The Impact of [Governor Rauner’s] Local “Right-to Work” Zones: Predicting Outcomes for Workers, the Economy, and Tax Revenues in Illinois (from the Illinois Economic Policy Institute and the University of Illinois at Urbana-Champaign)

EXECUTIVE SUMMARY  

“Efforts to create local ‘right-to-work’ zones would have negative impacts on workers and the economy in Illinois. The preponderance of evidence finds that worker incomes are lower in economies with ‘right-to-work’ laws and that employment effects are minimal at best. 

“For instance, average worker wages are $2.90 per hour (13 percent) higher in Illinois than in ‘right-to-work’ Indiana, and Illinois added 14,000 more jobs in 2014. At the same time, the unemployment rate in eastern Illinois counties was lower than in ‘right-to-work’ counties across the Indiana border in December 2014.  

“The proposal for local ‘right-to-work’ zones is based on the assumption that high union density hampers local economies. An analysis of the 102 counties in Illinois, however, reveals that this presupposition is unfounded. 

“Higher county-level unionization rates within Illinois have no discernible impact on employment growth, establishment openings growth, and average household income growth. The evidence that unionization raises the unemployment rate in Illinois is also weak. The claim that ‘right-to-work’ is an effective way to put people to work is not supported by the evidence.  

“Incorporating estimates from previous policy research, economic impact analyses are performed to determine the effect of adopting local ‘right-to-work’ laws in half of Illinois’ counties, excluding Cook County. The models randomly select 51 counties to become ‘right-to-work’ zones and demonstrate the negative consequences of the proposal. If half of the state’s counties (excluding Cook County) became ‘right-to-work’ zones: 

• Total labor income would fall by $1.3 billion;

• The economy would shrink by $1.5 billion;

• State and local tax revenues would be reduced by $80 million;

• Labor unions would experience a loss of 200,000 members;

• Racial income inequality and gender income inequality would both increase; and

• The number of workplace injuries and fatalities would rise.  

“In the seven integrated county economies with over 100,000 workers in Illinois, predicted impacts are generally similar. If local ‘right-to-work’ zones were only passed in the Chicago six-county area, the regional economy would experience over 5,500 jobs lost and an economic contraction of $2.6 billion. 

“Both businesses and workers would relocate to other parts of the state with better incomes and higher consumer demand. Similarly, local ‘right-to-work’ laws would reduce total worker earnings by around $40 to $60 million in the Champaign-Urbana, Quad Cities, Rockford, and Springfield-Decatur regions. 

“Labor income would also be predicted to decline by $16 million in the Peoria-Bloomington community and by $104 million in the St. Louis region. Local ‘right-to-work’ zones would eradicate good middle-class jobs, replacing them with low-wage employment openings and redistributing income from labor to capital.  

“Ultimately, economic analysis reveals that local ‘right-to-work’ laws would reduce worker earnings and decrease state and local tax revenues…   

  

CONCLUSION

“Local ‘right-to-work’ zones would have overall negative impacts for Illinois workers. First, workers earn more in fair-share collective bargaining economies. The preponderance of evidence indicates that incomes are between 2 and 6 percent lower in ‘right-to-work’ states. Compared to their counterparts in Indiana, a neighboring ‘right-to-work’ state, Illinois workers earned 12.8 percent more in average hourly wages in 2014. 

“There is also no evidence that higher unionization rates are associated with slower income growth across Illinois. Moreover, if half of Illinois’ counties adopted ‘right-to-work’ regulations, total labor income in the economy would fall by $1.3 billion throughout the state.  

“Second, the impact of ‘right-to-work’ laws on employment outcomes is mixed. Previous estimates suggest a marginal 0.4 percentage point increase in jobs due to ‘right-to-work’ laws, but an effect of zero cannot conclusively be ruled out. 

“The unemployment rate in western counties in ‘right-to-work’ Indiana is higher than the unemployment rate in bordering eastern Illinois. Additionally, there is no evidence that a higher county-level union membership rate leads to smaller employment growth rate or establishment growth rate in Illinois counties. The predicted impact of 51 counties becoming ‘right-to-work’ zones in Illinois is a small 2,348-job increase in the state.  

  

“A definitive consequence of enacting local ‘right-to-work zones’ would be further erosion of Illinois’ middle class. Labor unions would be expected to experience a loss of 200,000 members if half of the state’s counties (excluding Cook County) became ‘right-to-work’ areas. 

“Since unions provide greater income benefits for nonwhite and female workers than for Caucasian males, this causal impact of ‘right-to-work’ would increase both racial income inequality and gender income inequality. 

“Good middle-class jobs would be replaced by low-wage openings in ‘right-to-work’ counties, and employee income would be transferred to wealthy employers. As result, total economic output in Illinois would fall by $1.5 billion and cash-strapped local governments would experience a revenue loss of $80 million.  

“Ultimately, economic analysis reveals that local ‘right-to-work’ laws would encourage free-riding, lower worker earnings, and reduce state and local tax revenues. The likely result would be a weaker Illinois economy. Improving the entire Illinois economy by increasing consumer demand, raising worker wages, and making investments in education and public infrastructure are better policy prescriptions with proven track records to help all counties in the state…”

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