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U.S. Regional Manufacturing Employment Affected by Labor Union Policies12 Mar 07Recent news highlights how regional differences in labor union policies and membership affect employment in the manufacturing sector. Recent news from the East North Central and the East South Central regions highlight the struggle between union and non-union labor in the manufacturing sector. Toyota's announcement to build its latest U.S. plant in Tupelo, Mississippi, was partly influenced by the cheaper non-union labor found in the state. At the same time that Toyota was choosing its plant location, work-stoppages at two Ohio manufacturing firms ended. On January 2, 2007, Goodyear Tire and the United Steel Workers reached an agreement that sent 14,000 union workers in nine states back to work. On March 1, 2007, the lockout of 1,700 workers at AK Steel's Middletown, Ohio, plant ended. Unions have the advantage of providing better working conditions and benefits to workers, but also drive up the wages for workers. Higher wages make states with strong labor unions less attractive to businesses. The wage differences between union and non-union workers can be large, as illustrated below. The union wage premium for manufacturing firms is among the lowest for all sectors. Even though the gap between union and non-union wages is relatively small, it still represents a significant amount of money when large plants are built. For example, the new Toyota plant in Mississippi is expected to employ 2,000 workers, so the wage savings accumulated by choosing a non-union state can be dramatic. Moreover, the decision about plant location also depends on construction costs. Indeed, the premium paid to unionized construction workers is the largest. Union members generally have higher wages than non-union workers, or even workers represented by unions, but are not members.
Source: BLS and Global Insight Union laws vary by state. States that have right-to-work laws prohibit unions from making membership or payment of dues a condition of employment. Unions typically have a harder time organizing in these states, but union organization does exist in right-to-work states. The map below shows right-to-work states in red and non-right-to-work states in blue. Southern states are more likely to have right-to-work laws.
An obvious question is whether right-to-work states are doing a better job at retaining and attracting manufacturing jobs than states that do not have right-to-work statutes. It is evident that in the manufacturing sector, employment losses have been slower in states that have right-to-work laws.
While not all of the manufacturing losses in union states can be blamed on the labor unions, the Toyota plant siting illustrates how attracting manufacturing jobs is difficult for states with a strong union presence. Indeed, the Japanese automaker did not consider any states where unions were strong, and expects to pay its workers $8 per hour less than their union counterparts. by Michael Nipple
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