Wisconsin Assembly passes 'right to work': A blow to income equality nationwide?

[Update: On Friday, Wisconsin's State Assembly approved legislation preventing unions from requiring workers to pay dues.]

With a pending vote by the state legislature, Wisconsin is poised to become the nation’s 25th “right to work” state, in which labor unions can’t impose fees on private-sector workers who don’t want to join.

The move has stirred deep controversy in a state that has a long history of support for organized labor, even as Republican backers of the shift say it’s about making the state’s economy stronger.

The legislation, which is expected to be approved by the state’s Assembly on Friday, after Senate passage last week, has implications beyond the Badger State.

For one thing, how it’s perceived could affect Gov. Scott Walker’s prospects in the 2016 presidential race, where he currently has risen to the top of the list of Republican hopefuls, alongside former Florida Gov. Jeb Bush. Governor Walker has pledged to sign the measure.

More broadly, the nation’s overall climate for labor unions is in play. Wisconsin would join Michigan and Indiana in a trio of Midwestern states serving as test cases for what happens to local economies under right to work (RTW). The nation is at a potential tipping point, with about half the states on each side of the labor-law issue.

So far, most RTW states are in the South, the Plains, or the Mountain West, so this really is a new thing for factory-oriented states with union traditions. If residents end up accepting or embracing the change, Wisconsin and its neighbors could pave the way for more states to follow.

The battle over union power could affect whether and how the nation grapples with widening inequality of incomes. The decline of unions in recent decades has coincided with a growing income gap between high-income Americans and the middle- or working class. Some economists say that’s no coincidence, and that union power should be strengthened rather than undercut.

“Look, there are no perfect institutions in America, and unions are no exception,” economist Jared Bernstein of the liberal Center on Budget and Policy Priorities opined in a recent online column. “But they exist for a critically important reason: to balance out the inherent power of employers over workers and, thus, to enforce a more equitable distribution of the fruits of growth."

Economists don’t all agree, of course.

But both political parties are feeling pressure to find a policy response to the persistent trend of inequality and an “opportunity gap” based on social class. On the Republican side, Mr. Bush, for example, has espoused the need to revive social mobility (under the slogan “right to rise”). Count on the issue being an important one in the 2016 general election campaign.

The role that unions play in the economy is a matter of sharp debate among economists and the general public alike.

Although a majority of Americans in a 2014 Gallup poll said they approve of labor unions, only 35 percent said they would like to see unions have more influence in the United States than they have today. Others said they’d like unions to have the same or less influence as today.

The poll also found Americans broadly supportive of RTW laws, with 71 percent voicing approval.

Under RTW, unions can still function and potentially organize new workplaces, but it’s financially harder because of workers’ freedom to opt out of fees that would help cover bargaining costs.

Supporters of RTW say the laws free workers from forced participation, while union advocates say RTW creates a “free rider” problem – workers who enjoy higher pay and benefits because of unions at their workplaces, but don’t help pay for those benefits.

For his part, Walker has had complicated views on RTW. A fact-checking article by Tom Kertscher of The Milwaukee Journal Sentinel concluded that he deserved a “full flop” rating for changing his position on whether the state’s law should be changed in 2015.

Although he had long supported RTW in general, Walker made specific statements during his reelection campaign last fall saying that it is “not something that's part of my agenda,” and that he did not expect the legislature to act on the issue. Now, as state lawmakers are moving the bill, he’s pledging to sign it.

Walker is already known for acting to reduce the bargaining power of many of the state’s public-sector unions, saying the step was needed to safeguard the state’s financial future.

With or without RTW laws, states across the US have seen union membership declining in recent years as a share of total employment, according to tracking by economists Barry Hirsch, David Macpherson, and Wayne Vroman, who wrote an article, “Estimates of Union Density by State.”

Nationwide, about 11.2 percent of nonfarm workers are union members as of 2014, compared with nearly 25 percent in 1975.

In Wisconsin, 11.6 percent are union members, down from nearly 30 percent in 1975.

Wisconsin's pending change could hasten further union declines in the state.

One Republican state senator in Madison, Jerry Petrowski, voted against measure, saying he was “not convinced the supposed benefits of passing this bill will materialize and offset a potentially disruptive impact on our economy.”

For all the fervor on both sides of the RTW debate, economists who have researched the policy say it’s hard to distinguish its impacts from other forces that affect a state’s economy. The effects may be modest.

Still, backers cite numbers suggesting RTW will help lure businesses and jobs to the state. Opponents counter that a drive by states to be “business-friendly” can become a race to the bottom in the treatment of workers. (They cite evidence that employee compensation suffers as firms feel less at risk of unionization.)

At the very least, the experiment under way in the Midwest, with some states that are newly RTW sitting alongside others that aren’t, should provide new evidence about the policy’s effects.

“We'll have a better idea 10 years from now than we do today,” predicts Timothy Bartik, an economist at the Upjohn Institute for Employment Research in Kalamazoo, Mich.