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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.

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
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.

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