Right-to-Work battle looms in Michigan: Businesses fear repeal by Democrats

• Michigan Democrats say they plan to consider repealing the state’s Right-to-Work laws in the next legislative session
• The state’s business leaders say the move would be divisive at a critical point for Michigan’s economy
• Data about the law’s effects on Michigan is scant

Jan. 13, 2023: Right-to-Work repeal just a start: Michigan Democrats eye pro-worker agenda

Michigan business groups are wary of Democrats’ calls to repeal Right-to-Work laws when they take charge in Lansing early next year, saying the state instead should focus on economic policies that attract jobs.

Business Leaders for Michigan, the Michigan Chamber of Commerce and chamber leaders from the state’s two largest cities — Detroit and Grand Rapids — all urge caution. But Democrats — who are backed heavily by unions including the Michigan Education Association and United Auto Workers —  say the move prioritizes workers and labor rights.

Right-to-Work has “negatively impacted the state,” said House Speaker-elect Joe Tate, D-Detroit.

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“Obviously, labor has been (and)  is a part of the fabric of the state of Michigan,” he said. “Our workers here should be supported and treated with dignity as well in the work that they do."

Right-to-Work, which was approved by Republicans in 2012, allows workers to opt out of paying dues in union-represented jobs but still receive benefits. 

Business leaders question why the law’s repeal should be a priority after a year-long bipartisan push to attract investment and jobs, including a $5 billion investment by the state to create a fund to attract big-ticket projects.

“The worst thing new leadership in the Legislature could do is to make big sweeping changes that disrupt our fragile economic recovery,” said Brian Calley, who was lieutenant governor in 2012 and is now president and CEO of the Small Business Association of Michigan. 

“Michigan has made great strides since the bottom of the pandemic, but there are many warning signs on the horizon,” such as inflation and a pending increase in minimum wage.

Some business groups contend the policy helps the state’s economic development efforts. Michigan is one of the nation’s 27 Right-to-Work states, and many are in competition for large-scale electric vehicle battery manufacturing, including Kentucky, Tennessee, Georgia and North Carolina. 

Right-to-Work laws are not a silver bullet, but are “one of those things that contributes to making a state conducive to economic growth,” along with a skilled workforce and business-friendly tax structure, said Andy Johnston, vice president of government affairs for the Grand Rapids Area Chamber of Commerce. 

But the research is less conclusive, said Tim Bartik, an economist focused on economic development for the W.E. Upjohn Institute for Employment Research in Kalamazoo.

Most Right-to-Work research has been limited to states that enacted the laws before 2000, largely southern states.

“The current economic environment is different,” Bartik said.

Some data is now emerging on states, like Michigan, that more recently adopted Right-to-Work, Bartik said, and it shows mixed results. 

“Right-to-Work laws may have some positive effects on attracting manufacturing jobs,” he said.  One benefit could be attracting manufacturing jobs in areas that border other states, such as west Michigan areas close to Indiana. 

Yet those jobs, Bartik said, would not be high-paying positions. And setting statewide policy based on that manufacturing growth would not be likely to generate overall job gains or wage increases in Michigan.

One recent study, which includes Michigan, concludes that Right-to-Work lowers unionization rates and leads to lower wages, in part by reducing the threat of unionization because unions have fewer resources — less money coming from dues — to mount organizing campaigns.

“The net effect on state jobs and per capita income is uncertain,” Bartik said.

What the data shows

Proponents have long argued that right-to-work states have more robust economies, growing manufacturing sectors and higher wages. Critics say the laws lead to shrinking paychecks and fewer workers covered by pensions and employer-paid health insurance.

“Right-to-Work as a policy is an area of robust disagreement,” said Steve Delie of the Mackinac Center for Public Policy, a free-market think tank based in Midland.

The Mackinac Center looked at how Right-to-Work affected Michigan counties through 2018 and concluded that the law helped add higher-paying jobs in  manufacturing, construction, transportation and warehousing sectors.

The center made the conclusion by comparing counties in the Right-to-Work states of Indiana, Michigan and Wisconsin and comparing them to Ohio, which is not a Right-to-Work state.

The work built upon similar national research of border regions.

A 2021 study by two doctoral candidates at Harvard University found that Right-to-Work counties, compared to bordering non-Right-to-Work counties have a slightly higher share of manufacturing employment, a greater jobs-to-people ratio and slightly lower unemployment rates.

But the report’s authors cautioned that not all the differences between states can be attributed to one law, acknowledging that other factors — tax rates, population changes and climate can play a role. For instance, many of the Right-to-Work states are in the Sun Belt, which has had high population growth over the past half century.

Manufacturing wages have grown in Michigan since 2012, but not kept pace with the increase in inflation. They’ve grown 12 percent from 2012 to 2021, a similar growth to Indiana, which adopted Right-to-Work in 2012 as well. Over that same time frame, inflation rose 29 percent.

Hourly manufacturing wages in Michigan averaged $30.50 in Michigan in 2021 and $28 in Indiana. In Ohio, they grew 18 percent since 2012 to  $29.71.

Among all states, wages among private sector workers increased the most in Hawaii — which is not Right-to-Work — from 2012 to 2022. But half of the states with the biggest gain in wages — Nevada, South Carolina, Nebraska, Alabama and Utah — are Right-to-Work states. Michigan’s wage growth ranks 31st in the nation.

And being a non-Right-to-Work state did not prevent Ohio from landing one of the biggest economic development prizes in decades in 2022: the $20 billion Intel semiconductor plants east of Columbus that will employ 7,000 workers during construction and another 3,000 workers who make an average of $135,000 when it is up and running. 

All told, Intel has said investment could hit $100 billion.

Few states have repealed Right-to-Work, making predictions difficult about whether doing so in Michigan would have a negative impact. 

Both New Hampshire and Indiana reversed their laws decades ago, then Indiana reinstated it in 2012. Virginia attempted to do so in 2021 under a Democratic legislature, but moderates did not embrace the effort. 

Right-to-Work has lowered union participation 

While there’s no consensus on whether Right-to-Work laws an economic development tool, their impact on union membership is undisputed.

Since the law was enacted in 2012, the percentage of Michigan’s 4.85 million workers covered by a union contract has declined to 15.4 percent in 2021 from 17.2 percent in 2012.

But the percent of employees who actually belong to a union fell even further, from 16.8 percent to 13.1 percent, a sign that tens of thousands of eligible union members likely took advantage of Right-to-Work laws and declined to join.

And Michigan’s drop is part of a national trend: of the four states with the largest drop in union membership since 2012, three have adopted Right-to-Work laws: Michigan in 2012 and Wisconsin in 2015. *Iowa has been a Right-to-Work state since 1947.)

Only Alaska, which saw union membership drop from 22.5 percent in 2012 to 15.7 percent in 2021, had a bigger decline.

Businesses say change would be ‘divisive’ 

Business leaders say lawmakers have more pressing issues besides repealing Right-to-Work, such as education, workforce skills and infrastructure and investment in electric vehicles.

Bipartisan policy wins, like recent large-scale incentive funding, should be a goal for 2023, business leaders say.

“It will take bipartisanship and cooperation to make a difference (in Michigan), and pursuing a deeply divisive agenda straight away (like Right-to-Work) puts the rest of the important work at risk of stalemate,” said Calley of the small business group.

The Detroit Regional Chamber sent a letter to the four incoming legislative leaders on Wednesday, outlining its priorities. The group urged leaders to establish a bipartisan caucus “to help drive reasonable and practical solutions” on issues such as an increase to the state’s Earned Income Tax Credit for lower-income families and finding sustainable funding for large-project tax incentives.

Missing from the letter was mention of the potential repeal of Right-to-Work laws. It’s not on the chamber’s priority list, said Sandy Baruah, the chamber’s president and CEO.

“The chamber has not addressed the Right-to-Work matter with our membership or board,” Baruah told Bridge. 

“We consider this settled Michigan law and not a policy priority, as Michigan exits the pandemic and addresses our outstanding economic competitiveness issues.”

Democrats aren’t saying how they’ll position a change to Right-to-Work, or whether any fissures are showing in their caucus. With a two-vote majority in the House, they could only lose one vote to keep a bill alive, unless they get Republican support.

In 2013, six Republicans in the House voted against the legislation.

Senate Majority Leader-elect Winnie Brinks, D-Grand Rapids, said it’s “unrealistic” for Right-to-Work policy to be ignored in the next session.

“I want to be thoughtful and deliberative about this,” Brinks said. “And that's how you're going to see us start.”