How right-to-work laws affect wages

I examine the wage effects of Right-To-Work (RTW). Using state-level data, I estimate that, ceteris paribus, RTW states have average wages that are significantly higher than non-RTW states. This result is robust is across a wide variety of specifications. An important distinctive of this study is that it controls for state economic conditions at the time states adopted RTW. States that adopted RTW were generally poorer than other states. Failure to control for these initial conditions may be the reason that previous studies have not identified a positive wage impact for RTW. I thank Kevin Grier for valuable comments and Lawrence Mishel of the Economie Policy Institute for constructive criticisms on an earlier version of this research.     

The impact of right-to-work laws on employer unfair labor practice charges

The expected impact of right-to-work (RTW) laws on employer unfair labor practices is discussed within a resource allocation framework. How RTW laws affect the relative prices of different organizing tactics is also considered. Empirical analysis based on cross-sectional data for 1970, 1975, and 1980 shows that the impact of RTW laws on employer unfair labor practice charges is insignificant. Other variables that affect charge activity are also discussed in terms of their effect on employer/union organizing resource allocation decisions.     

State minimum wage laws: Youth coverage and impact

Federal minimum wage statutes cover only 70 percent of the work force and 30 percent of all employers. State laws are designed to close some of these coverage gaps and in some cases to set higher wage floors. Hence, differences in state wage floors and coverage should affect employment rates and wage distributions, particularly among low-skilled workers. Evidence from the National Longitudinal Ssurveys of Youth is mixed, however: State wage floors appear to have no impact on youth employment or entry wages, but coverage exemptions appear to increase both employment and wages. These observations underscore the need to include state provisions in models of minimum wage impacts, particularly for later periods (e.g., 1988–1991) when state wage floors were relatively higher.     

The impact of unionization,right-to-work laws,and female labor force participation on earnings inequality across states

This study examines the effect of unionization, right-to-work laws, and participation of women in the labor force on income inequality. Two distinct models are developed using 1970 and 1980 census data on the 50 states in the U.S. First, an income inequality model is specified as a beta distribution of the second kind to estimate Gini measures of income inequality. Second, these Gini estimates are used in a simultaneous equations model. The 1970 results indicate that higher unionization rates decreased inequality while right-to-work laws increased inequality. In 1980, the measure of inequality was lower in states with higher female labor force participation. We thank an unknown referee and the editor for comments and criticisms that greatly improved the paper. The usual caveat applies.     

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.     

Empirical evidence on the union free-rider problem: Do right-to-work laws matter?

This study provides detailed statistics by state, industry, occupation, and worker characteristics on private sector wage and salary workers covered by union collective bargaining agreements but who are not union members. A distinction is made between those workers who value the benefits of coverage more than the cost of membership, the true free riders, and those who do not, the induced riders. A probit union membership equation is estimated on a sample which excludes the covered nonmembers. Predicted probabilities are then calculated from the estimated model, yielding a quantifiable measure of the true free-rider problem. The author gratefully thanks Barry T. Hirsch, David A. Macpherson, and an anonymous referee for their constructive comments and insightful ideas. Any errors remain the sole responsibility of the author.     

Prevailing wage laws and market recovery strategies of construction unions

This paper draws attention to the way prevailing wage laws serve as a market retention and recovery mechanism for unions, and how government is their active partner in this enterprise. It was not intended to provide counters to these efforts, although the traditional nonunion response of seeking repeal of the laws has had measurable success at the state level during the past dozen years.     

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.     

Nontransferable rents and an unrecognized social cost of minimum wage laws

This paper identifies an additional social cost of minimum wage laws. The nontransferable sunk investments made in competing to obtain minimum wage jobs produce a social cost since individuals will remain in those positions as long as they obtain a positive return on this investment. This will be true even when more efficient providers of the service exist. The higher the minimum wage is, the greater the level of sunk nontransferable investments and, therefore, the greater the potential inefficient allocation of labor.     

The labor market effects of minimum wage laws: A new perspective

Economists almost uniformly argue that minimum wage laws benefit some workers at the expense of other workers. This argument is implicitly founded on the assumption that money wages are the only form of labor compensation. Based on the more realistic assumption that labor is paid in many different ways, the analysis of this paper demonstrates that all laborers within a perfectly competitive labor market are adversely affected by minimum wages. Although employment opportunities are reduced by such laws, affected labor markets clear. Conventional analysis of the effect of minimum wages on monopsony markets is also upset by the model developed. The author is indebted to Rex Cottle, Benjamin Hawkins, Hugh Macaulay, Michael Maloney, Thomas Schaap, Gordon Tullock, Gene Uselton, and Karen Vaughn for helpful comments on earlier drafts of this paper.     

Race and prevailing wage laws in the construction industry: Comment on Thieblot

Using the 1990 Census of Population, Thieblot (1999) argued that black employment and the strength of the prevailing wage laws are correlated and that repeal of these laws would lead to higher black employment in construction. Analysis of the 1970 Census of Population reveals that the relative abundance of black construction workers in the group of states that eventually would repeal their laws preceded those repeals and that this is mainly due to the characteristics of Southern labor markets. This and other research cast doubt on both the strength and the existence of such a correlation.     

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.     

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.     

Strategic behavior and the impact of unions on wage incentive plans

This paper analyzes optimal wage incentive plans in situations in which firms make capital investments and employees supply work effort. An efficient contract will take workers’ response into account in its design, leading to a competitive contract that takes the form of a lump sum penalty and full marginal rewards to workers, or equivalently, a base wage and a piece rate above a quota. A union optimizing worker welfare will alter this lump sum amount rather than attempt to control worker effort or the marginal rewards for additional output. The greater utilization of piece rate systems in capital-intensive industries is correctly predicted by the analysis.     

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.     

Recent minimum wage increases and the minimum wage labor force

Coclusion  Recently Whaples (1996) reported that most labor economists believe that minimum wage laws decrease employment. Despite this, policy makers have continued to periodically raise the minimum, with the most recent increases occurring in October 1996 and September 1997. The various analyses done by Card, Katz, and Krueger, that showed little to no employment effect of past minimum wage increases, have provided additional ammunition for those who would seek further increases. However, using the estimates of Williams and Mills (1998), we demonstrate that the latest minimum wage increases substantially decreased employment for both sexes. We believe that future increases will do likewise.     

The migratory impact of minimum wage legislation: Puerto Rico, 1970-1987

"This study examines the impact of minimum wage setting on labor migration. A multiple time series framework is applied to monthly data for Puerto Rico from 1970-1987. The results show that net emigration from Puerto Rico to the United States fell in response to significant changes in the manner in which minimum wage policy was conducted, particularly after 1974. The extent of commuter type labor migration between Puerto Rico and the United States is influenced by minimum wage policy, with potentially important consequences for human capital investment and long-term standards of living."