“Right to Work” Bill Would Suppress Wisconsin’s Already Anemic Wages

Monday, February 23, 2015 at 7:32 PM by

Though researchers disagree on the effects of “right to work” legislation on the number of jobs, what is quite clear is that such laws suppress wages.  Now that legislative leaders have suddenly put a so-called “right to work” (RTW) bill on a very fast track, I hope legislators will take a careful look at a couple of recent studies that examine the economic effects and warn against following the path of the states that have approved RTW laws

A recent report by Dr. Abdur Chowdhury, who teaches economics at Marquette, reached the following conclusion about the effects on Wisconsin income and state taxes:  

The potential net loss in direct income to Wisconsin workers and their families due to a RTW legislation is between $3.89 and $4.82 billion annually. Using a conservative estimate of an impact multiplier of 1.5, the total direct and induced loss of a RTW legislation is estimated between $5.84 and $7.23 billion annually. Based upon the two estimates of lost incomes and an overall effective tax rate of 4.0%, the economic loss in state income taxes is estimated between $234 and $289 million per year.” 

Keep in mind that Wisconsin is already a low-wage state and our lower-than-average incomes seem to be holding back our economy.  A December blog post on Jake’s Economic TA Funhouse, titled “Lower wages is the PROBLEM, not the solution in Wisconsin,” lays out the case why further suppressing wages in Wisconsin will hurt rather than hinder economic growth and prosperity in our state.  

A paper issued in October by Marc Levine at the UW Milwaukee Center for Economic Development provides additional evidence about the growth in low-wage jobs in Wisconsin.  That report adds:

even in many occupations that remained “middlewage,” especially in manufacturing, real wages fell noticeably between 2010 and 2013. The inflation-adjusted median hourly wage for production occupations in Wisconsin fell by 5.2 percent between 2010-2013. Even in occupations like welders or CNC machine tool operators, supposedly in such high demand that employers claim there is a “skills gap” in Wisconsin, real wages fell by 6.5 percent and 4.7 percent respectively between 2010 and 2013.” 

Returning to Professor Chowdhury’s report, he wrote at length about other adverse effects of RTW laws and concluded: 

right-to-work legislation would provide no discernible overall economic advantage to Wisconsin, but it does impose significant social and economic costs. The benefits of right to work enjoyed by some prospective employers are overshadowed by the costs borne by other employers and the state as a whole. Low wages would weaken consumption. Higher rates of labor turnover and adversarial labor-management relations would decrease productivity. And low-wage employment would burden the state with “mop up” costs (including social services, housing assistance, subsidized day care, school lunch programs, etc).” 

A short report issued a month ago by Gordon Lafer at the Economic Policy Institute provides a number of other arguments against RTW legislation, including this one:

“According to multiple quality-of-life measures, Wisconsin significantly outperforms the states with RTW laws. Thus, it appears RTW states should be trying to become more like Wisconsin, instead of Wisconsin becoming more like RTW states.”

Jon Peacock

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