An economic implication of right-to-work laws

Abstract

At the present time, there exist statutes in 20 states providing that employees are not to be required to join a labor union as a condition of receiving or retaining employment, as permitted by Sec. 14(b) of the National Labor Relations Act. Various effects of these "rightto-work laws'L have been considered at length in the scholarly literature and in textbooks as well. Even so, investigation has largely overlooked one important potential impact of the open shop: its effect upon commodity prices. It can be reasonably argued that union strength in a given area is largely dependent upon (a) the existence in the area of rightto-work statutes and (b) the extent of unionization in the area. Presumably, right-to-work legislation implies diminished union strength, ceteris paribus, and conversely, the absence of right-to-work legislation implies greater union strength, ceteris paribus. In turn, greater union strength would logically imply higher labor costs and hence higher output prices. Thus, it is hypothesized that, other things held the same, the existence of right-to-work statutes in an area implies a lower overall commodity price structure in the area. To test this hypothesis, the following regression was estimated by ordinary least squares for i980: Pj = + 20994.66 2089.34 LA Wj + 1.05913Denj (-2.59) (+2.98)