It's pretty well known by now that the National Labor Relations Board filed a complaint last month seeking to block Boeing from starting up production its new 787 Dreamliner assembly plant in South Carolina. In keeping with the Obama administration's heavy handed abuse of federal power, the NLRB complaint is brought in support of Obama's union political allies. South Carolina, a "right to-work" state, prohibits compulsory union membership. That is a big enough problem for the NLRB that it is taking the unprecedented action that if successful will dictate to Boeing where it may build its Dreamliners. The NLRB preferred location is Washington state, a union-shop state.
The NLRB's action, which Boeing will challenge at a hearing next month, is a big deal. It's the first time a federal agency has intervened to tell an American company where it can and cannot operate a plant within the U.S. It lays the foundation of a regulatory wall with one express purpose: to prevent the direct competition of right-to-work states with union-shop states. Why, as South Carolina Gov. Nikki Haley recently asked on these pages, should Washington have any more right to these jobs than South Carolina?
Although right-to-work laws are understandably unpopular with unions, Arthur Laffer and Stephen Moore argue that they are good for workers and good for the states that enact right-to-work legislation.
The two of us are often accused of arguing that income tax rates are the only factors that influence where businesses and capital relocate. Taxes certainly matter. But Boeing's move shows that taxes are not always the definitive factor in plant location decisions. In the case of Washington the advantage of its no income tax status is outweighed by its forced-union status. Lucky are the six states—Texas, Tennessee, South Dakota, Nevada, Florida and Wyoming—that are both right-to-work states and have no income tax.
While there are only six right-to-work states that also have a zero earned income tax rate and three zero earned income tax rate states that have forced- union shops, their performance differences over the past decade (2000-09) are revealing. Of the nine zero income tax rate states, those six that are also right-to-work have grown a lot faster than the three with forced-union shops: 64.9% versus 53.8% in gross state product, 59.0% versus 46.8% in personal income, 15.5% versus 10.3% in population and 8.2% versus 6.9% in payrolls.
The Boeing incident makes it clear that right-to-work states have a competitive advantage over forced-union states. So the question arises: Why doesn't every state adopt right-to-work laws? Four or five are trying to do so this year, and have faced ferocious opposition from the union movement.
New Hampshire, for one, is trying to adopt right-to-work laws. The Granite State is one of the few that enjoys the competitive advantage that comes of having no state income tax and no statewide sales tax. Recently, New Hampshire's Republican dominated legislature has attempted to augment that advantage by passing right-to-work legislation. Unfortunately, Governor John Lynch, a Democrat, vetoed it.
Lynch said Wednesday the bill wrongly intrudes on the ability of labor and management to negotiate contracts.
”There is no evidence that this legislation will offer any benefits to New Hampshire's economy or workers,” Lynch wrote in his veto message. He said out-of-state interests, not New Hampshire businesses, are driving the issue.
Laffer and Moore disagree:
As of today there are 22 right-to-work states and 28 union-shop states. Over the past decade (2000-09) the right-to-work states grew faster in nearly every respect than their union-shop counterparts: 54.6% versus 41.1% in gross state product, 53.3% versus 40.6% in personal income, 11.9% versus 6.1% in population, and 4.1% versus -0.6% in payrolls.
Personally, I'd prefer to see the New Hampshire advantage become even more advantageous. The more money we draw into the state the quicker the New Hampshire real estate market will recover, which will be a real boost to local economies. It will also help to restore jobs in the construction industry that were lost to this seemingly unending recession.
Construction jobs are often union jobs, so we come to the counter-intuitive idea that making New Hampshire a right-to-work state might very well be a better plan for the typical, often unionized, construction worker.
There is a bright side. Prospects for an override of Governor Lynch's veto are not too bad.
The House plans to take up a challenge of the veto on May 25. The Senate has no schedule in place at this point. It requires a two-thirds majority in the House and the Senate to override. The Senate cleared that bar in passing the bill, but the House has fallen short twice.
Speaker of the House William O'Brien said he is confident an override will succeed. He needs to pick up 15 to 20 votes to prevail.
He said Lynch has “put loyalty to union bosses ahead of creating jobs for New Hampshire residents and improving the state's economy.”
An override would make New Hampshire the 23rd state to adopt the law, and the only one in the Northeast.
I'm for the New Hampshire Advantage.
