Will Michigan’s Right-to-Work Law Mean Larger Declines in Union Membership?

Michigan is about to become the 24^th state with a “right-to-work” law.  A “right-to-work” law makes union dues voluntary by prohibiting closed union shops in the private sector.  In a closed shop workers represented by a union are compelled to pay union dues.  Once the law is signed in Michigan, workers represented by new collective bargaining agreements are free to decline paying union dues.   The Michigan law would make existing union-employer agreements exempt from the prohibition on closed shops.  An argument in favor of the Michigan law is that companies considering alternate locations for a new plant, factory or facility will face the same right-to-work environment in Michigan as in southern and western states.  For those who believe that states in the industrial Mideast have lost jobs in capital-intensive industries because of differences in labor laws, this law makes Michigan more competitive.  It is also notable that Indiana, the most manufacturing state in the country, enacted a right-to-work law in 2012.

It is surprising that Michigan has enacted a right-to-work law because from 2010-2012 it had the fourth highest union membership rate in the country behind Nevada, New York and Alaska.  Nevada is the right-to-work state with the highest union membership rate.  Nevada, Michigan and Indiana are the only right-to-work states with private sector union membership rates above the national average of 6.9%.  About 45% of total U.S. employment will now be in right-to-work states, where the average private sector union membership rate is 4.4%, less than half of the union membership rate of 8.9% in the other 26 states.

The following chart shows the uphill battle that private sector unions are likely to face at the ballot box in the years ahead.  Workers under the age of 35, who are becoming a more important force in elections, have not been members of private sector unions and therefore may be less likely to oppose right-to-work legislation.  Fewer than 3% of workers under the age of 35 in right-to-work states are union members.  Fewer than 6% of workers under 35 are union members even in states without right-to-work laws.

Given the age gap in union membership, it should not be surprising if right-to-work laws are considered by legislatures in other states.  Politicians in states competing for new businesses and jobs will continue to make the argument that jobs are being lost overseas and to states where unions are less of a force.  As long as job creation is a primary concern legislatures will consider laws that will weaken the strength of private sector unions.

Vanishing Private Sector Unions

Yesterday Indiana Governor Mitch Daniels signed the law making Indiana the only right-to-work state in the Rust Belt.  Earlier this week pollster Scott Rasmussen reported that 74% of voters favor right-to-work laws that would eliminate mandatory dues and make it much more difficult for unions to organize.  Public employee unions are also being challenged.  In November Ohio voters rejected a law that restricted the collective bargaining rights of public sector unions, and Wisconsin Governor Scott Walker is facing a possible recall after signing a similar bill in Wisconsin.

Voters’ sentiments seem to reflect their labor market experiences.   Private sector unions are vanishing, which will erode support for laws and regulations that strengthen or preserve their bargaining power.  On the other hand membership has never been higher in public sector unions.  I expect well-organized opposition to bills such as the one introduced in Arizona, which limits the collective bargaining power of public sector unions.

The latest Labor Department data indicate that union members comprise only 6.9% of the private sector workforce.  Private sector union membership rates peaked in the 1940s and 1950s at about 1/3 of the workforce.  Unions were virtually nonexistent until the 1960s.  Today the situation has reversed and there are more union members in government than in the private sector.

Union members are older than non-union workers.  In the private sector there are about the same number of non-union workers under the age of 30 and age 55 and above.  Among union members there are 2.5 workers age 55 and above for each worker under 30.  The following figure illustrates private sector union membership rates for four different age cohorts.  The only age group that ever experienced membership rates in excess of 20% includes workers who are now age 55 and above.  Younger age cohorts have seen stable membership rates of 10% or less.  If these trends continue no more than 5% of the Millennial Generation will ever be (private sector) union members.

The aging of the private sector union workforce means that the issues that matter to Richard Trumka, and the AFL-CIO, are unlikely to energize younger voters.  Voters who never belonged to a union show little interest in recess appointments to the National Labor Relations Board, NLRB rules changes that give unions an organizing advantage, the NLRB’s opposition to Boeing’s plans to shift production from Washington to South Carolina, or Indiana’s right-to-work law.  In an earlier era when the AFL-CIO had more political clout, these issues would have been pivotal in an election year.

Local government employees, such as teachers, sanitation workers, police and firemen, have the highest union membership rates that we have ever seen in any sector of the economy in U.S. history (43%).  The battleground for the labor movement has shifted to laws that limit the collective bargaining rights of unions representing government workers, as in Arizona, Ohio and Wisconsin.  These laws have gained support as local governments have been squeezed by declining property values and tax bases and increasing costs of health care benefits and pensions.  The result of the efforts to recall Governor Scott Walker will foreshadow whether public sector unions can maintain their bargaining power and political clout.