Cost of Living-Adjusted, After-Tax Income Per Capita More Than $2,400 Higher in Right to Work States Than in Forced-Unionism States

Heidi Shierholz and her fellow staffers for the Big Labor-funded Economic Policy Institute routinely “under-compensate for the effect of living costs” when comparing wages in Right to Work states and forced-unionism states. Image: C-SPAN

An ever-growing mountain of scholarly research and countless Americans’ personal experience confirm that nominal income per capita, unadjusted for regional differences in cost of living, is quite misleading as a measure of living standards within a state.

Last spring, Dr. Andrew Hanson, an associate professor at Marquette University, and fellow economist Zackary Hawley, an assistant professor at Texas Christian University, highlighted this point in an op-ed calling for reform of the federal Earned Income Tax Credit. (See the link below for more information.)

Hanson and Hawley cited data showing the cost of feeding a family in Boston, Mass., is 53% higher than it is in Jackson, Tenn. Overall, a dollar in Harlingen, Texas, is worth nearly 2.7 times as much as a dollar in New York City, they reported.

Union officials and other opponents of Right to Work laws know as well as anyone else that compulsory-unionism states like Massachusetts, New York, California, and New Jersey are far more expensive than the national average. However, Big Labor frequently tries to pretend out of existence regional disparities in the cost of living when it is attacking Right to Work laws.

Moreover, even when forced-unionism apologists, such as the staffers of the union boss-backed Economic Policy Institute, issue analyses that claim to adjust for purchasing power, they routinely “under-compensate for the effect of living costs on wages,” as a 2015 Heritage Foundation paper demonstrated.

The fact is, nonpartisan analysts such as the Missouri Economic Research and Information Center (MERIC), a state government agency, consistently find that compulsory-unionism states as a group have a substantially higher cost of living than do Right to Work states as a group.

In 2016, 26 states had Right to Work laws protecting employees from federal labor-law provisions authorizing forced union dues; 24 states did not. The 27th and 28th Right to Work laws, in Kentucky and Missouri, respectively, were not adopted until this year, so they are counted as forced-unionism states for the purpose of analyzing 2016 cost-of-living data.

Last year, according to MERIC, the 26 Right to Work states combined had a population-weighted cost-of-living index of 93.5, or 6.5% below the national average. The forced-unionism states combined had a population-weighted cost of living of 117.4, or 17.4% above the national average. (MERIC itself does not weight states based on population size in calculating its indices. For that reason, the national average for population-weighted states does not equal 100.)

This spring, the Institute adjusted 2016 disposable income in the 50 states as reported by the BEA for cost of living by using MERIC’s annual cost-of-living indices for 2016.

The Institute found that the average cost of living-adjusted disposable income per capita in Right to Work states last year was $42,814, more than $2400 higher than the forced-unionism average.

Seven of the eight highest-ranking states for real disposable income per capita have Right to Work laws. Meanwhile, six of the eight bottom-ranking states lack Right to Work laws.

Adjust the EITC for Cost of Living

NOTE:

Early this week, NILRR began a series of blog posts dedicated to taking a closer look at the data presented in the latest edition of “Right to Work States Benefit from Faster Growth, Higher Real Purchasing Power,” an Institute fact sheet published on April 27.

The first post in the series focused on total private-sector employment growth as measured by the U.S. Commerce Department’s Bureau of Economic Analysis (BEA). The second considered another key gauge of job growth, civilian noninstitutional employment as reported by the U.S. Labor Department’s Bureau of Labor Statistics.

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