In some ways, economic development can be complicated stuff.
It can involve controversial legal constructs, like eminent domain, and multi-layered tax incentives, such as tax increment financing (TIF), transit-oriented development (TOD) and payments in lieu of taxes, or PILOTs.
As we can see from the work of the Maryland Economic Development & Business Climate Commission (the Augustine Commission), it also can include a mixing bowl of regulatory and tax reform, and an overall recognition that government agencies need to adopt private-sector-like biases toward excellent customer service.
But in other ways, economic development can be very, very simple. Such is the case with Right to Work (RTW) vs. forced unionism.
From an economic development perspective, states in which workers have a right to work without being forced to join or pay dues to a union trounce states, such as Maryland, that force such union participation. It is no coincidence, therefore, that Maryland consistently ranks in the bottom half of the myriad state rankings of economic health (although the lack of RTW is but one of many self-inflicted economic hurdles we face, such as estate taxes, high personal tax rates and a challenging tort system). The empirical RTW data tell a compelling story.
In their exhaustive examination of why some states perform better than others (An Inquiry Into the Nature and Causes of the Wealth of States: How Taxes, Energy, and Worker Freedom Change Everything, Wiley, 2014), renowned economist Arthur Laffer and his co-authors show that RTW states have much higher growth rates, relative to forced-unionism states, such as Maryland. They beat us in population growth, domestic in-migration, nonfarm payroll employment, personal income, gross state product, and yes, even tax revenues to the state and local governments.
Why is a state’s RTW status so critical to its economic development success — or lack thereof? The answer is multi-faceted, but quite simply, it is this: RTW sends a clear signal about the positive business climate in a state, and given the choice, relocating businesses choose pro-business states; and it’s less risky to grow a business, invest in infrastructure and hire more workers in a RTW state than in one with forced unionism.
Indeed, increased freedom, for workers and business owners, yields a stronger economy.
Even Michigan Is RTW
That’s right, Michigan, that state up north with an economy built upon the cold, gray steel of Detroit’s automotive industry, is now a RTW state. Detroit once bustled with economic activity, but then its economy literally went south. As the quality and reputation of U.S. auto brands suffered and Ford, Chrysler and General Motors yielded market share to foreign manufacturers, those rivals built new plants not in Michigan, Ohio and Indiana, but in the RTW states of the southeast.
By 2010, Detroit’s unemployment rate was a ghastly 25%. Something needed to be done. So in 2013, just one year after Indiana made the change, Michigan became the 25th RTW state. When recently asked about Detroit’s economic turnaround, one of the city’s business leaders explained, “We needed a new national narrative and needed to make a dramatic statement. And that’s what RTW did for us.”
Please Forget the Politics
Michigan lawmakers (and voters) knew they had a problem, and they knew that RTW was a part of the solution. So, although their state has a long history with the unions and much of the power structure still exists, they made a decision to act on the data rather than politicize and obfuscate. Worker freedom always trumps top-down mandates.
Good economic policy need not be partisan. RTW was once a bastion of Republican-leaning “red” states, but has now been enacted in solidly blue Wisconsin and Michigan. Even Illinois’ governor is floating the idea in his state, and Kentucky has taken a novel approach with county-by-county RTW legislation.
When the data clearly show that a given policy helps grow a state’s economy and make it more competitive with its neighbors, it is worth a serious look by our lawmakers. We hope that our representatives in Annapolis consider a RTW solution that will help us match our economic rivals to the south who are all solidly RTW.
Western Maryland and our Eastern Shore are in dire need of an economic defibrillator jolt, and the multi-generation blue-collar families surrounding Sparrows Point — truly a world-class manufacturing center — are desperate for a return of Maryland’s get-your-hands-dirty economy. RTW would do wonders for these parts of the state.
Duane Carey and Scott Dorsey are president and board chair, respectively, of Maryland Business for Responsive Government. They can be reached at [email protected].