Free Rider States: How Low-Wage Employment in “Right-to-Work” States Is Subsidized by the Economic Benefits of Collective Bargaining

Source: Robert Bruno, Frank Manzo IV, University of Illinois and Illinois Economic Policy Institute, Research Report, August 28, 2014

From the press release:
States with right-to-work laws “free ride” on the higher tax revenues generated by workers in collective bargaining states, says a new study from a University of Illinois labor expert. According to Robert Bruno, a professor of labor and employment relations on the Urbana campus, workers in collective bargaining states are effectively subsidizing the low-wage model of employment in right-to-work states….

Bruno and study co-author Frank Manzo IV, the policy director of the Illinois Economic Policy Institute, investigated the impact of right-to-work laws on worker earnings, employment, tax revenues and government assistance.

The authors found that right-to-work laws:
• Reduce worker income from wages and salaries by 3.2 percent on average.
• Lower both the share of workers who are covered by a health insurance plan (by 3.5 percent) and the share of workers who are covered by a pension plan (by 3 percent).
• Reduce union membership rates by 9.6 percent.
• Increase the employment rate (by 0.4 percent), but at the expense of a lower labor force participation rate (by 0.5 percent).

While workers in right-to-work states account for just 37.4 percent of all federal income tax revenues, they receive 41.9 percent of all non-health, non-retirement government assistance, the paper says….