Right-to-Work States Have Higher Incomes

February 5, 2013

Adjusted for cost-of-living, workers in right-to-work states have higher incomes than workers in non-right-to-work states. After adjusting for per-capita personal income (PCPI) -- a measure of a state's wealth -- the larger paychecks in non-right-to-work states have an equal amount of purchasing power as states with the union-limiting laws, says James M. Hohman, assistant director of fiscal policy at the Mackinac Center for Public Policy.

Hohman compares Michigan, a new right-to-work state, with Connecticut, a non-right-to-work state, and finds that prices for consumer goods are higher in Connecticut. Connecticut also levies more sales and gas taxes and the cost of the average home in Connecticut is three times as much as in Michigan. This means that a dollar in Michigan gets an individual a lot further than a dollar in Connecticut.

Right-to-work states have 4.1 percent higher PCPIs than non-right-to-work states.
After adjusting for cost-of-living, Wyoming becomes the second-wealthiest state and Texas, Virginia and Florida enter the top 10.
Only three right-to-work states, Mississippi, Utah and Idaho, were in the bottom of the cost-of-living adjusted list.

Hohman notes that many right-to-work states have lower incomes than non-right-to-work states and vice versa. PCPI in right-to-work states only overtook non-right-to-work states in 2003, which explains why many people are not aware of this discrepancy.

Right-to-work states have added 1.7 million jobs to their payrolls since 2001.
During the same time, non-right-to-work states lost 2.1 million jobs from their payrolls.
The unemployment rate in right-to-work states is a full 1 percent lower than in non-right-to-work states over the past decade, despite harsh economic conditions.
Right-to-work states also attract more workers from non-right-to-work states. Over the past two years 400,000 people moved to right-to-work states.

If workers in right-to-work states earn higher incomes when adjusted for costs-of-living and enjoy lower unemployment rates, workers in non-right-to-work states may continue to flock to opportunity.

Source: James Hohman, "Right-to-Work States Have Higher Incomes," Mackinac Center for Public Policy, January 25, 2013.