The long-running battle over “right-to-work” (RTW)legislation reappeared recently in Indiana. The Indiana Chamber of Commerce, in a recent report, contends that the growth of realpersonal income in RTW states has been higher thanin non-RTW states. Their argument is thatRTW laws lead to lower wages in RTW states, which attracts businesses to locate in those states. The increased business presence leads to higher income growth, which in turn leads – in the longrun – to higher productivity and higher wages in the state.
We find the Chamber’s arguments unpersuasive. Obviously there are businesses that are attracted to low-wage areas, but in our current global economy it is a risky strategy for a state to think it can compete with workers in developing countries who are paid much less. Moreover, many companies reject the “low-road” approach of low wages and make location decisions on other criteria, like the quality of the work force, infrastructure, and quality of life. Read more