Firms Prefer to Locate on the Right-to-Work Side of a State Border

A blog about business and economics.
Dec. 12 2012 5:23 PM

Firms Prefer to Locate on the Right-to-Work Side of a State Border

The experience of American history since 1947 suggests that a country can in fact endure half "right-to-work" and half "unions can bargain for whatever terms they can get employers to agree to" but there is reason to believe that ultimately one model or the other has to prevail. Matthew Kahn and Erin Mansur, for example, have pretty compelling research showing that when you look at the boundary between two states with different rules in this regard that firms tend to cluster jobs on the union-hostile side of the border.

So the fact that Michigan has gone right-to-work is not moral encouragement to the Wisconsin and Ohio Republican parties to do likewise, it strengthens the case on the merits for anti-union action. If there were no right-to-work states, no state could systematically lose out on job opportunities as a result of having stronger labor unions. The only question would be whether the unions create some kind of systematic labor market rigidity. But in the actual divided United States of America, even if there are no such rigidities the mere fact that capital prefers to flow to jurisdictions with more capital-friendly policies means that such policies tend to take on their own momentum.

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The flipside is that with labor unions more and more concentrated in the public sector, I'm not sure this is nearly as big a deal in practice as it might be in theory. Obviously a public school or a fire department or a DMV isn't going to move across state lines to take advantage of the cheap labor.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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