Eric Fruits
Right-to-work legislation is one of the very few pro-growth policies that is virtually costless to enact. And a large body of research has found that it benefits states economically.
New Mexico, along with much of the country, still struggles to recover from a recession that began more than four years ago. While the state has benefited from the recent energy boom, states like New Mexico have struggled to cope with the employment consequences of the recession. In response, policymakers have tended to focus on fiscal policies such as tax cuts and “stimulus spending” rather than market structural solutions.
Right-to-work laws can be a key component of a pro-investment and pro-employment package for New Mexico that encourages firms to locate and expand in the state. A large body of research has found that, as a group, right-to-work states have enjoyed more rapid employment growth, better job preservation and faster recoveries from recession that states without right-to-work laws in place.
New Mexico has recognized this when the Legislature passed right-to-work legislation twice – in 1979 and 1981 – only to see the legislation vetoed by then-Gov. Bruce King.
Proponents of right-to-work legislation argue that individuals should have the choice of whether or not to join a union and that the choice of whether to join a union should not be a condition of employment. They point to the relatively rapid growth in employment and incomes in right-to-work states relative to non-right-to-work states.
On the other hand, opponents of right-to-work legislation argue that union collective bargaining benefits all employees – without compulsory union membership, employees have incentives to “free ride” on the benefits of collective bargaining without contributing to the costs associated with such bargaining. They suggest that the potential job gains from right-to-work are virtually non-existent.
In fact, right-to-work supporters are correct. The legislation would give New Mexico a permanent structural advantage in attracting employers and employment to the state.
Study breaks new ground
A recently released study from Rio Grande Foundation quantifies the impacts and potential impacts of right-to-work legislation on employment and income growth in New Mexico, using data from each of the 50 states and spanning a time period covering almost 60 years. The study finds that if right-to-work legislation goes into effect next year, then by 2020, New Mexico would have 42,300 more people working than if it maintains the status quo. In addition, the state’s personal income would be nearly $5 billion higher and wage and salary income would be $2.2 billion higher.
The study has broken new ground. It covers a very long time period, every state, and relies on what is believed to be the largest datasets ever employed to study the impacts of right-to-work laws. The results demonstrate more than just a correlation between right-to-work policy and economic growth, but point toward a causal link. In other words, this research demonstrates that the right to work actually contributes to more employment, higher incomes and faster economic growth. It is therefore a policy from which New Mexico will permanently benefit.
Unlike fiscal policies that must weigh spending against taxes or pit one government program against another, enacting right-to-work legislation will not take a single dime out of state coffers. Indeed, right-to-work legislation is one of the very few pro-growth policies that is virtually costless to enact.
Even if this research had not so clearly shown that New Mexico’s economic prospects would improve as a right-to-work state, we would still support a right-to-work policy based on the non-economic benefits that the name itself implies.
It is unconscionable that a job-seeker in can be denied the opportunity to make a living simply because he or she declines to join a union. Thus, even basic principles of liberty and the pursuit of happiness demand that New Mexico assert employees’ and job-seekers’ right to work.
Eric Fruits, Ph.D., is president and chief economist at Economics International Corp., an economics consulting firm, and an adjunct scholar with the Rio Grande Foundation. His economic analysis has been widely cited and has been published in The Economist, the Wall Street Journal and USA Today.