A study from Labor and Employment Relations professor Robert Bruno of the University of Illinois-Urbana and policy director of the Illinois Economic Policy Institute Frank Manzo IV showed that states with anti-union “right-to-work” laws have lower tax revenue, and have to spend more on government assistance to the poor as a result.
The study, titled, “Free-Rider States,” found that legislation supporting workers’ right to organize increases wages and reduces income inequality. As a result, collective bargaining states have higher incomes and less inequality. States with “right-to-work” laws have lower wages. These lower wages mean lower state income tax revenue, a slower economy in those states, and higher demand for government “safety-net” services.
Our study found that right-to-work laws weaken state economies and strain public budgets. Right-to-work laws not only sap government revenue in the form of reduced tax receipts, but they also increase government spending in outlays for food stamps and the earned income tax credit.”
The study found that right-to-work laws:
- Reduce worker income by 3.2 percent on average.
- Lower both the share of workers covered by a health insurance plan (by 3.5 percent), and the share of workers 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).
The study also found that workers in right-to-work states account for just 37.4 percent of all federal income tax revenues, but receive 41.9 percent of all non-health, non-retirement government assistance. This means that the better-paid people in union-friendly states are paying more taxes to subsidizing the low-wage earners in the right-to-work states.