Last week, Indiana became the first state in a decade (and the first state in the Rust Belt) to adopt a right-to-work law. This means that Indiana's working men and women, like their comrades in 22 other states, will no longer have to pay mandatory dues to union bosses as a condition of employment. Big Labor was apoplectic, even threatening demonstrations at Sunday's Super Bowl in Indianapolis, although saner heads prevailed, averting a PR disaster for unions.
But regardless of how Big Labor feels, Indiana's law will go down in history as the watershed moment that decisively stemmed the awesome power it has exerted on American politics for about a century.
After months of histrionics by unions and Democratic legislators—who twice skipped town to prevent a quorum—the Indiana House a few weeks ago passed the bill with a largely party-line 54-44 vote. It sailed through the GOP-dominated Senate last week and Gov. Mitch Daniels signed it immediately. Daniels pulled a switcheroo, becoming a big right-to-work champion after years of foot-dragging. In doing so, he might have unleashed forces that Big Labor can't beat back.
The economic case for right-to-work laws has long been clear. Big Labor denies this, but manufacturers avoid union towns like the plague. Not a single foreign automaker has built a factory in Michigan, the auto capital of the world, whose highly trained auto work force—you'd think—would give it an unbeatable advantage. Daniels embraced the right-to-work cause when he couldn't get Volkswagen even to return his calls, because the company won't consider coming to a non-right-to-work state.
The upshot is that right-to-work states have done a far better job of growing their economies, providing jobs—especially in manufacturing—and attracting people. Between 2002 and 2009, every year except one, economic growth in these states was noticeably higher than in non-right-to-work states. Over the last decade, employment grew 2.3 percent in right-to-work states compared with a 4 percent decline in others. What's more, income growth in the right-to-work states was 17.5 percentage points higher. And Ohio State University economist Richard Vedder found that "without exception, a statistically significant positive relationship" exists between the presence of right-to-work laws and in-migration.
So why aren't states scrambling to embrace right-to-work laws? Four words: fear of Big Labor.
It took 10 years to win this battle in Indiana, even though unions are less potent there than in its neighboring states. Only 10.9 percent of Indiana's private-sector employees are unionized, compared with 16.5 percent in Michigan.
More importantly, Indiana doesn't allow recalls against lawmakers or referenda to repeal bills, making the fight for right-to-work much more winnable. That's not the case in most other states. Big Labor, for example, launched a recall campaign against Wisconsin Gov. Scott Walker after he implemented a right-to-work law for public-sector employees. And Big Labor deployed its enormous war chest—amassed through mandatory dues, obviously—in November on a ballot initiative that killed a similar law in Ohio.
This means that right-to-work advocates have to prepare not for just one but multiple battles in order to prevail. The uncertainty makes it hard to convince state GOP lawmakers, even when they control all chambers, to take up their cause. Indeed, the last time a right-to-work bill came up for a vote in Indiana, in 2005, 22 Republican House lawmakers voted against it.
Right-to-work activists could overcome such resistance—and short-circuit the process—by themselves putting a referendum before voters. But the problem there, notes Paul Kersey of the Michigan-based Mackinac Center for Public Policy, is that unless there is about 60 to 70 percent public support and considerable financial backing to withstand the $100 million or so advertising onslaught and a union-orchestrated get-out-the-vote drive, things could backfire badly. Not only would the ballot lose, but the cadres of pro-union voters who show up at the polls would cause losses in other GOP races. That's why the GOP establishment moves mountains to stop right-to-work initiatives.
So why will the Indiana victory break this logjam? Three reasons. First, unions are in a depleted state after fending off attacks in Indiana, Wisconsin, and Ohio. They may no longer be able to fight effectively on new fronts, especially if they lose the recall petition against Walker, which looks likely. His law is gaining popularity every day as public schools, for example, regain control over their budgets and teachers.
Second, anemic growth and state budgets saddled with public employee legacy costs have shifted opinion in a pro-right-to-work direction. In Michigan, the union epicenter, the issue has been drawing over 50 percent support for a while.
But, above all, Indiana will both intensify the competitive pressure on its neighbors and offer lessons that they can't ignore. So long as none of the Rust Belt states was right-to-work, they could all blame other factors for their manufacturing woes. With Indiana breaking ranks, this is a less viable political sell. A highly regarded 1998 study by Thomas Holmes of the Federal Reserve Bank of Minneapolis found that manufacturing employment as a percentage of county population increased by a third in right-to-work counties compared to bordering non-right-to-work ones. If Indiana becomes an attractive destination for manufacturers in the Midwest, its neighbors can hardly sit on their derrieres and watch.
None of this will happen overnight. Right-to-work states are not even in the majority today. But a decade hence, things might look dramatically different.
Shikha Dalmia is a Reason Foundation senior analyst and a columnist for The Daily, where this column originally appeared.