The Right-To-Work Or The Right To Free Ride? The Impacts Of U.S. Right To Work Laws On Wages, Free Riding, And Unionization

Abstract

This paper uses state fixed effect models and a Synthetic Control design with Current Population Survey (CPS) data to identify the impact of state Right-to-Work (RTW) laws on wages, benefits, and union status among private and public sector workers. Despite a modest effect of RTW laws on wages, results suggest RTW laws differentially affect benefits, proxied by employer health insurance contributions. RTW laws are associated with substantial increases in free riding (40 percent in the private sector and 35 percent in the public sector) and decreases in union membership and coverage in the private sector (20 percent and 16 percent, respectively). A Synthetic Control design for Wisconsin indicates RTW legislation is associated with declines in membership and coverage in the state's public sector (29 percent) and private sector (40 percent). The evidence supports theoretical predictions that RTW laws result in union decline through increased free riding, though effects are sector-dependent.