas 568
Connecticut 686 Florida 640
Delaware 637 Georgia 629
Hawaii 425 Idaho 563
Illinois 669 Iowa 621
Indiana 663 Kansas 632
Kentucky 636 Louisiana 598
Maine 551 Mississippi 568
Maryland 723 Nebraska 580
Massachusetts 620 Nevada 637
Michigan 682 North
Carolina
629
Minnesota 680 North
Dakota
518
Missouri 669 South
Carolina
605
Montana 471 South
Dakota
563
New
Hampshire
610 Tennessee 642
New
Jersey
693 Texas 686
New
Mexico
558 Utah 558
New
York
632 Virginia 722
Ohio 634 Wyoming 520
Oklahoma 607    
Oregon 573 Average 638
Pennsylvania 667    
Rhode
Island
655    
Vermont 545    
Washington 603 Sources:
U.S. Census Bureau, Statistical Abstract
of
the U.S., 2001; U.S. Bureau of Labor Statistics,
Employment
& Earnings, May 2001; AFT Survey &
Analysis
of Teacher Salary Trends, 2001; BNA
Union
Data Book, 2001 edition.
          
West
Virginia
583
Wisconsin 627
   
Average 632
    
In
2000, employees in Right to Work states earned a mean of $638
a
week, after adjusting for the cost of living, compared to $632 in
non-Right
 to
work states.
     

TABLE III:

 

2000 Mean Weekly
Earnings Adjusted for
   

Cost of Living, State & Federal Taxes:
   
Right to Work vs. Non Right to Work
   
    
Non-Right
to
Work
States   
Right
to Work

States
   
       
Maryland 539 Virginia 531
Michigan 508 Texas 526
Missouri 507 Tennessee 496
Minnesota 503 Florida 481
Pennsylvania 502 Nevada 479
Indiana 500 Kansas 477
New Jersey 499 Arizona 476
Illinois 495 North Carolina 475
Rhode Island 491 Iowa 474
Kentucky 487 Georgia 470
Ohio 482 Alabama 466
Colorado 480 Louisiana 465
Connecticut 477 South Carolina 462
Delaware 471 Mississippi 443
Oklahoma 467 Nebraska 439
Alaska 463 South Dakota 437
Wisconsin 462 Arkansas 434
New York 460 Idaho 429
New Hampshire 456 Utah 424
West Virginia 454 North Dakota 405
Massachusetts 447 Wyoming 378
Washington 440    
New Mexico 429 Average 484
Oregon 427    
Maine 418 Sources:
U.S. Census Bureau, Statistical Abstract
of
the U.S., 2001; U.S. Bureau of Labor Statistics,
Employment
& Earnings, May 2001; AFT Survey &
Analysis
of Teacher Salary Trends, 2001; BNA
Union
Data Book, 2001 edition; Federal Tax Burdens &
Expenditures,
Tax Foundation, July 2002; State
Policy
Institute of NY State, www.bcnys.org.
       
California 413
Vermont 407
Montana 354
Hawaii 326
   
Average 468

Stan Greer serves as senior research associate
for the National Institute for Labor Relations
Research. Mr. Greer holds a bachelor’s degree
(1983) from Georgetown University in
Washington, D.C., and a master’s degree

(1986) from the University of Pittsburgh.

* * *

The National Institute for Labor Relations
Research is an organization whose primary
function is to act as a research facility for

the general public, scholars and students. It
provides the supplementary analysis and research
necessary to expose the inequities of compulsory
unionism.

The Institute is classified by the Internal
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and research organization. Contributions and
grants are tax deductible under Section 170
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upon request, provide documentation to
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* * *

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to aid or hinder the passage of any bill
before Congress.

 

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