State Right to Work Laws and Economic Dynamism in U.S. Counties, 1946 to 2019

Do state Right to Work (RTW) laws unleash economic dynamism, or the ability for local economies to respond, thrive, and grow in changing conditions? Although the specific goals of RTW laws to limit union security agreements appear to narrowly target unionized firms, proponents and opponents alike argue that RTW laws have broad labor market consequences. Union monopoly theories suggest that unions increase labor costs and exert greater worker control over the labor process in ways that distort and dampen firm investment and growth, and hence that RTW promotes economic dynamism. Institutionalist theories counter that unions increase labor productivity and build a stronger local consumer base, and hence that RTW inhibits economic dynamism. We provide a novel test of these divergent hypotheses using 75 years of County Business Patterns data and county-border-pair fixed-effects regression models to address unobserved heterogeneity. We fail to find consistent evidence that RTW passage is associated with meaningful changes in employment or workplace establishment concentration relative to geographically proximate counties in non-RTW states that share a common border. We develop an alternative competitive labor policy mitigation perspective that highlights how policymakers respond to policies in neighboring states to help explain this null result. Consistent with our arguments, we find that non-RTW states made tax and incentive policy more attractive for employers during this period, and that tax and incentive policies have a meaningful association with local economic dynamism. This highlights tax incentives as an alternative policy lever that non-RTW states used to mitigate the competitive advantages of RTW states.