Is "Right-to-Work" Relevant When Considering Relocation and Expansion Projects?
Declining levels of unionization may have been responsible for the right-to work factor receiving a middling ranking from the respondents to Area Development's 2007 Corporate Survey.
Dave Claborn , Director of Development and Community Relations, Ohio State University, Marion (Jun/Jul 08)

In the site selection process, how important is a state's right-to-work (RTW) status? In large measure, that depends on who's answering the question. Respondents to Area Development's 2007 Corporate Survey ranked right-to-work state fourteenth among 24 site selection factors, which was well below factors like highway accessibility (1) or energy availability and costs (3). It should be noted, however, that labor costs ranked second, availability of skilled labor ranked fourth, and low union profile was twelfth on the list of important criteria, which indicates companies consider labor issues, in all of their manifestations - cost, availability, attitude, unionization, training - critical to their location decisions.

Right-to-work statutes first appeared in the U.S. following World War II as industrialization and unionization grew. RTW legislation, whether passed by legislatures or through state constitutional amendments, essentially provides that individuals cannot be compelled to join a union or pay its dues, even if a union is certified at their place of employment. The tenet behind RTW legislation is that individuals have a basic need and right to work that cannot be abridged by compelling union membership. Unions argue that, once winning the right to represent a particular group of employees or bargaining unit, all of those employees should pay the union's dues in order to benefit from the union's negotiation of salaries, work rules, and grievance procedures.

Corporate Survey 2007
Combined Ratings* of 2007 F actors
Site Selection Factors                   2007
Ranking
1. Highway accessibility 96.9
2. Labor costs 92.3
3. Energy availability and costs 89.0
4. Availability of skilled labor 88.7
5. Occupancy or construction costs 88.2
6. Available land 85.4
7. Corporate tax rate 83.8
8. State and local incentives 83.4
9. Environmental regulations 83.2
10. Tax Exemptions 82.8
10T. Proximity to major markets 82.8
11. Availability of advanced ICT services 82.2
12. Low union profile 80.6
13. Availability of buildings 79.3
14. Right-to-work state 72.1
15. Proximity to suppliers 71.8
16. Expedited or "fast-track" permitting 71.51
*All figures are percentages and are the total of "very important" and "important" ratings of the Area Development Corporate Survey and are rounded to the nearest tenth of a percent.
Companies' Viewpoint
Of the site consultants interviewed, all agreed that RTW status is given considerable weight by their clients. For example, John Warden, a senior vice president for The Walker Companies in Atlanta, says, "Unionization and right-to-work status are issues for every client we represent. It's always something they're concerned about. We do see companies reject states that are not right-to-work." However, he says, he tries to discourage such out-of-hand rejections in favor of reviewing all states on a variety of location factors. Factors such as access to markets, infrastructure, energy costs, and others may be of much more importance in a given company's site selection matrix.

Mark Sweeney, senior principal at McCallum Sweeney Consulting in Greenville, S.C., agrees: "Our clients almost all have a sensitivity to labor-management considerations." Sweeney asks his clients not to make RTW status a first-cut factor, but to score it with an area's overall labor evaluation. "Right-to-work should be scored as a noteworthy advantage for locations, not as a pass-fail litmus test." He notes, however, "The primary factor in whether a company will have a union issue is local management - how well a company is managed and how well its management communicates with employees."

Nucor Steel, the North Carolina-based Fortune 500 steel manufacturer, operates 53 nonunion plants across the United States in both RTW and non-RTW states. Nucor's Vice President of Human Resources Jim Coblin says, "Right-to-work is very important to us, especially when we go to build a plant. Given the choice, we prefer right-to-work because it allows much more freedom for our employees." How does Nucor remain nonunion across its many locations? Coblin credits the company's wage and benefits plan and ability to keep people employed even in a slow economy. "In most good years, our employees earn more than they would in union plants," he says. "Through our flexibility, we can provide job security even in a cyclic business."

How the States Feel About RTW
Twenty-two of the 50 states have adopted RTW legislation, often after legal battles with the AFL-CIO. Oklahoma was the latest. Oklahoma residents passed a constitutional amendment in September of 2001, but the legal wrangling wasn't over and the amendment didn't take effect until 2003. "We thought it would help us attract more jobs," says Debra Lea, senior research analyst for the Oklahoma Department of Commerce. So has it? "It's hard to measure," she says, given the many other factors that can affect new project development, such as the ups and downs of the national and global economies. Nevertheless, on its website, the state prominently advertises the fact that it has joined most other Southern states in adopting RTW provisions.

A May 2007 fact sheet issued by the pro-RTW National Institute for Labor Relations Research quotes U.S. Department of Commerce statistics indicating that between 2003 - when Oklahoma's RTW amendment took effect - and 2006, real personal income in Oklahoma grew by 13.6 percent, half again faster than the national average and over twice as fast as in the 28 non-RTW states. The National Right-to-Work Committee publishes a compilation of U.S. Bureau of Labor Statistics data showing growth in private-sector employment in RTW states (+17.7 percent) twice that of non-RTW states (+8.6 percent) between 1997 and 2007.

Mark Mix, the president of the National Right-to-Work Committee is quick to point out that right-to-work doesn't mean nonunion. In fact, he says, there are RTW states that have higher union densities than some non-RTW states. "We're not opposed to unions," he says. "We just think employees should have the freedom to choose whether or not to belong to one."

Leading consultants agree that although companies are cognizant of the right-to-work status of the various states that they are considering, RTW status alone does not assure them maintaining nonunion operations. In today's global economy, companies are seeking qualified, dependable, and trainable work forces - be they unionized or not. In fact, many foreign-based companies that are coming to the United States have dealt with unions in their respective countries for years, and, for the most part, they like what that they are seeing in the quality and work ethic of the U.S. labor force.


RTW's Effect on Wages
There is disagreement over the effect on wages in RTW states versus non-RTW states. In an article for the labor-backed Economic Policy Institute, Lawrence Mishel argues that there is an average wage reduction of 6.5 percent for employees in RTW states versus those in non-RTW states. But others see both an increase in unionization in RTW states and a trend toward higher wages in those states as well. Why? As more advanced technology industries have moved to Southern right-to-work states in particular, more training and higher skill sets have been required. This has put pressure on the pool of qualified workers, which, in turn, puts pressure on wage scales in order to attract and keep those qualified employees.

Some non-RTW states (Ohio and Kentucky among them) have argued that RTW status may trigger the unintended consequence of more companies being organized. They reason that an employee may be more likely to vote for union representation, knowing that he or she won't be required to actually join the union or pay dues, but might still benefit from the union's bargaining on wages and other issues. Actual evidence for or against this hypothesis is scant.

Corporate Survey 2007
Combined Ratings* of 2007 F actors
Site Selection Factors                   2007
Ranking
1. Highway accessibility 96.9
2. Labor costs 92.3
3. Energy availability and costs 89.0
4. Availability of skilled labor 88.7
5. Occupancy or construction costs 88.2
6. Available land 85.4
7. Corporate tax rate 83.8
8. State and local incentives 83.4
9. Environmental regulations 83.2
10. Tax Exemptions 82.8
10T. Proximity to major markets 82.8
11. Availability of advanced ICT services 82.2
12. Low union profile 80.6
13. Availability of buildings 79.3
14. Right-to-work state 72.1
15. Proximity to suppliers 71.8
16. Expedited or "fast-track" permitting 71.51
*All figures are percentages and are the total of "very important" and "important" ratings of the Area Development Corporate Survey and are rounded to the nearest tenth of a percent.
An examination of the State Union Density Database, compiled by Barry Hirsch of Georgia State University and David Macpherson of Florida State University from the U.S. Census Bureau's Current Population Survey, reveals that non-RTW states, on average, had about twice the level of union membership as RTW states in 2007 (16 percent vs. 8.1 percent). But there are some notable exceptions. For example, Nevada, a RTW state, has a 17.7 percent union density, which is higher than all but seven of the non-RTW states. Iowa at 13.2 percent and Alabama at 10.7 percent also have relatively high union densities among the RTW states.

Declining Unionization
Union density for all states has been declining steadily for at least the last three to four decades. In 1977, the average for all states was 26.9 percent union density. Last year (2007), it had been cut in half to 13.4 percent. Which begs the question, does right-to-work matter anymore? Glenn MacDonald, the John M. Olin Distinguished Professor of Economics and Strategy at Washington University in St. Louis, thinks RTW status is of diminishing importance. "It was more important when unions were more important. Now they're practically gone, so I think it's doesn't have nearly the influence it used to have."

A look at the map of RTW and non-RTW states finds non-RTW states clustered in the Northeast, Upper Midwest, and West Coast regions. RTW states are in the South and West. Professor MacDonald and the site consultants say that geographic arrangement is no accident. In the more heavily industrialized states of the Northeast and Midwest, says Professor MacDonald, unions have a longer history and have supported political candidates backing their agendas over the years. John Warden with The Walker Companies notes the South was slow to industrialize, and thus to unionize. It was the South's long rural tradition, he surmises, that produced an independent, self-sufficient work force "living by their own wits and just not interested in having a third party introduced" into the relationship between workers and employers, he explains.

Right-to-work efforts continue in a number of states that have not yet adopted the concept; among them are Michigan, Ohio, Kentucky, and Missouri. However, if the present trend of declining unionization continues, the debate over right-to-work will likely become less relevant to companies examining sites for relocation and expansion projects. More relevant, perhaps, will be whether workers are well-educated, trained, affordable, and available.

Dave Claborn was recently named vice president of marketing and communications for The Missouri Partnership, a new statewide-Missouri economic development organization based in St. Louis. Prior to that, he was president of Marion CAN DO, the economic development agency for the city and county of Marion, Ohio. He spent three years with the Ohio Department of Development following a 20-year career in radio news, primarily with WTVN Radio, Columbus, where he was news director. He can be reached at 314-954-0560.

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