Do right-to-work laws increase economic inequality? No, according to a new study by Jeffrey Jordan, Aparna Mathur, Abdul Manasib, and Devesh Roy. Looking at a “comprehensive set of measures of inequality,” the authors found no impact of RTW laws on economic inequality in Idaho, Louisiana, Oklahoma, and Texas—“the only states that enacted RTW laws over a period of five decades between the 1960s and the 2000s.”
There is an ongoing debate about the effect of changes in labor regulations such as Right-to-Work (RTW) laws on rising income inequality in the U.S. Unlike some earlier papers that suggest a negative link between the RTW laws and correlates of inequality such as wages, we find that RTW laws had no significant impact on income inequality in these states.
As more states adopt or consider Right-to-Work laws, there is an ongoing debate whether these laws are contributing to rising income inequality in the U.S. AEI adopted the Synthetic Control Method (SCM) for comparative case study to examine this issue at the state level. Specifically, the findings show that adoption of RTW laws in Louisiana, Idaho, Texas, and Oklahoma—states that enacted their RTW laws between the 1960s and 2000s – did not contribute to the worsening of their state’s income inequality. A wide range of inequality measures was used. The results are consistent across all measures. The finding is also robust across different specifications and choice of the control groups.
The four states that don’t show any impact of RTW on inequality are the only states that converted to RTW between 1964 and 2010. Most of the RTW states implemented RTW laws in the 1940s and 1950s. However income inequality in the U.S. started to exacerbate in the mid-1980s. If RTW had an impact on inequality, it would have to be that RTW started to have a casual effect on inequality in the states that enacted the law in the 1940s and the 1950s with a lag of more than 30 years. Therefore, while the worsening inequality in the U.S. merits extensive exploration, RTW laws do not seem to be the answer.
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