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The Rust Belt Gets Tired Of The Label

protest outside the Wisconsin State Capitol
Anti-right-to-work protesters outside the Wisconsin State Capitol in Madison.
Photo by Flickr user blue cheddar.

“Right-to-work” laws are not just a Southern thing anymore.

Such laws, which prohibit union agreements that require employees to join unions or pay equivalent dues, have long been a staple of Southern and inland Western states. But Wisconsin is poised to become the latest example of a trend where such legislation is gaining a foothold elsewhere in the country.

As The Wall Street Journal noted, if Wisconsin passes its currently proposed law, it will become the 24th state to have such legislation on the books. The state’s Senate passed the bill last week, and it is expected to clear the Assembly in short order. Gov. Scott Walker has already said he will sign such a bill into law if it arrives on his desk. Four years ago, Walker’s decision to push through legislation that curtailed the reach of public-sector unions triggered the contentious recall election that made national headlines (and which he won).

While only three states other than Wisconsin have passed their right-to-work laws within the last 10 years, it is worth considering that two of those three states - Michigan and Indiana - are in the Rust Belt. (The third, Oklahoma, is solidly Southern and Southwestern in its culture.) In fact, Wisconsin’s bill was at least partly modeled on the law that passed in Michigan.

What is almost certainly driving this expanding trend is the manufacturing sector in general, and auto manufacturing in particular. Foreign-based automakers have rushed to expand in Southern states where they can attract non-union labor forces. The United Auto Workers union has struggled to gain footholds in Southern, foreign-owned plants, and many experts have cited right-to-work laws as a major barrier. Though the UAW did manage last year to scrabble out some recognition at a Volkswagen plant in Chattanooga, Tennessee, it lost a worker vote that would have allowed it to handle collective bargaining exclusively. Tennessee has been a right-to-work state since the 1940s.

Legislatures in the heartland of the traditional U.S. auto industry seem to be realizing that the only way to compete is to create a similarly attractive legal and economic environment.

It isn’t only automakers at issue. Perhaps even more important is the supply chain that surrounds the industry: smaller manufactures that cluster within a few hours’ drive of auto assembly plants to produce parts typically required to be delivered on short notice, since automakers no longer want to hold large inventories of parts and supplies. It will be interesting to see whether this legislative trend expands beyond the upper Midwest to places like California and Washington state, which have seen aviation manufacturing jobs move to places with friendlier business climates.

On the state level, the trend is a safeguard of sorts against an aggressively pro-union National Labor Relations Board. The federal government is pushing hard to allow unions to demand quick elections with less time for companies to respond and explain to workers why they might not want to organize. The new rules are set to go into effect this spring, though legal challenges to them are expected. In right-to-work states, the NLRB’s overzealous position is less threatening to employers - and workers - because even in unionized factories, some workers will be entitled to opt out of paying union dues. As I have written before, dropping union membership levels may well indicate workers are skeptical of what they are getting in return for often-pricey annual union dues. According to the Bureau of Labor Statistics, only 11.1 percent of wage and salary workers were union members in 2014, compared to 20.1 percent in 1983. The rate in the private sector is below 7 percent.

It’s difficult enough for America to compete for manufacturing jobs, thanks to our illogical tax system, which imposes a unique burden on anything produced for export, limiting our manufacturing to a purely domestic market and thus giving up economies of scale. Even that limited domestic manufacturing is impeded by inefficient and costly union contracts in many industries, making the prospect of U.S.-based manufacturing doubly unattractive.

The results of these policies are evident in the very name “Rust Belt.” Rust Belt states are getting tired of the label and are reacting logically. Time will tell whether that logic will spread to the remainder of the country.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s book, Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us” and Chapter 4, “The Family Business."

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