Rusty Dominos

Michigan’s adoption of right-to-work legislation may spark chain reaction

December 15, 2012

Michigan’s adoption of right-to-work reforms could have a domino effect in the heavily unionized Rust Belt, according to political observers across the region.

Republican Gov. Rick Snyder had said passing right-to-work legislation, which prohibits forcing employees to join unions as a condition of employment, was not a major part of his agenda when he ran for Michigan governor in 2010. But the state’s dire economic condition—850,000 jobs left the state between 2001 and 2010—along with Indiana’s move to become the Rust Belt’s first right-to-work state drove the Republican governor to push labor reforms through the legislature on Tuesday.

Indiana state Rep. Jerry Torr (R., Carmel), who began pushing for right-to-work in Indiana in 2003, said the reforms helped the state gain an advantage over its neighbors and predicted other states would follow suit.

"It was important for us to be the first state in the Midwest because I assumed that it would have a domino effect, lead our neighbors to come around to passing it," he said. "What I didn’t expect was for Michigan to be the first one to follow and I didn’t think it would happen this fast."

Snyder stunned political observers on Dec. 4 when he publicly said that he wanted to pass a right-to-work law during the lame-duck session. One week later, Michigan, one of the most heavily unionized states in the country and the birthplace of the powerful United Auto Workers union, became the nation’s 24th right-to-work state.

The move has emboldened Mark Mix, president of the National Right to Work Committee to push similar measures in neighboring states, including Wisconsin, Ohio, and Minnesota.

"All of these states are competing with neighbors with similar circumstances: similar infrastructure, similar industries, similar populations," he said. "The fact that Indiana did it raised the stakes for Michigan and now that Michigan has done it, the pressure to consider right-to-work has increased dramatically in all of those states."

Regional competition is a driving force behind state labor laws, according to Brent Pollina of Pollina Corporate Real Estate, Inc. The company provides information on local business climates to clients ranging from Fortune 500 companies to small businesses looking to cross state lines.

"Regional competitiveness is very important. Clients approach us and say, ‘We need to be in the southwest or the Great Lakes area—where should we go,’" he said.

Pollina takes a number of factors into account when analyzing a state’s business climate, including tax policy and budget deficits. Right-to-work legislation has emerged as a "veto issue" for companies looking to expand, especially in industries reliant on human capital such as manufacturing and logistics. Indiana has experienced a boom in company relocations since becoming the first right-to-work state in the Rust Belt in February.

"Not being right-to-work is a fatal flaw when you’re trying to attract jobs; it serves as a shortcut for CEOs to judge whether a state is friendly to business," Pollina said. "Indiana has had a significant uptick in business because it is the only game in town—it enabled them to go over the border."

Indiana jumped from 23rd to 5th on Pollina’s ranking of most business friendly states with the passage of right-to-work, making it the most-improved state on the list.

Michigan has not been so lucky. The state ranked 13th for its business climate in 2006. By 2012, it had fallen to 39th due in part to union power and the high deficits of the Jennifer Granholm administration.

"This could be the first year that Michigan starts to reverse its decline because [Snyder] has shown that he’s willing to take the state in a new direction," Pollina said. "Where it’s going to help out is in attracting out of state employers—it’s a great thing for the state of Michigan."

Michigan’s gain could represent a loss for its neighbors, according to Ohio University economics professor Richard Vedder.

"There’s a regional pattern to [right-to-work]—the south and the western states became universally right-to-work once one state did it," he said. "There is some concern about the behavior of neighbors and the economic advantage they gain in having it."

Vedder, whose grandfather, Edward Fry, served as Michigan Democratic Party chairman during the Great Depression, said that the weakness of modern unions, which have seen membership dive in recent years, may make right-to-work inevitable.

"The long run prognosis for these laws is very good; unions don’t have the clout in numbers and dollars that helped them fight these off with ease 25, 30 years ago," he said.

"There’s no doubt you’re starting to see that trend spreading throughout Midwest with Indiana, Michigan and Iowa," said Sean Lansing of the nonprofit MacIver Institute. "As more states move in that direction and if it’s as successful as supporters say it will be, other states will have to address the issue in order to remain competitive."

Indiana’s Rep. Torr holds no illusion that Indiana will forever hold a tactical advantage over its neighbors, but he said the state is enjoying it while it is there.

"We’ve had companies knocking on our door ever since we passed the law," he said. "If Michigan has the kind of experience that we have had, then it wouldn’t surprise me if other states got on it."