Among the states most adversely affected by unionization, Michigan
has suffered the most with a 23.1 percent loss in real per capita income
because of unionization since 1964. Michigan is the latest state to
abandon forced unionism by passing a right to work law, and Michigan
workers are probably kicking themselves for not passing one sooner.
Among the other states most adversely affected by unionization are
Alaska with a 20.2 percent loss in real personal per capita income
(RPCI), Nevada with a (19.6 percent RPCI loss), New York (19.5 percent),
and Hawaii (18.7 percent).
The study also shows the connection between unionization and
“dead-weight loss”—the amount of lost economic output due to
artificially raised labor costs in certain industries.
CEI labor policy analyst Aloysius Hogan summarizes the process that causes this dead-weight loss:
By raising the cost of labor, unions
decrease the number of job opportunities in unionized industries. That,
in turn, increases the supply of labor in the nonunion sector, thereby
driving down wages in those industries. The effect of this situation is
to increase the natural rate of unemployment, thus imposing a deadweight
loss of economic output on the economy.
As Hogan explains, Richard Vedder and Lowell Galloway built this
study on a formulation devised by labor economist Albert Rees to
quantify the dead-weight losses from unionization. Rees’s formulation
requires that three factors are known: the percentage of unionized
employees (union density), wage premiums associated with union presence,
and the general elasticity of demand for labor.
Including consideration of five independent variables (manufacturing,
income tax rates, RPCI, politics, and college education equivalency),
the study finds that dead-weight loss from the unionization rate has
played a statistically significant role in real per capita income loss
in states with higher union density.
Specifically, the study finds that, for every additional percentage
point in the average unionization variable during the study period, real
per capita income was reduced by 1.73 percent.
The cost of heavy unionization is best seen when examining a 50-year
period in which the average Michigan worker lost $11,000 real per capita
income compared to a $1,239 loss for the average South Carolina worker
(South Carolina has had a right to work law for decades).
These findings vindicate critics of the National Labor Relations Act
of 1935 (NLRA), which encourages wage-depressing unionization.
Collective bargaining hurts more people than it helps. Therefore,
Congress should consider amending—or ideally, repealing—the 79-year-old
NLRA.
In the meantime, states can take matters into their own hands by passing right to work laws."
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