STUDY: Workers in “Right-to-Work” States Receive 24% More Government Assistance

September 3, 2014

A new study, from University of Illinois-Urbana professors From Labor and Employment Relations professor Robert Bruno and Illinois Economic Policy Institute Director Frank Manzo found that just as “Right-to-Work” allows some workers to freeload to the detriment of others, it also allows states to promote an anti-labor business model on the dime of those who respect workers. Workers in “Right-to-Work” states account for 37.4 percent of federal income tax revenues, for instance, but receive 41.9 percent of non-health, non-retirement government assistance.
“Right-to-Work” states typically receive assistance from the federal government without paying their fair share. Workers in “Right-to-Work” states receive $0.232 in non-health, non-retirement assistance per dollar they contribute in federal income tax. Workers in collective bargaining states, on the other hand, receive $0.187 per federal income tax dollar, or 24 percent less.
Beyond affecting individual contributions to federal assistance programs, “Right-to-Work” laws contribute to the race to the bottom promoted by business interests looking to cut labor costs. The authors of the paper 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).
Thought the study found that “Right-to-Work” states have seen a tiny increase in employment (0.4 percent), it does not offset the number of workers who drop out of the workforce (0.5 percent) or factor in the number of low-wage jobs the legislation brings about. Workers who no longer participate in the workforce often begin collecting public assistance which puts an increased burden on such programs.
“Working-age residents who drop out of the labor force depend more on government assistance, which raises the poverty rate and, in turn, leads to increased government spending on food stamps, as well as a lower share of workers who are covered by a health insurance plan,” Robert Bruno writes.  “Government assistance in the form of food stamps and EITC benefits would have increased by over $440 million during that time,” Bruno said.
Although workers in states with right-to-work laws work slightly more hours per week and per year than their counterparts in collective bargaining states, that’s likely only because workers need to offset the effects of lower wages, Bruno said.  “The question for policymakers is whether a small increase in the employment rate is worth a significant decrease in total labor income, a considerable decline in state income tax revenues, an even larger drop in federal income tax revenues and an increased erosion of public budgets,” he said. “Ultimately, the negative impact of right-to-work laws greatly outweighs the uptick in employment rates it creates.”
Focusing the argument on their home turf of Illinois, the researchers looked at what would have happened in the Land of Lincoln has “Right-to-Work” been in effect in 2013.  The researchers found that the state’s labor income would have fallen by $12.3 billion and resulted in $4.8 billion in lost federal income taxes.