Right to Work: Is Indiana an Economic 'Loser'?

This is the latest media release from the Indiana Policy Review:

Right to Work: Is Indiana an Economic 'Loser'?
by Craig Ladwig

After a century of being one of the most innovative creators of jobs and wealth in the nation, has Indiana developed a losing mentality?

It is not an idle question. Economists see a growing separation between those states whose policies defy investment and those states whose policies don’t.

Statehouse boosters are adamant that Indiana is in what might be called the “winner” camp. When the issue of job loss comes up, they cite the fact that we outperform our neighbors Michigan, Ohio and Illinois. Lately, though, it is cited in a more wooden and perfunctory way.*

That is because the politicians know (and know that we know that they know) that Indiana isn’t competing with any of those states. It is competing with Texas, Virginia, North Carolina, South Carolina, Georgia, Florida, Iowa, Nevada, Arizona, Utah and most recently Oklahoma.

These and 11 others have adopted right-to-work laws. That means workers there are free both to join unions and to refrain from joining unions. It was successfully argued in each state that forced unionization is a violation of the Constitutional right to freedom of association as well as the common-law principle of private ownership of property.

Right or wrong, the market likes the idea. Ohio lost 10,400 jobs this past decade while Texas, a right-to-work state, was creating 1,615,000 new ones. Some believe that such disparities will even increase in the next few years.

The presence of labor flexibility is becoming a certain indicator of growth. That is clear when right-to-work status is compared with selected economic rankings.

For example, only one of this year’s Forbes magazine 10 “Most Taxed” states (Wyoming) enjoyed right-to-work status. None of its 10 most “Downsized Cities” was in the right-to-work column and fully nine of the top 10 “Relocation Destinations” were in right-to-work states (the exception being Denver).

If Indiana would equal those rankings and avoid a “loser” image, it must acknowledge that its business model, proud history notwithstanding, has become uncompetitive.

There is another big problem. In the 1970s, Indiana approved a collective-bargaining law that treats public employees as if they were competing in a free market. At the extreme, members of teacher unions elect their own boards of education so that the law in effect manages the state’s education system, driving all other budget considerations.

Today, it is impossible for even the most stout-hearted legislature or governor to control state spending levels. But a political leadership that for all these years has found it acceptable to force citizens into unions and operate schools for the convenience of teachers is no doubt making all sorts of decisions that allow government to deter investment and squash innovation.

Not surprising, Indiana has lost its reputation as a low-tax state. The Tax Foundation now ranks us 28th in overall tax burden. That compares with a 41st place ranking as recently as 1983. Indiana homeowners now are 23rd in the amount they pay for property taxes as a percentage of home value. And Marion county’s sales tax is close to the nation’s highest.

Andrea Neal, writing for the Indianapolis Star, draws the obvious conclusion: “We’ve been on a slippery slope of tax hikes that have allowed us to invest in education and services but could ultimately damage our business and employment climate.”

Slippery slopes, rights and wrongs, Constitutional law, teacher unions, out-of-control budgets — all of this will color Indiana electoral campaigns these next few cycles. And that will be especially true to the degree voters come to understand what is differentiating “winning” states from “losing” ones.

Craig Ladwig is editor of The Indiana Policy Review.

*The author acknowledges a debt to the oratory of Dan Hannon, member of the European Parliament from Great Britain.