Study: Take-Home Pay Buys More in Right-to-Work States

August 28, 2014

A study released by the respected Tax Foundation last week ranks Washington among the top 10 most expensive states in which to live.  The study calculates the real buying power of $100 in each state to measure the true cost of living. 

Hawaii, New York, New Jersey, California and Maryland rank as the highest-cost-of-living states, while states in the south, such as Mississippi, Arkansas and Alabama, followed by Missouri and South Dakota, boast the lowest cost-of-living.  In these states a worker’s raw income may be lower, but he can buy more with it.

For example, spending $100 in Mississippi will get you consumer goods that cost $115.74 in a state closer to the national average, while spending $100 in Hawaii gets you just $85.32 worth of goods, and only $86.66 in New York.  In other words, Mississippians are nearly 16% richer than their nominal incomes suggest, while residents of Hawaii and New York are nearly 15% poorer.

A total of 15 states have the highest cost-of-living, where the real value of $100 is less than $100. Washington is the 10th highest cost-of-living state. Spending $100 here buys what would cost only $96.90 in other states.

As I read the Tax Foundation report, I received news that this year SPEEA, the union that represents certain aerospace workers, is sending state legislative candidates a survey of just three questions. One question asks candidates whether they support making Washington a right-to-work state so union membership would become voluntary.  SPEEA union executives skew the question by calling the right not to join a union the ‘right-to-work-for-less,’ and urge candidates to read about “the harm of ‘right-to-work’ laws on workers, businesses and communities” by visiting a website.

This got me wondering; how does the value of $100 compare in right-to-work states and non right-to-work states?

It turns out all but one of the 15 highest cost-of-living states are also forced unionism states, where workers are fired if they decline to join an approved labor organization. Conversely, all but one of the 24 right-to-work states, where union membership is voluntary for workers, are low cost-of-living states.  In these 23 right-to-work states, the relative value of $100 is higher than $100, compared to living in other states.

This explains the “right-to-work-for-less” claim opponents of union choice make against right-to-work laws.  They say workers in right-to-work states make less than employees in forced union membership states.  But right-to-work states generally have a significantly lower cost of living. The same income will buy a much better standard of living for a family living in a right-to-work state than in a forced unionism state.

When the cost of living is accounted for, workers in right-to-work states enjoy higher real, spendable income than workers in forced union membership states.  As one researcher  put it, “RTW [right-to-work] states have average wages that are significantly higher than non-RTW states.”

The data shows consistently that people living in right-to-work states enjoy a more affordable cost of living.  Working families also benefit because they are not forced to give part of their take-home pay to union executives. The Tax Foundation assessment of the real value of $100 in each state reinforces the fact that a working family’s income goes farther in right-to-work states.

Of course, facts often get in the way of a good sound bite, and the “right-to-work-for-less” slogan is a prime example.  It sounds good, so expect to hear it a lot, but the facts simply don’t back it up.