Why Michigan May Become a Right-to-Work State

The defeat of Proposal 2 in Michigan might have unleashed forces that the unions can't hold back.

Unions went for broke in Michigan and they lost big time. But the question now is that will this defeat open the right-to-work floodgates?

Michigan voters soundly defeated Prop 2—a.k.a. the Protect Our Jobs initiative—a constitutional amendment that would have given

public-sector unions a potent tool to challenge any law—past, present, or future—limiting their benefits and powers. It would also have permanently barred Michigan from becoming a right-to-work state where payment of dues is no longer required as a condition of employment in unionized companies.

Although both sides raised a whopping $20-plus million for their campaigns, ultimately the proposal lost by a wide margin because of opposition across the political spectrum. Both the Detroit News and the Detroit Free Press, the state's flagship conservative and liberal papers respectively, counseled a "no" vote. The Free Press, usually an ardent supporter of collective-bargaining rights, concluded: "Michigan just can't afford those kinds of limitations in an era when debt from pension and health obligations to current and retired employees are pushing many local governments to the brink of insolvency."

All of this would have rung the death knell for the last two years of fiscal reforms by Gov. Rick Snyder, a moderate Republican, paving the way for future tax increases on individuals and businesses. The Mackinac Center for Public Policy estimated that the proposal would cost state taxpayers $1.6 billion annually as it gutted recent laws requiring public employees to pick up 20 percent of their health care costs and school employees to move to a defined contribution pension program, among other things.

This would have been economically devastating for Michigan, which went into a recession several years before the rest of the country—and is only now beginning to post a slow recovery. Its unemployment is still about a point above the national average.

The unions may wish they had never overplayed their hand in this battle, which they lost even though President Obama carried the state handily, thanks to a high turnout of his base. They were field-testing a strategy to take back existing right-to-work states that allow legislative action through ballot referendums.

If anything, however, they hurt their cause. Ever since Indiana became the first right-to-work state in the Rust Belt earlier this year—and 23rd in the country—Gov. Snyder has been under tremendous pressure from his party to push a right-to-work law in Michigan as well. Snyder resisted because he wanted to concentrate on tax and regulatory changes and avoid a distracting fight with unions.

But conservative lawmakers are already interpreting the resounding defeat for the ballot proposition as essentially a mandate for a right-to-work law in the state and are calling for one before the end of the year—not an impossible feat since they managed to hang on to their control of the legislature and the Supreme Court. Moreover, unions are in a weakened state after their defeats in Indiana and the Scott Walker recall battle in Wisconsin. "It should be sooner rather than later," Senate Finance Committee chairman Jack Brandenburg of Harrison Township insists. "Proposal 2 was defeated badly and we've been very patient with the unions. I think we have the votes to get it done."

Snyder is still clinging to his old position that he would sign such a bill if it comes to his desk but won't push it. Now, however, there is a chance that Republican lawmakers might actually test him, especially since the economic case for such a law is just as compelling as the political moment is propitious.

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.

What's more, high labor costs and an inflexible workforce are the biggest obstacle deterring manufacturers from setting up shop in Michigan, depressing employment. If Michigan had been a right-to-work state, according to research by economist Hari Singh of Grand Valley State University, the auto industry, for example, would have seen a 25 percent gain in jobs since 1965. Instead, it lost 56.6 percent just from 2002 to 2009, shrinking its work force by 165,777.

Even before the collective-bargaining measure, polls showed that 50 to 60 percent of Michigan residents supported a right-to-work law. That number will no doubt be even higher now. If Michigan, a union stronghold, goes that route, it will become difficult for non-right-to-work states to resist and remain competitive.

Unions might yet rue the day they forced their hand in Michigan.

A version of this column originally appeared in Bloomberg View.