Membership and wage impact of right-to-work laws

This paper examines the effects of “Right-to-Work” laws on union membership and on the earnings of union and nonunion members. Using regression analysis, we find that once the simultaneous equations bias between the degree of unionization and RTW laws is eliminated, RTW laws have no statistically significant influence on union membership. Similarly, using a human-capital earnings model, we find that RTW laws have no significant influence on the wages of all workers, union workers, or nonunion workers. However, we did find evidence that such laws may promote aggressive union wage policies resulting in a larger union/nonunion relative wages advantage in RTW states than in non-RTW states.     

An integrated model of the economic effects of right-to-work laws

This study derives an empirical model which simultaneously traces the effect of Right-to-Work laws on the worker’s decision to join the union, the union’s decision to set the wage rate, and the firm’s decision to employ inputs. The model identifies two channels through which Right-to-Work laws affect these decisions: the wage effect and the productivity effect. Our results show that RTW laws tend to affect economic decisions through the wage effect, because the effect of RTW laws on productivity is small in most states. We thank an anonymous referee for helpful comments. Any errors that remain are the responsibility of the authors.     

The determinants and effects of right-to-work laws: A review of the recent literature

I review the recent literature on the determinants and effects of right-to-work (RTW) laws. The focus is primarily on the econometric studies published since the early 1980s. Five major areas of impact are assessed: unionization, free riding, union organizing activities and successes in NLRB elections, wage structure, and state industrial development. While individual findings are quite sensitive to model specification, the accumulated evidence indicates that RTW laws have at least a significant short-run impact on all of these areas except perhaps wages.     

Right-to-work laws and union density: New evidence from micro data

Although union density is much lower in Right-to-Work (RTW) states than in states permitting union shops, most studies have found that after correcting for omitted-variable and simultaneity biases, RTW laws do not have independent impact on union density. However, these studies typically use data sets which include certain government, agricultural, supervisory and transportation workers who are not subject to RTW legislation thus diluting the effect of RTW laws. When these employees are excluded from the data set, we find that RTW laws do significantly affect union density in the private sector.     

Race and prevailing wage laws in the construction industry: Reply to Azari-Rad and Philips

In the Winter 1999 issue of the Journal of Labor Research (“Prevailing Wage Laws and Black Employment in the Construction Industry”), I reported a significant inverse relationship between the strength of states’ prevailing wage laws and the prospects for black employment in the construction industry. My conclusions are challenged by Azari-Rad and Philips in “ Race and Prevailing Wage Laws in the Construction Industry,” in this issue. This reply responds with new evidence reinforcing the previously asserted relationship: black employment ratios in construction are better in states that don’t have prevailing wage laws than in states that do, and they lessen as the strength of those laws increase. Furthermore, prevailing wage law repeal has apparently benefited black employment opportunities in the construction industries of the states where it has occurred.     

A Reexamination of Card and Krueger's State-Level Study of the Minimum Wage

Card and Krueger's (1995) difference-in-difference study of the 1990-1991 federal minimum wage hikes compared states by the proportion of workers directly affected by the minimum wage. They found "no evidence that the increase in the minimum wage significantly lowered teenage employment rates more in highly affected states" and they concluded the minimum wage did not reduce employment. Their paper was highly influential and convinced many that the minimum wage did not reduce employment. However, when I apply their model to the 1996-1997 federal minimum wage hike, I find that increases in the minimum wage significantly lowered teenage employment rates more in highly affected states. Using Card and Krueger's interpretation, this implies the minimum wage did reduce teenage employment.     

How state exceptions to employment-at-will affect wages

Little research has been conducted on the effects of state adoption of exceptions to the common law doctrine of employment-at-will, which states that both employees and employers have the right to terminate an employment relationship at any time for any reason. I examine how these exceptions affect wages and find that, as predicted, the two are inversely related. All three commonly adopted exceptions are negatively related to the wage rate, with state adoption being associated with up to a three percent reduction in wages.     

WAR AND PESTILENCE AS LABOR MARKET SHOCKS: U.S. MANUFACTURING WAGE GROWTH 1914–1919

This paper explores the effect of mortalities from the 1918 influenza pandemic and World War I on wage growth in the manufacturing sector of U.S. states and cities from 1914–1919. The hypothesis is that both events decreased manufacturing labor supply, thereby initially increasing the marginal product of labor and wages. The results reveal that states and cities having had greater influenza mortalities experienced higher wage growth—roughly 2–3 percentage points for a 10% change in per capita mortalities. World War I combat mortalities also had a positive, but smaller, effect on wage growth. ( JEL N62, N32, N92, I12)     

Do ENDAs End Discrimination for Behaviorally Gay Men?

Twenty-two states have implemented state Employment Nondiscrimination Acts (ENDAs) making sexual orientation discrimination illegal, and Congress has repeatedly considered a federal ENDA. However, we know very little about the impact of existing ENDAs and the likely impact of future ENDAs. I describe the implementation of ENDAs and highlight their shortcomings relative to federal employment nondiscrimination law. Despite their shortcomings, I show that state ENDAs decrease wage differentials by roughly 20 % for behaviorally gay men. ENDAs appear to reduce this wage differential by reducing the portion of wage differentials typically associated with discrimination. These results inform a contemporary policy debate over the necessity and impact of expanded protection from discrimination for gay men. (JEL J1, J3, J7)     

The effects of right-to-work legislation on union outcomes: Additional evidence

The authors reexamine the role of open shop legislation in affecting union outcomes. New indices of union success are employed which include election voting behavior, the size of newly certified units, and the rate of union decertification. Three competing hypotheses are empirically tested: (1) the free rider argument predicting lower membership levels in right-to-work (RTW) areas; (2) the saturationist hypothesis predicting a higher level of organizing activity in RTW areas as a result of large concentrations of unorganized workers; and, (3) the hypothesis that legislation is vitiated by distinct organizing behaviors in RTW and nonRTW areas. Empirical results, based on SMSA data from 35 states, tend to provide support for hypotheses (2) and (3). Recently, RTW areas have experienced more prounion outcomes, and the union returns to regional attributes (measured by Chow tests) are found to be distinct in the two areas.     

Do unions always decrease wage dispersion? The case of Brazilian manufacturing

The literature on the impact of unions on wages has established that unionized workers earn a wage premium when compared to their nonunion counterparts and that the dispersion of wages within the union sector is lower than in the nonunion sector. I examine the validity of these findings in the context of a developing country labor market and show that unionism does create a positive wage differential but that wage dispersion is greater in the union sector. These findings are explained by the greater variance in the characteristics of unionized workers, the vulnerability of nonunion workers to market conditions, and the structure of wage bargaining.     

Teachers’ collective bargaining outcomes and tradeoffs

This study uses data from Illinois and Iowa public school districts to examine the factors that influence the wage and nonwage bargaining outcomes negotiated by teachers’ unions. Tradeoffs between wage and nonwage outcomes and among nonwage contract provisions are also examined. The results provide some evidence that tradeoffs exist between wage and nonwage outcomes. The findings also reveal differences in outcome and tradeoff patterns across the states for issues unrelated to union security. I am grateful to the Illinois State Board of Education, the Iowa Department of Public Instruction, and the Iowa Public Employment Relations Board for providing the data analyzed in this study. I am also grateful to the Institute of Labor and Industrial Relations at the University of Illinois and the Columbia University Graduate School of Business for research support, and to Jack Fiorito, David Lewin, Susan Schwochau, Donna Sockell, and an anonymous referee for helpful comments on an earlier version of this paper.     

Prevailing wage laws and black employment in the construction industry

As a by-product of analysis of state-level prevailing wage laws applying to public construction projects, a strongly inverse correlation was found between black employment and strength of prevailing wage law. Although black construction employment is generally below what it averages in other sectors, it is closer to parity in states where there is no prevailing wage law, and progressively less so in groups of states that have progressively stronger laws.     

Characteristics of cities that pass living wage ordinances: Are certain conditions more conducive than others?

Cities that have passed living wage ordinances often do so because of the strong political appeal of local living wage campaigns as a response to the declining value of the minimum wage, the outsourcing of municipal services, and rising income inequality. These campaigns generally consist of coalitions of community organizations, religious groups, and often times labor organizations. Organized labor is not the primary force behind most living wage campaigns, but they are an important constituency. Unexplored, however, are the labor market and other characteristics of those cities that have passed ordinances. This paper looks at data from the Current Population Survey (CPS) and compares cities that passed living wage ordinances to those that did not. Cities in states with high union density, and with higher levels of income inequality and larger immigrant populations appear to be more likely to pass living wage ordinances than those cities that do not have these demographics. But as important as union support may be, without key demographic and economic characteristics, it is nonetheless insufficient to achieve living wage ordinances in most cases.     

The effects of prevailing wage laws: A comparison of individual workers’ wages earned on and off prevailing wage construction projects

I evaluate the effects of prevailing wage laws using a unique data set that shows the wages paid to workers on prevailing wage projects and the wages paid to the same workers during the same time period for work on projects not covered by prevailing wage regulations. The wage comparison shows that workers are generally paid more for work on prevailing wage projects than they are for work on nonprevailing wage projects. Thus, prevailing wage laws likely do increase the cost of public construction. In addition, to the extent that the quality of construction is improved, prevailing wage laws appear to be an inefficient mechanism by which to achieve additional quality, as the regulations often result in workers being paid more than they earn in the private market. This research was done originally for the Program Review and Investigations Committee of the Kentucky State Legislature. I thank the staff of the Program Review and Investigations Committee and the Legisla-tive Research Commission for assistance with data collection and Mark Berger for helpful comments. Due to confidentiality requirements, the data cannot be made available.     

UNCERTAINTY AND STICKY-DOWNWARD BUT UPWARD-MOBILE WAGES

The usual search models of unemployment hold that firms do not offer wage cuts to employees in time of slack demand because the employees have alternatives open to them at wages higher than the reduced wage that would be required to maintain full employment. This paper extends these models by considering employees as choosing in conditions of uncertainty and showing that refusal to accept a wage cut is often rational in the absence of a higher alternative wage. Additional implications are derived for union behavior and simultaneous inflation and unemployment.     

Do minimum wage hikes reduce employment? State-level evidence from the low-wage retail sector

Several recent studies have challenged the conventional notion that raising the minimum wage reduces employment. This study considers this issue by examining the minimum wage's influence on retail employment. Standard labor market analysis suggests that low-wage industries should be particularly sensitive to minimum wage hikes. Therefore, by considering retail employment using pooled-cross sectional, state-level data, this study extends recent research that generally emphasized teen employment. The empirical analysis considers state data from the latter 1980's, a unique period where many states raised their minimum wage above the federal level. Our results suggest that an increased minimum wage reduces retail employment, which is consistent with the standard labor market model. Moreover, further analysis indicates that minimum wage hikes also had relatively large adverse effects on total state employment growth, which implies that state minimum-wage policies can affect firm and household location. We thank Dan Rickman and the anonymous referee for their help with this study.     

The Effects of Prevailing Wage Laws: A Comparison of Individual Workers'' Wages Earned on and off Prevailing Wage Construction Projects

I evaluate the effects of prevailing wage laws using a unique data set that shows the wages paid to workers on prevailing wage projects and the wages paid to the same workers during the same time period for work on projects not covered by prevailing wage regulations. The wage comparison shows that workers are generally paid more for work on prevailing wage projects than they are for work on non-prevailing wage projects. Thus, prevailing wage laws likely do increase the cost of public construction. In addition, to the extent that the quality of construction is improved, prevailing wage laws appear to be an inefficient mechanism by which to achieve additional quality, as the regulations often result in workers being paid more than they earn in the private market.     

It does (not) get better: Reference income violation and altruism

We experimentally test whether the gap between reference and actual income impacts subsequent altruism. Participants first perform a real-effort task for a fixed wage and then play a dictator game. Between conditions, we vary the level and the timing of the revelation of the wage. In some conditions, participants know the wage before the real effort task and are not informed of the other potential levels. In some other conditions, they are informed of the distribution of wages before the real effort task, but the actual wage is only revealed afterward. Participants in the latter conditions can form references that may be higher or lower than their actual wage. Our hypothesis is that the gap between the reference and the actual wage impacts transfers in the subsequent dictator game, either because participants want to compensate their recent losses, or because of the emotional reaction to gains and losses. The results support this hypothesis: participants who get the low wage transfer less and are less likely to transfer when they are informed of the other potential levels than when they are not. Conversely, participants who get the high wage are more likely to transfer positive amounts when they are informed of the other potential levels. We use physiological (skin conductance response) and declarative data to discuss the role of emotions in our treatment effects.     

Political support for minimum wage legislation

Conclusion Even if minimum wage laws reduce employment opportunities for some workers, other individuals may benefit from their enactment. In particular, union members and residents of states with high wage levels would be expected to encourage their senators to vote in favor of minimum wage legislation. Examination of senators’ votes on the 1966 and 1974 minimum wage bills indicates that senators favoring passage of these bills are likely to come from states with high union membership and, to a lesser extent, high wage levels. The equations explaining senators’ votes on these bills were disaggregated by political party affiliation and length of membership in the Senate. Democrats were more likely than Republicans to support minimum wage bills. Virtually no difference was observed between senators who voted on both the 1966 and 1974 measures and those who voted on only one. Perhaps the most encouraging result reported is the similarity of coefficients generally observed for corresponding 1966 and 1974 equations. This similarity suggests that the equations reported herein could be used to predict votes on future minimum wage bills. The results suggest also that the general mode of analysis can be fruitfully applied to other economic legislation.