Tag Archives: Right to Work

Pittsburgh region jobs struggling to recover

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Background: Recently released jobs data for March 2022 show private-sector employment in the Pittsburgh Metropolitan Statistical Area (MSA) the seven-county area of Allegheny, Armstrong, Beaver, Butler, Fayette, Washington and Westmoreland, has failed to recover to the level reached three years earlier in March 2019.  The March job count remains 53,800 (5.1 percent) below the three-year-ago reading.

U.S. jobs performance

Note that the national jobs performance, while not sterling, was much better than the Pittsburgh MSA with private employment in March rising 0.8 percent above the three-year-earlier posting.  As previous Policy Briefs have pointed out, simply returning to pre-pandemic employment levels fails to take into account the job growth that likely would have occurred if COVID-19 had not devastated the strong economy underway in early 2020 with the impact extending well into 2021. In the three years from 2016 to 2019, private employment rose 5.2 percent.

Assuming, conservatively, that the 2019 to 2022 growth would have been a more modest 3 percent, the March 2022 job total would have reached 130.3 million, which is 2.8 million higher than the number actually reported. In short, while there is some satisfaction in recovering to pre-pandemic levels, there remains a lot of catching up to get the economy back on track.

Comparisons to other MSAs

To understand the Pittsburgh jobs situation more clearly and the context of what is happening in other metro areas, this Policy Brief reviews and compares private-sector job gains in nine other metro areas, five with much stronger employment gains and four others with poor performances.  

The five MSAs with strong post-pandemic gains chosen for comparison include Austin, Texas; Nashville, Tenn.; Tampa Bay, Fla.; and Charlotte and Raleigh, N.C.  The four poor performance MSAs to go along with Pittsburgh include Nassau-Suffolk Counties, N.Y.; Buffalo, N.Y.; Cleveland, Ohio; and Hartford, Conn. The selections were chosen to keep the sizes relatively close to Pittsburgh. Thus, very large metros such as Atlanta, New York City, Chicago or Los Angeles or much smaller areas such as Schenectady, N.Y., Charleston, W.Va. or Dayton, Ohio, or Erie, Pa., were not considered.   

In aggregate, the five strong performing MSAs posted an average private jobs gain from March 2019 to March 2022 of 7.7 percent. Among this group, Austin was the strongest at 13 percent growth while Charlotte was slowest with a 4.7 percent gain from 2019.

Meanwhile, for the five poor performing MSAs, employment, on average, remained 3.9 percent below the March 2019 readings. Pittsburgh was the worst performer with jobs still 5.1 percent below the March 2019 level.  Cleveland had the best of the five with employment 2.3 percent lower than three years earlier.  Buffalo and Nassau remained 4.7 and 4.1 percent lower, respectively.  Hartford remained 3.5 percent lower.

Austin is truly remarkable with employment nearly doubling since 2000 and is up 57 percent in the last 10 years.  Indeed, the five fast-growing MSA-average added 39.2 percent more jobs over the 10 years, March 2012 to March 2022.  During the same period the five slow-growing MSAs posted an average gain of just 2 percent with the Pittsburgh MSA the only one of the 10 reviewed that had fewer jobs in March 2022 than in March 2012. 

The relatively strong years in the Pittsburgh MSA from 2016 to 2019 were basically reversed during the pandemic and the bounce back has far to go to achieve full recovery and even further to go to regain the momentum of the 2016 to 2019 period.

Possible explanatory factors for MSA growth rate differences

 % Change in Jobs: Mar. 2019-Mar.2022% Public Sector Union
Avg. of Five strong performing MSAs7.714.5
Avg. of Five poor performing MSAs-3.961.2

Two related factors are apparently important in explaining growth rate differences.  The first is the presence of a right-to-work (RTW) law in the state where the MSA is located or the absence of right-to-work (NRTW).  Second, and closely related, is the percentage of public-sector workers who are labor union members.

All five of the poor performing, slower growth MSAs in this Policy Brief comparison are in NRTW states (N.Y., Pa., Ohio, Conn.). Moreover, all poor-performing MSAs have high percentages of public-sector employee union membership.  The five MSA average union membership was an estimated 61 percent based on unionstasts.com data for 2021(the latest year available). Union membership in the five MSAs ranged from a low of 49 percent in Cleveland (a drop from 55 percent in 2017) to a high of 78 percent in Buffalo.  Indeed, most New York MSAs have quite high membership percentages. 

Pittsburgh MSA public-sector union membership stood at 50 percent in 2021, a decline from 58 percent in 2012 and 57.3 percent in 2019. And it has been well over 55 percent for the last several years.  Hartford public-sector union membership stood at 69 percent in 2021. The recent declines in some areas could be related to the Janus Supreme Court ruling that public-sector union members cannot be forced to pay union dues.

Meantime, 2021 public-sector union membership in the five fast-growing MSAs averaged 14.5 percent, with a range of 10.1 percent in Raleigh to 21.5 percent in Nashville. Austin’s rate stood at 11 percent.  Austin saw the rate drop from 17.5 percent in 2012 while Raleigh’s rose from 7.8 percent in 2012 to 10.1 percent. Charlotte’s rate in 2021 was 10.5 percent and Tampa Bay came in at 19.5 percent.

All told, the five faster job growth MSAs had on average a 46.7 lower percentage of unionized public sector employees than the slow growth MSAs in 2021.  Coincidence? Seems to be highly unlikely.  The states and MSAs with high levels of public-sector union membership are far more likely to be areas with substantial union influence on government policies regarding economics, taxes and spending than the low union membership areas.  Unions can have substantial influence on elections through voting and fund raising. And public-sector unions certainly have a major impact on compensation packages and work rules.

As can be seen in these high union member areas, there are more laws and regulations regarding such things as wage rates and sick leave pay, mandatory time off provisions and other rules governing the private sector and general efforts to operate a top-down, government-involvement approach to managing the economy.

Effects of high rates of public union membership

Moreover, public-sector union benefits such as pensions, work rules, time-off provisions tend to be very generous and, once granted, never are withdrawn and become legacy burdens. All this leads to more expensive government provisions of service which, in turn, requires higher tax revenues. 

Higher taxes, work-place interference with burdensome regulations on the private-sector and development restraints all work to discourage entrepreneurism and business growth and expansion.   High tax rates and regulations that are costly to comply with are burdens that can lead to bankruptcies or business leaving since firms cannot continually pass on ever higher costs to their customers.

Obviously, there are special local situations around the country that can lead to a departure from the findings based on the 10 MSAs in this study. External or exogenous factors such as massive shifts in consumption patterns, foreign competition and technological innovations can offset somewhat the benefits of RTW and low public unionization on one hand or the hindrances of NRTW and high public unionization on the other.

However, from a public policy standpoint, special factors should not override the basic facts: High rates of public-sector unionization lead to more and unnecessary government involvement in the lives of citizens and businesses.  We see in country after country the negative effects of the heavy hand of government.  Little wonder Franklin Roosevelt did not support the creation of government unions.

Pittsburgh metro private jobs recovery in 2021

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Background:  In April 2020, the seven-county Pittsburgh Metropolitan Statistical Area (MSA) (Allegheny; Armstrong; Beaver; Butler; Fayette; Washington and Westmoreland) suffered a loss of 219,000 private sector jobs from the April 2019 reading, an astounding decline of 20.3 percent. Although employment began to recover through the rest of 2020, the December count was still 98,400—9.1 percent—below the December 2019 level.  For 2020 as a whole, average annual jobs were 93,300, or 8.7 percent lower than the annual employment level in 2019.

There were monthly gains in 2021 compared to 2020 except January, February and March that had not taken the huge hit that came in April 2020.  These gains brought the yearly total to 23,100 or 3.4 percent higher than the 2020 level. Unfortunately, the 2021 annual reading was still 70,200, or 6.5 percent under the 2019 annual reading.

Pre-pandemic

From the post-2010 recession year of 2012 through 2016, private employment in the MSA had climbed a modest 9,300, or less than 1 percent in four years. From the 2016 level through the last pre-pandemic year of 2019, private jobs rose 32,300, a three-year gain of 3.1 percent, over three times more than the four-year gain from 2012 to 2016. 

While not comparable to many MSAs with much more robust growth, the period was a marked improvement over the Pittsburgh MSA’s previous four years.  But sadly, this faster growth period was interrupted by the economic impact of the COVID pandemic.  And the 2021 gains have been too anemic to restore the jobs to the 2019 year-end levels, with the December 2021 reading still 58,500 below the December 2019 level.   

Pandemic losses by major sector

As noted, the annual average total private sector jobs in 2021 were still 70,200 below the 2019 level. Of that number, 12,300 were goods-producing and 57,700 were service-providing.  The 58,500-shortfall from the December 2019 posting is comprised of 10,800 goods-producing jobs and 47,700 service-sector employees. 

Table 1

Manufacturing jobs in 2021 as-a-whole remained 7,800 below the 2019 level and in December 2021 were 6,500 lower than December 2019. However, the December 2021 count was barely above the 2020 level and there had been essentially no growth in factory employment since the fall of 2020.  Construction employment fell dramatically, by nearly 50 percent in April 2020 when the lockdown occurred.  But it showed great resilience and by June of 2021 had recovered to the June 2019 level.

Within the services sector, the biggest loser has been leisure and hospitality.  In April 2020, employment fell by 66,500 from April 2019, a drop of 55.9 percent.  By December of 2020, nearly 32,000 jobs had been recovered and by December 2021 another 18,000 had been recovered.  The 2021 annual average employment was 22,700 (18.8 percent) under the 2019 yearly figure.

Comparison to other MSAs

To evaluate the strength of the Pittsburgh MSA’s private employment recovery it is useful to look at seven similarly sized MSAs around the country.  The sample is divided into two groups of four. One northern and north-central and long-time traditionally non-right-to-work (Buffalo, Cleveland, Milwaukee and Pittsburgh); the second, southern and mountain, and long-time right-to-work (Ft. Worth, Nashville, Raleigh and Salt Lake City).

Table 2

The first group, the northern group, turns out to be very weak compared to the second group, the southern group, in terms of long-term employment growth as well as recovery from the losses due to the pandemic in 2020.

Between 2011 and pre-pandemic 2019, private employment in the four-weak MSAs rose an average of 7.4 percent. Remember, 2011 was in the early stages of recovery from the 2008-2010 recession. The strongest MSA in the weak group was Milwaukee at 9.1 percent growth and the weakest was Pittsburgh at 5.7 percent. Meanwhile, in the strong group the average growth from 2011 to 2019 was 30.4 percent, led by Nashville at 37 percent. The slowest gain was posted by Ft. Worth at 23.4 percent. Thus, average employment growth in the strong group was four times faster than the weak group.

The same pattern holds for the recovery of jobs following the huge decline in April 2020.  Extent of recovery is measured in two ways. First, the December 2021 count of private employment is compared to the December 2019 reading. Second, the annual average employment is compared to the annual average for 2019.

As shown in Table 2, the weak group average shortfall in December 2021 compared to 2019 was 5 percent. Pittsburgh was the weakest of the group with jobs still 5.4 percent below the December 2019 level.  The strong group average a 2.2 percent increase compared to December 2019 with all MSAs fully recovered. Salt Lake City led the way, climbing 4.5 percent above the 24-month-earlier level, followed by Raleigh at 2.6 percent above the pre-pandemic December count.

Thus, at the end of 2021 the strong group was a total of 7.2 percent further ahead in employment gains than the weak group that was still significantly below the pre-pandemic job counts. 

Conclusion

The statistics in Table 2 amplify the significant difference in approaches to the job markets and government’s attitude toward control of economic activity and individual liberty among the states—and especially in large cities where control of government has been liberal or very liberal for decades.

In the case of the Pittsburgh MSA, the region is working in an environment of state regulations and development policies that rely too heavily on subsidies in various forms while imposing unnecessary or outdated regulations on the economy and local governments. High costs of fuel and Pennsylvania Turnpike usage driven by state law are not an inducement for prospective businesses to locate in the region and add substantial cost to commuters to work and local truck freight.  Then, too, hefty reliance on subsidies to attract airlines has been largely unsuccessful in adding to the region’s economic growth while sending a bad signal to carriers.      

Lack of regular, periodic reassessments of real estate produces a situation in which inequities mount, forcing appeals that are costly and create uncertainties for homeowners and businesses that could be avoided.  Binding arbitration rules that do not require taking into account the financial capability of local government in union contracts are clearly not in the interest of taxpayers.

Public transit operations in Allegheny County are extremely costly compared to other systems around the country, requiring tremendous subsidies from taxpayers. Then, too, the extraordinarily high education expenditure per student in the City of Pittsburgh and other districts with very poor academic achievement are a substantial force that pushes parents with school-age children out of these school districts.

In short, the MSA and the central city are saddled with a legacy of policies that are not free market supportive. The poor growth compared to other regions points vividly toward the need to make drastic changes in these growth-inhibiting polices.

Covid recovery through June: Right-to-Work states much stronger

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Background

Recently, Policy Brief Vol.21, No. 26, presented an analysis evaluating the Pittsburgh Metropolitan Statistical Area (MSA) recovery from the steep economic and jobs downturn in the March-April-May period of 2020. The analysis compared the Pittsburgh MSA with 13 MSAs around the country grouped separately from Right-to-Work (RTW) states and non-Right-to-Work (NRTW) states.  That study concluded,

“the presence of RTW and relatively low percentage of public sector unionization are associated with friendlier better business climates and a more free-enterprise oriented approach to regulation while not having Right-to-Work and heavy public sector unionization are indicative of a less friendly business climate.”  

That Brief also found that the Pittsburgh MSA recovery was very poor in comparison to the other MSAs, outperforming only Hartford in the group of 14 metro areas studied.

As in the MSA study, this Brief focuses on private-sector employment at the state level because government jobs in general, but especially federal jobs, were almost immune to the COVID lockdowns.

Outline of study

To gauge relative state recovery performance and for the two eight-state group averages, several measurements were calculated—all using private employment levels.  Three indicators are based on changes in June job counts—June 2019 to June 2020, June 2020 to June 2021 and June 2019 to June 2021.

First, these show the degree of the COVID impact in 2020 by comparing June to the year-earlier reading. Second, the June 2020 to June 2021 change indicates the extent of recovery thus far of the jobs lost in the spring of 2020 and, finally, the June 2019 to June 2021 change illustrates the extent to which jobs have recovered compared to pre-COVID downturn levels. Another measure of the extent of the duration and depth of the downturn is captured by looking at the change in the yearly average of jobs from 2019 to 2020.  States with bigger losses in the April to June period and with relatively slow job gain in the second half of 2020 will show larger declines in the annual average change.

States in the study 

The NRTW states include four northeast states (New York, New Jersey, Connecticut and Pennsylvania), a mid-western state, (Illinois), and three western states (Oregon, Colorado and New Mexico).  Since there are no RTW states in the northeast they were matched in the RTW group by four states including Texas, Tennessee, North Carolina and South Carolina. Illinois was paired with Indiana, its RTW neighbor. Each of the western NRTW states was paired with a neighbor RTW state including Idaho, Arizona and Utah.  Importantly, private job growth in the West has generally outpaced the nation for a couple of decades, even in the NRTW states selected for this analysis.

Lockdown losses and initial recovery

During the critical months of April, May and June 2020 there were state-imposed constraints on the economies of virtually every state. There were, however, major differences among the states regarding the degree of restraint and the duration of severe limitations. A broad finding from the data clearly suggests that while there is substantial variation in jobs recovery within both the RTW group of states and the NRTW group, the averages on the key measurements of recovery for the two state groups point to much better performances for the RTW states compared to the NRTW states. 

On the indicators that capture (1) the severity of the downturn due to initial reaction to COVID and (2) during the ongoing economy-limiting measures during the second half of 2020, the RTW states performed much better than the NRTW states. 

On the gauge of the severity of the COVID impact, the average jobs decline from June 2019 to June 2020 was 5.9 percent for the eight RTW states compared to an average drop of 12.3 percent for the eight NRTW states, more than double the RTW average. Six of the NRTW states had double-digit declines with New York at 18 percent and New Jersey at 16 percent the hardest hit. Pennsylvania was down 12.2 percent, very near the average of the NRTW group. The best performances were in Colorado and New Mexico with an 8.6 percent and 8.9 percent drop, respectively.

Meanwhile, for the RTW states over the June 2019 to June 2020 period, Utah (-3.1 percent) and Idaho (-1.9 percent) had the smallest drops while Indiana (-8.2 percent) and South Carolina (-8.1 percent) suffered the biggest losses.  No RTW state had a double-digit decline.

Secondly, the indicator of the strength of job gains during the first months of recovery shows the same pattern of advantage in the RTW states. This is measured by the change in the yearly average job count from 2019 to 2020. For NRTW states the average year-to-year change in the eight states was a decline of 8 percent and for RTW states the drop was 3.8 percent, less than half the NRTW decline. By far the worst performing state was New York with a drop in private employment of 11.6 percent from 2019 to 2020. Colorado had the smallest decline in the group at 5.6 percent. Pennsylvania’s decline of 8.2 percent year-to-year was close to the NRTW average.     

In the RTW grouping, Idaho had a decline of only 0.4 percent followed closely by Utah with a 1.4 percent loss from 2019 to 2020. Indiana’s 5.8 percent drop was the steepest loss year-to-year followed closely by South Carolina’s 5.7 percent loss. 

Colorado (-5.6 percent) was the only NRTW state to have a smaller loss than the poorest performers in the RTW group and only by a very thin margin. 

In short, the two indicators of COVID’s impact clearly suggest a better RTW performance both immediately after the virus hit and over the second half of 2020. It is also clear that the western states in both groups were significantly stronger at keeping and restoring jobs than other states in their group.  Nonetheless, the three RTW western states with an average year-to-year loss of only 1.7 percent were much better than the three NRTW western states’ average loss of 6.7 percent in 2020 compared to 2019.  And the five RTW non-western states’ average 5.1 percent decline year-to-year was just about half the 9.7 average drop year-to-year in the five nonwestern NRTW states. Two conclusions emerge:  the western states have been stronger than the rest of the country and RTW states are better than NRTW states in each region.

Jobs recovery through June 2021

The last measure analyzed the ongoing strength of recovery in the first half of 2021. The most direct indicator is the change in jobs from June 2019 to June 2021. In other words, where does each state stand in June 2021 compared to the last June before the COVID pandemic struck? Not surprisingly, the comparison pattern continues.  For the eight NRTW states, the average change in private jobs from June 2019 to June 2021 was a loss of 6.1 percent. Meanwhile, the eight RTW state average loss over the same period was 0.3 percent, pointing to much greater underlying resilience and robustness in those economies.

By far the biggest loss for the 24-month period was in New York with a decline of 10.1 percent from June 2019 to June 2021, indicating huge restraints were being placed on the state’s economy. At the same time, Oregon, with a shortfall of 4.6 percent, and Colorado, with a loss of only 2.4 percent, were relatively strong performers in terms of returning to pre-COVID levels. Pennsylvania at a minus 6.4 percent shortfall was joined by Connecticut, New Jersey, Illinois and New Mexico with declines in the 6-to 6.5-percent range.  

Among the RTW states, Idaho (4.6 percent) and Utah (3.9 percent) had gains from June 2019 to June 2021 while Arizona managed a 1 percent rise. The weakest performers were Indiana at (-3.7 percent) and South Carolina (-3.3 percent). Obviously, the ability to rebound and grow was very much stronger in this wide range of RTW states.

Only Colorado among the NRTW states was close to the RTW group.  

Pennsylvania was outperformed by every RTW state, even trailing Indiana, which had the weakest numbers in the RTW group.  However, it was much better than New York and was comparable to other non-western NRTW states.

Conclusion

This analysis confirms the findings of the MSA study. RTW states have enjoyed much better recoveries than NRTW states from the COVID pandemic-caused plunge in jobs in the second quarter of 2020.

The results also point to regional differences in strength with western states in both RTW and NRTW states exhibiting much smaller losses among their group in the worst months and better recovery since the second quarter of 2020.

Pennsylvania’s job changes on each measure were very close to the averages of the NRTW group but were significantly better than New York and New Jersey and not as good as any RTW state in the study. 

With the Delta variant of coronavirus spreading rapidly across the country, state economies are about to get another test.  Will lockdowns and other restraints on activity return and will governors and mayors of each state respond as they did in 2020? Those responses in each state will play a key role in determining whether jobs are lost or gained and by how much.

Right-to-Work and pandemic jobs recovery

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Summary:  The Allegheny Institute has been a long- time advocate for the adoption of Right-to-Work in Pennsylvania. Our research has demonstrated that the presence of Right-to-Work is associated with stronger economic growth in those states compared to the commonwealth. And while the pandemic has wreaked havoc on state economies across the nation, Right-to-Work states have fared better during the pandemic and are recovering faster than states without Right-to-Work. 

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Background

For two decades the Allegheny Institute has reported on the employment growth differences between Right-to-Work (RTW) states and non-Right-to-Work (NRTW) states. Indeed, the presence of RTW has long been a generally strong proxy for the degree to which free market economic policies are in place.

Several states that had for decades resisted RTW provisions as provided in the Taft Hartley Act have in recent years adopted RTW. The impact in those states has not yet had time to be felt fully as many other changes in the regulatory environment must be enacted to complement the RTW. And, predictably, much resistance to RTW still exists in the states that recently adopted it.

Unfortunately, there is a move in Congress sponsored by the Office of the President to remove the Right-to-Work provision completely. That would be a disaster for the nation’s economic future. 

States with RTW typically have a friendlier business climate overall, with far less unionization of their public-sector employees and they generally have faster growth.  Of course, there are exceptions for both RTW and NRTW states as special growth-enhancing or-constraining factors can, to some degree, offset the RTW effect.  For example, the high-tech sector in Silicon Valley and around Seattle. But the engineering and research jobs typically are not unionized and the manufacturing of many of the final products (Apple for example) are frequently offshored.

In recent years, many firms have begun relocating facilities and operations to Texas and other RTW states because of taxes and regulatory impediments.

Data sets

This Policy Brief looks at the jobs lost and then regained in 10 states during the worst of the COVID pandemic and the opening up that has been underway since the second half of 2020, to varying degrees across the country.  Five of the states are RTW with conservative-leaning governors and five are NRTW with more liberal governors. The states selected, both the RTW and NRTW, include a variety of sizes and are from very small to very large states spread geographically across the country.

The RTW states are South Carolina, Florida, Tennessee, Utah and Idaho. The NRTW states include Connecticut, New York, Pennsylvania, Illinois and New Mexico. Obviously, there is a great variety in each sample in terms of makeup of state economies and population size. Recent RTW-adopting states such as Michigan and Wisconsin were not selected. All employment data are taken from the U.S. Bureau of Labor Statistics.

Analysis

The analysis looks at: (1) the jobs lost from 2019 to 2020, (2) jobs lost for the worst month comparing April 2019 to April 2020 and (3) the job change from April 2019 to April 2021 as a more accurate measure of the degree of recovery from the worst of the pandemic. Employment growth from to 2011 to 2019 is included as an indication of the robustness of the states’ economies over a longer period following the severe 2008-2010 downturn. Jobs used for the comparisons are total private jobs since public jobs were much less affected by the pandemic closures. All comparative gauges are the unweighted percentage changes for the five states in each group.  

First, it is important to note the very large difference in the eight-year employment growth (2011 to 2019) for the RTW and NRTW states.  The RTW states averaged 26 percent growth for the period. NRTW employment climbed 9.8 percent. Thus, the RTW states grew jobs 2.65 times faster than the NRTW pace.

Over the eight years Pennsylvania’s private employment level rose just 8.6 percent, slower than the average of the NRTW states and only a third as fast as the average of the five RTW states.  And this period included the tremendous surge in shale gas drilling and production.  Connecticut was the weakest of the group with only a meager 5.3 percent gain over the eight-year period.  

Second, how did the states fare for the worst COVID impact year, 2020, compared to the 2019 level?  Here again there is a large difference in jobs performance.  RTW states in 2020 for the year as a whole averaged a loss of 3.5 percent of employment from the 2019 12-month average.  On the other hand, the NRTW states suffered an average 8.6 percent drop in employment in 2020 as a whole compared to 2019, or a 2.5 times bigger loss than the RTW states.

Pennsylvania had a loss of 8.2 percent for 2020, about the average for the five NRTW states. New York was hardest hit with a drop of 11.6 percent.  Owing to a very sharp bounce back after April and May, Idaho saw a loss of only 0.4 percent for the year compared to 2019.

Third, how did the two groups compare for job declines from April 2019 to April 2020, the hardest hit month for most states? Here the difference in losses is not as stark as the first two comparisons.  But it remains substantial.  For the NRTW group of states, the April-to-April drop average was 18 percent and for the RTW group 11.8 percent. Both groups were heavily impacted by federal guidelines and the initial frightening nature of the potential health problems posed by the virus.

Pennsylvania suffered a very large 20 percent decline in private jobs from April 2019 to April 2020, the first lockdown month. Of the 10 states reviewed in this analysis, only New York posted a worse figure, with a drop of 22.6 percent.

Fourth, a comparison is made of how well the groups have moved toward recovering job losses incurred during the pandemic. This is done by looking at the April 2019 data and the April 2021 numbers, the most recent currently available.  Here the comparative performance is truly startling:  The five RTW states’ average employment change is a very small loss of 0.3 percent. Granted, some states were better than others but all were significantly better than any state in the NRTW group where the average loss in April 2021 compared to April 2019 was 7.6 percent.

Pennsylvania’s private jobs had recovered in April 2021 to a loss of 6.9 percent from April 2019. This is slightly better than the NRTW group as a whole and significantly better than New York where jobs were 10.3 percent below April 2019.

Conclusion

What are the reasons for the group average performances being so different?  For one, gubernatorial actions and restrictions were far less draconian in the RTW states. This reflects the fundamental mind set differences between RTW red states and NRTW blue states.

For one thing, NRTW blue states are far more likely to have very large and powerful public sector unions whose jobs were largely protected so closing down the private economy would not have much effect on public sector employees continuing to collect paychecks and benefits. Second, governors in the red RTW states eased restrictions much sooner and allowed business activity to resume more quickly.

This all reflects the importance of the differences in the fundamentals of attitudes toward business and personal freedom and responsibility and setting limits to government power. There can be little doubt that RTW is a key component of the success in those states in bouncing back from the COVID pandemic.

Right to Work and the Recent Election

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At the time of the presidential election in November there were 26 states with a right to work (RTW) law in place.  Three states had recently joined the RTW ranks in the years since the 2012 presidential election: Michigan in 2013, Wisconsin in 2015 and West Virginia in February of 2016. Prior to Michigan’s entry into the list of RTW states, the most recent to join was Indiana in February 2012.  When Oklahoma signed on back in 2001, 16 years had passed since Idaho voted to become RTW in 1985. Amazingly, over the last four years since 2012 more states enacted RTW than in the previous 49 years dating back to 1963.

How is this related to the election?  Twenty four of the twenty six RTW states voted for Trump.  Only two RTW states, Nevada and Virginia, voted for Clinton.  Trump carried 30 states by picking up six non RTW states, Pennsylvania, Ohio, Kentucky, Missouri, Alaska and Montana.

Now there are news reports that Kentucky and Missouri, having voted for Republican majorities in both legislative chambers as well as the governorship, will be moving quickly to pass RTW in those states and bring the total RTW states to 28.

Something is definitely happening across the middle of the country.  Ohio, Illinois and Minnesota will be the only three Midwestern states that do not have RTW protection for employees. All states having a Pacific shore line are non RTW along with all Northeastern states including Maryland, Delaware and Pennsylvania.

One wonders if Ohio with its Republican legislature and Governor will follow its neighbors to the South and West and enact RTW bringing the total to 29.  Then too, New Hampshire’s government is now under Republican control. Local news accounts suggest Republican legislators in New Hampshire will push again in 2017 to enact RTW. Several attempts have failed in the past because of vetoes or lack of adequate legislative support. Thirty RTW states would be a nice number.

After the 2016 elections Republicans will take control of both governorships and legislatures in 25 states in January.  This count is up from only ten states under Republican control prior to the 2010 elections. Five states that are RTW have mixed party control, 21 are Republican controlled.  Only six states now have Democrat control of the legislature and the governorship, down from 17 in the period before the 2010 elections. This is a massive shift in the political divide that has been accompanied by more conservative approaches to governance in a large number of states.

The recent additions and prospective pickup of two more RTW states suggest significant change in attitudes toward free market operations in the interior of the country.  The ramifications for a stronger pace of investment and startups in areas of the nation long beset by downsizing and factory closings are quite dramatic.

The fact that 24 of 26 RTW states voted for Trump is important. After all with the help of Missouri, Kentucky, Pennsylvania, and Ohio, the Electoral College vote count was well over the 270 needed. The RTW bloc, if you will, was definitely looking for some policy approaches far different from the last eight years.  RTW and conservative economic prescriptions would seem to go hand in hand.

The recent wave of new RTW laws is a very positive sign that voters have become weary of public sector unions driving government costs and taxes higher than they need to be and usurping management prerogatives.  RTW will also act as a check on private union boss greed if Trump’s plan to bring back jobs from other countries begins to take hold.  There are now so many states all over the country with RTW that geographic opportunities for investors will be greatly enhanced.

We have argued for years that Pennsylvania should enact RTW legislation.  As the number of states with RTW grows and if per chance Ohio joins the group, Pennsylvania would be under great pressure to do so as well.  It is not likely to happen in the next couple of years. But it is time for renewing the effort to get the topic moving as a major strengthening of free market economics in the Commonwealth. Industries and companies in New York and New Jersey could be ripe for the picking. No need for them to go to the Carolinas, Tennessee, Georgia or Indiana.

Preventing Tax Rate Increases in Pennsylvania

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In a growing economy with taxes levied on sales, income, and the value of real property, not to mention special levies such as business privilege taxes and fees for government services, tax revenues will normally rise with the tax rates that are in place.  Of course, confiscatory rates, evasion, loop holes and inability to pay might offset some of the expected revenue gains.  Indeed, lowering some tax rates such as capital gains tax rates can boost revenue by creating more realization of gains through selling. Or lowering U.S. corporate net income rates could lead to repatriation of overseas profits. Granted, those two are mostly national level considerations. Then too, regulatory costs and restraints can impact business and economic growth.

 

Pennsylvania has been shown to rank poorly in several areas of taxation on business by the Tax Foundation and that undoubtedly exerts a drag on the Commonwealth compared to lower tax rate states.  Certainly, the state should not be looking to make doing business and earning after tax profits more difficult through regulations and higher taxes.  But that seems to be the Governor’s office’s preferred way of going after more revenue.

 

The problem in Harrisburg, as in many state capitals, is the refusal of some to understand the need to curb and even reduce spending.  In Pennsylvania and in many other states,  public sector pensions, especially the school retirement and the state employees retirement that are heavily funded by state tax dollars, are gobbling up tax revenues at a horrendous pace and taking money that could be used for other state functions, including education expenses other than pensions.  As a result of making overly generous promises to future retirees over fifteen years ago through an increase in the payout formula and failing to adequately fund them for several years, the state is in a crisis. A crisis the Governor and his allies refuse to address in any meaningful way thereby allowing the devouring of revenue growth by the pension system’s insatiable appetite.  There will be no significant progress on the state’s budget dilemma until the pension issue is dealt with seriously.

 

Nor is there any significant effort in Harrisburg to address some other underlying drivers of exorbitant and unnecessary expenditures.  The state and other levels of government could save hundreds of millions if not billions of dollars each year by getting rid of the prevailing wage law that artificially drives up the cost of public construction in Pennsylvania. And it is grossly anticompetitive by preventing non-union contractors from bringing their cost advantages to bear.  Why not implement a staged phase out of the prevailing wage requirement over the next three or four years, lowering the gap between the prevailing  wage and market wage each year, eliminating the prevailing wage altogether in year four?

 

Next, the government should put an end to the right of teachers and transit workers to strike and then revise the law governing arbitration in police and fire labor contracts to be more in line with what other states use and along the lines spelled out in the legislation that created the Intergovernmental Cooperation Authority in Pittsburgh.  Teacher strikes are allowed in very few states and Pennsylvania has for decades led the nation in the number of strikes. The strikes disrupt education and create hardships for parents.  Worst of all they are used to ratchet up compensation and benefits as well as more favorable work rules. A union in one district gets a very generous contract by striking or threatening to strike and that contract is then used by unions in other districts as bargaining leverage.

 

Well-off districts with large tax bases that can comfortably afford rich compensation packages in labor contracts at relatively low tax rates become the standard that unions in less well-off districts can hold up as what fair pay should be.  This also leads to cries of unfairness by the education lobbies and groups who continually point to disparities in per student spending across the state.  The use of these disparities generates needless pressure for more state spending that can never eliminate the disparities as long as wealthy districts have enormous tax bases—or until the state eliminates local taxing authority for schools and funds all expenditures out of Harrisburg, an unlikely event to say the least.

 

Transit strikes allow unions to use threats to the economy as well as to public welfare to browbeat transit managers into capitulating to demands, or getting the state to toss in more money—a pattern used successfully over and over again by PAT workers.

 

Or perhaps Pennsylvania might follow the lead of Michigan and enact a right-to-work law.  Michigan enacted right-to-work for all employees other than police and fire in December 2012.  After years of languishing, private employment growth in Michigan since the bill was signed into law has more than doubled the rate in Pennsylvania. For example, from August 2012 to August 2015, Michigan jobs grew 7.6 percent, in Pennsylvania during the same period the employment count rose 3.3 percent. From August 2013 to August 2015 jobs were up 4.9 percent in Michigan compared to 2.5 percent in Pennsylvania.

 

Granted, factors other than right-to-work might be at play contributing to Michigan’s employment gains but bear in mind too that Pennsylvania’s economy was benefitting from the Marcellus Shale boom over the last three years: Michigan had no such natural resource driven economic boost. It is certainly time for Pennsylvania to begin moving toward right-to-work.

 

In sum, there are many alternatives to looking for tax rate increases and new items to tax to improve the state’s fiscal situation and its growth prospects—alternatives that are used in many other states. All it takes is a willingness to refocus the government toward cost effectiveness and respect for the taxpayers and businesses that make an economy prosper so that government can be funded. Of course, this will require reining in the power of special interest groups, especially the outsized influence of employees of government and government entities exercised on policy makers—the long running and seemingly intractable problem the Commonwealth faces.

 

Barring the enactment of the major cost savings and free market enhancements mentioned above it is incumbent on those who want a more prosperous Pennsylvania to fight any increase in taxes or new taxes unless there are; (1) true offsetting tax reductions that are broad based, (2) there is substantial pension reform and, (3) the state gets serious about working out a solution to the angst created by a school funding system that allows and/or requires local taxes in some districts to provide the lion’s share of school funds.

Has Business Executive Optimism Faded?

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In the Lincoln Institute’s Spring 2012 Keystone Business Climate Survey, executives/managers were asked about the current business conditions facing firms in the Commonwealth.  They were also asked to compare the current climate to six months ago as well as about their expectations for the next six months.  Survey responses reveal a distinct lack of enthusiasm about the current state of the economy or the prospects for the near future. 

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Pennsylvania Policies Increasingly out of Touch

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Notwithstanding its incredibly good fortune in being the home of vast natural gas deposits that are propelling much of the economic growth being experienced currently, the Commonwealth of Pennsylvania is losing its ability to compete for capital and jobs. The state has antiquated and seriously inadequate laws regarding property assessments, it faces enormous future government spending to keep its pension promises to teachers and state employees, it is a perennial leader among the states in teacher strikes, it is one of two states that still owns liquor stores, one of the state’s two largest transit agencies is in undeclared bankruptcy, and its bridges and roads are ranked among the worst in the nation.

Meanwhile, Wisconsin and Indiana have passed legislation that dramatically curtails the power of unions and their ability to drive jobs away and raise the cost of government. Neither state allows teacher strikes and in the case of Indiana has greatly expanded a voucher program to allow students choices other than failing public schools. Two things Pennsylvania has notably been unable to get done or in the case of banning teacher strikes has not come close to doing.

So, while we can congratulate ourselves for Marcellus related jobs and incomes gains and laud the powerful growth in education and health employment, it must be remembered that the extent of the state’s dependence on education and health for jobs cannot be the basis for sustained, long term economic health.

Pennsylvania must address the pension crisis, the teacher and transit worker right to strike, the state of transportation infrastructure and continue its recent efforts to contain the spending that grew so profusely under the previous administration. And if it really wants to get bold, it could eliminate the dues withholding for public sector employees and begin to talk seriously about doing with prevailing wage requirements on public construction projects. But in a state that cannot even get itself out of the liquor selling business, the much desired reforms enumerated here are probably best regarded as fantasies.

Right to Work Enters Rust Belt

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A few days before the "Big Game" the state of Indiana is poised to become the first rust belt state to enact a Right to Work law. Both houses of the state legislature have passed the bill and it now goes to the Governor for his action. Indiana would be the 23rd state in the union to be a Right to Work state.

It has been over a decade since the last state to join the ranks of the Right to Work fraternity, Oklahoma, did so. The New Hampshire legislature passed a Right to work bill in 2011 but it was vetoed by the Governor

As we pointed out last summer, private sector union membership in PA fell from 15% to 9% yet the issue of Right to Work cannot make it to the floor of the General Assembly. And the ever-present listings of "best places to do business" like Forbes shows that Right to Work states are consistently better performing than their non Right to Work counterparts. But will the change in Indiana put pressure on Pennsylvania to act?

Will Horsehead Get the NLRB’s Boeing Treatment?

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Horsehead Corporation has announced plans to move a big part of its operations from Beaver County to Rutherford County North Carolina. That move will involve building a $350 million dollar facility in Carolina and the possible loss of as many as 500 jobs in Beaver County.

The company, in explaining the decision, mentioned utility costs, logistics and development incentives. It did not mention the fact that North Carolina is a Right to Work state. Probably for good reason. In all likelihood, the union in Beaver County is already in the process of asking the NLRB to file a stop order (a la Boeing in Charleston) to prevent the plant from moving. Surely, as imaginative as the NLRB is-as it is currently constituted-will have no problem coming up with an unfair labor practice charge of some kind to justify issuing such an order.

Pennsylvania needs to make company moves of this type less attractive by enacting a Right to Work law. The state cannot depend on a new discovery of a valuable natural resource every time it needs an economic boost. Marcellus Shale might be godsend but it should be viewed as an opportunity to remove obstacles to growth in the state, not an excuse to delay doing what is right.