Sunday, September 8, 2013

ERIC HOUSEHOLDER, RIGHT TO WORK, AND THE ILLUSION OF PROSPERITY

A recently published study shows that political passions undermine basic reasoning skills, particularly with respect to mathematics. Perhaps that explains West Virginia state delegate Eric Householder's column in today's Martinsburg Journal titled "Creating Jobs in WV!"



Householder argues that implementing "Right to Work" laws can improve West Virginia's economic climate, create jobs, and restore prosperity. He cites a welter of economic growth statistics (most of them apparently cribbed from a 2-1/2 year old Michael Barone column) to support his argument and then suggests that West Virginia take lessons from Right to Work states. He specifically lists Virginia, North Carolina, South Carolina, Georgia, Tennessee, Florida, Texas, and Oklahoma. The reason we should take lessons he explains is that, ". . . states without Right to Work laws suffer with higher taxes, lower wages, higher unemployment, higher government spending and dependency, and more union influence dictating public policy".

It's a compelling rhetorical flourish, but is it true? Let's take the quantifiably verifiable measures that Householder lists one at a time and see if Right to Work states really have lower taxes, higher wages, lower unemployment and less dependency.

TAXES
The Tax Foundation 2013 Business Tax Climate Index, which combines all personal and corporate taxes to rank states, shows three of Householder's states as above average performers (#5 Florida, #9 Texas, and #15 Tennessee). But, five are below average (#27 Virginia, #34 Georgia, #35 Oklahoma, #36 South Carolina, and #44 North Carolina). West Virginia comes in at #23. Taken together Householder's Right to Work states have a slightly worse-than-average record on taxes.

WAGES
Implying, as Householder does, that Right to Work laws raise wage levels is particularly silly since the way in which these laws theoretically make states "more competitive"is by driving wages down. So, it's not surprising that 2011 Economic Policy Institute data show that only one of Householder's Right to Work States had an average wage above the national average (#11 Virginia). All the rest had wage rates below the national average starting with #23 Florida, #28 Georgia, and #36 North Carolina and including three in the bottom ten (#42 Oklahoma, #44 Texas, and #46 South Carolina). West Virginia came in at #37. Taken together Householder's Right to Work States have wages levels that are significantly below the national average.

UNEMPLOYMENT
The Bureau of Labor Statistics August 2013 report shows four of Householder's Right to Work states with unemployment rates below the national average (#11 Oklahoma, #13 Virginia, #18 Texas, and #25 Florida)and four with higher than average unemployment rates including some of the worst in the nation (#37 South Carolina, #40 Tennessee, #46 Georgia, #48 North Carolina). West Virginia meanwhile comes in ahead of all but two of them at #15. When aggregated, the unemployment rate in Householder's Right To Work states is no better than the national average.

GOVERNMENT SPENDING & DEPENDENCY
I looked at this in two ways -- rates of dependency among citizens and each state's dependency on federal government spending. For dependency among citizens, I looked at the percent of residents who participate in SNAP, the Supplemental Nutrition Assistance Program, more commonly known as Food Stamps. Seven of Householder's Right To Work states have above average participation rates, including five of the top fifteen (#5 Tennessee, #8 Georgia, #10 Florida, #11 South Carolina, #14 North Carolina, #21 Oklahoma, #25 Texas). Only #39 Virginia has a participation rate below the national average. West Virginia comes in at #12. Taken together the populations in Householder's Right to Work states are significantly more dependent than those elsewhere.

Finally, the Internal Revenue Service's summary of Federal Taxation and Spending by state shows that three of Householder's Right to Work states (Texas, North Carolina, and Georgia) contribute more in taxes than they receive in federal expenditures, but that five (Oklahoma, Florida, Tennessee, South Carolina, and Virginia) receive more than they contribute. In summary, to use Mitt Romney's famous formulation, Householder's Right to Work states are more likely to be takers than makers.

Still, despite the fact that by all of Householder's chosen quantitative measures he is demonstrably wrong about the superiority of Right to Work states, there remains the lingering question of why, if these states enjoyed above average economic growth, which they have, is their performance by these economic measures so weak? The short answer is that, in an economy that for two decades has been allocating virtually all of its incremental gains to the top five percent of income earners, that trend is even more pronounced in Right to Work states. You can judge for yourself whether that's a healthy state of affairs.

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