The unions and those opposed to right-to-work laws generally are fond of claiming that incomes in right-to-work states are lower. Thus, they claim that right to work laws make people poorer.
They’re right if you just look at the numbers superficially. Incomes tend to be lower in right to work states. The problem is that doesn’t tell us the whole story, because the cost of living is a lot lower in right-to-work states too:
Scores of right-to-work critics ranging from politicians to economists have cited lower per-capita incomes in right-to-work states as why the new law is not good for Michigan.
However, not factoring in cost-of-living exposes a flaw in that analysis, said Mackinac Center for Public Policy Fiscal Analyst James Hohman. Once that is considered, Hohman said the per-capita income is higher in right-to-work states than non-right-to-work states.
For example, Texas per-capita income was $37,098 but would have a purchasing power of $49,700 in the state of New York in 2007, according to Hohman’s analysis. New York’s per-capita income was $47,852.
Hohman found that in terms of Michigan dollars in 2000, right-to-work states had 4.1 percent higher per-capita personal incomes than non-right-to-work states when factoring in cost of living. Michigan was considered a non-right-to-work state because the law was passed in late December 2012. Hohman said the right-work-states didn’t surpass non-right-to-work states until 2003.
“One of the most basic arguments repeated time and time again by right-to-work opposition is that Michigan is going to lose income by passing this law,” Hohman said. “That just isn’t the case. When you adjust for what a dollar can get you, the difference reverses itself.”
This makes sense. Obviously in states where labor costs more, the price of goods and services produced by that labor are going to cost more as well.
Which is an indictment of all the government schemes to drive up wages up to and including the minimum wage. Inflating the cost of labor doesn’t help. It just makes the cost of living more expensive while simultaneously making business harder.