Right-to-Work Law

When you’re hired somewhere, one of the first things you do is sign the dotted line on the contract—the one between you and your employer. Things like your pay, agreeing to not share company secrets, that kind of thing.

Unions aren’t as big of a force as they used to be, but they’re still around. It used to be a more common occurrence that, if you joined a job, you’d need to agree to two contracts: one between you and your employer, and another that’s between the employer and you-as-part-of-the-labor-union.

Right-to-work laws are laws in the U.S. that give workers the right to work without having to be in a union or pay union dues. Before these laws, it wasn’t uncommon for part of your job to be in the labor union protecting that job. The thought goes that, if you’re benefiting from the union’s work and negotiations, you should pay union dues. Otherwise, you’d be getting all the gains without paying anything. You’d be a freeloadin' freerider.

While not making people pay fees they don’t want to as part of a job sounds cool to some, it sounds not-so-cool to labor unions. Why? Labor unions help keep worker wages up. And if everyone starts benefitting without having to pay, we get a free rider problem. All of a sudden, unions lose power, because they lose members and money. Then workers aren’t as protected in wages, safety, benefits, etc. as they otherwise would be.

Right now, the U.S. operates under “open shop” rules, which means employees can’t be forced to join a union or pay union dues. They also can’t be fired by a company for joining a union. Still, states and local governments have their own right-to-work laws too. While studies are mixed, the Economic Policy Institute found lower wages, employer-sponsored health insurance, and employer-sponsered pensions in places with right-to-work laws. But fewer employees then get hired, as the cost to employers is, well...higher.

It all comes back to the Supply and Demand Curve. If prices are higher, demand volume diminishes.