Right-to-Work Laws, Unionization, and Wage Setting

Nicole M. Fortin, Thomas Lemieux and Neil Lloyd

A chapter in 50th Celebratory Volume, 2023, vol. 50, pp 285-325 from Emerald Group Publishing Limited

Abstract: This paper uses two complementary approaches to estimate the effect of right-to-work (RTW) laws on wages and unionization rates. The first approach uses an event study design to analyze the impact of the adoption of RTW laws in five US states since 2011. The second approach relies on a differential exposure design that exploits the differential impact of RTW laws on industries with high unionization rates relative to industries with low unionization rates. Both approaches indicate that RTW laws lower wages and unionization rates. Under the assumption that RTW laws only affect wages by lowering the unionization rate, RTW can be used as an instrumental variable (IV) to estimate the causal effect of unions on wages. In our preferred specification based on the differential exposure design, the IV estimate of the effect of unions on log wages is 0.35, which substantially exceeds the corresponding OLS estimate of 0.16. This large wage effect suggests that RTW may also directly affect wages due to a reduced union threat effect.

Keywords: Unions; wages; right-to-work; threat effects; industries; local labor markets (search for similar items in EconPapers)
Date: 2023
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Working Paper: Right-to-Work Laws, Unionization, and Wage Setting (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:eme:rleczz:s0147-912120230000050011

DOI: 10.1108/S0147-912120230000050011

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