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The Effect of Right To Work Laws

Ari Goldfarb is communications director with Buffalo-based Goldfarb Financial, and published novelist whose works include Just Under the Sky. His series with Buffalo Rising comments on the intersection between finance, economics and pop culture.

Keeping in line with middle class content—let’s discuss labor unions; this can be a rather polarizing topic. Some people demonize unions and view them as obstructionist forces; it is not difficult to find critics of Rumore and the Buffalo teacher’s union. Back in 2012 The Atlantic covered a story about Buffalo school teachers costing the city $5.2 million in plastic surgery fees[1]. Four years later, in January 2016, the Union unanimously rejected a salary increase of 10% annually, citing “Buffalo teachers are $20,000 behind their colleagues in other districts, which is a $600,000 loss in lifetime earnings and a $10,000 a year loss in retirement benefits.”[2] The comment sections of articles about the union are often littered with individuals using colorful synonyms for “obstructionists”.

But is it fair to demonize the Unions as a whole, when historically the effects of unions have been beneficial for the country? 50 years ago, a time many consider a golden age for the American economy, over 30% of the country’s workers were union members.[3] Throughout the late 1950s, and most of the 1960s, inflation was stable, corporate profits were at an all time high, and unemployment was under 6%;[4] since the great recession of 2008 our highest annual GDP has been 4.56%; throughout the 1960’s our GDP was less than that only once.

Our economy has changed since the ‘50s and ‘60s—there has been a decline in vocational school attendance as our middle class’ skill sets have shifted[5]; currently only two of the top ten wealthiest Americans earned their wealth in a traditional sector (the Koch brothers), while six earned their billions from technology and two by creating diverse brands.[6] So, since the economy structure has changed, are Unions still necessary?

This leads to my main point—Right to Work Laws (RTW). RTW laws are currently active in 25 states (26 states on July 1st.). This law grants an individual the right to decline membership to a union, and not pay dues: “A Right to Work law secures the right of employees to decide for themselves whether or not to join or financially support a union.”[7] This sounds innocent, however under the National Labor Relations Act (NLRA), mandatory union membership is already outlawed; furthermore, Pattern Makers v NLRB confirmed in 1985 that full Union Membership is not required. So why are RTW laws expanding throughout the country?

What the EPI claims is dangerous about RTW laws is they “entitle employees to the benefits of a union contract—including the right to have the union take up their grievance if their employer abuses them—without paying any of the cost.”[8] In other words, employees who are not a part of the union and do not pay dues, are still fiscally protected by the Union under the same collected bargaining agreement. Dues are the life source of unions, so membership has declined in Right to Work States because the unions cannot afford to be active. Michigan has historically had high union membership rates. It became the 24th RTW state in 2013 and lost 7.6% Union membership the following year.[9]

The national average for union membership is 11.1%. In 2015 there were 14.8million salary and wage workers in Unions. However, according to the Bureau of Labor statistics, 30 states and the District of Columbia have participation below the national average.[10] In 2015, the five lowest Union memberships were all RTW states (South Carolina, North Carolina, Utah, Georgia, and Texas—the highest among them Texas at 4.5%.) These five states also have five of the lowest wages in the country. Georgia has a state minimum wage below the federal limit; employees not covered by the Fair Labor Standards Act can legally earn an hourly wage of $5.15.[11] Also among these five states only Utah and Texas had a higher household median income than the National average (Texas was less than $250 more than the national average– $53,875 vs $53,657.)

The two most unionized states, Hawaii and New York, have higher minimum wages than the federal requirements, and higher median household incomes.[12] Full time salary workers in unions earned on average over $200 more per week than non-union members.[13] This is a trend among all union states— in 2011, Elise Gould and Heidi Shierholz estimated wages in RTW states “are 3.2% lower” than Union states.[14] Economist Robert Reich claimed on his Facebook page average annual incomes in RTW states are 12.2% less per year than Union States.[15] RTW state employees also receive lower pensions—“4.8 percentage points lower”[16] and worse health care. The National Education Association reports 18.6% of people in RTW states do not have insurance.[17] The NEA used Census Bureau data to confirm these statistics, adding that 11 of the top 15 highest uninsured rate states are RTW states. If interested the entire Census Bureau report can be found on this PDF: https://www.census.gov/prod/2013pubs/p60-245.pdf

Ideally, we would work in a country where Unions are not necessary. There are a large number of employers who give their staff a voice without a Union, and often times these companies thrive. But citing successful employers as a reason why we do not need Unions is a synecdoche—much like claiming all unions are dysfunctional and only citing a few. When one looks at the whole picture, the need for Unions in certain scenarios becomes clear.


[1] http://www.theatlantic.com/business/archive/2012/01/why-does-buffalo-pay-for-its-teachers-to-have-plastic-surgery/251533/

[2] http://www.buffalonews.com/city-region/buffalo-teachers-union-rejects-school-boards-offer-of-10-percent-raise-20160129

[3] http://www.npr.org/sections/money/2015/02/23/385843576/50-years-of-shrinking-union-membership-in-one-map

[4] http://elcoushistory.tripod.com/economics1960.html

[5] http://blogs.edweek.org/edweek/top_performers/2012/01/the_death_of_vocational_education_and_the_demise_of_the_american_middle_class.html

[6] http://www.forbes.com/billionaires/list/#version:static_header:country_country:United%20States

[7] http://www.nrtw.org/rtws.htm

[8] http://www.epi.org/publication/right-to-work-states-have-lower-wages/

[9] http://www.freep.com/story/money/business/columnists/2015/01/23/union-membership-michigan-right-work-fall-state/22219305/

[10] http://www.bls.gov/news.release/union2.nr0.htm

[11] http://www.ncsl.org/research/labor-and-employment/state-minimum-wage-chart.aspx

[12] http://www.advisorperspectives.com/dshort/updates/Household-Incomes-by-State.php

[13] http://www.bls.gov/news.release/union2.nr0.htm

[14] http://www.epi.org/publication/bp299/

[15] https://www.facebook.com/RBReich/?fref=ts

[16] http://www.epi.org/publication/bp299/

[17] http://www.nea.org/home/52880.htm


Ari Goldfarb is not affiliated with Raymond James. Views expressed are the opinions of Ari Goldfarb and the Financial Advisors at Goldfarb Financial and not necessarily those of Raymond James. Goldfarb Financial is an independent firm. Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Goldfarb Financial, 295 Main St Suite 914, Buffalo, NY 14203 716-842-0145

This article is courtesy of Goldfarb Financial www.goldfarbfinancial.com, a Buffalo boutique independent financial firm

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