For most of the last decade, earnings in Minnesota and Wisconsin grew at a similar pace—until 2015. In that year, Wisconsin adopted its so-called “right to work” (RTW) law. Since then, earnings growth in Wisconsin slowed relative to Minnesota. In 2017, the average hourly earnings gap between Minnesota and Wisconsin was 42% greater than it was in 2015.
The term “right to work” is actually a misnomer, insofar as workers in RTW states have no more right to work than workers in any other state. What workers in RTW states do have is the ability to receive unions benefits without paying for them. Specifically, RTW states grant employees represented by unions the benefits of a union contract—including union-negotiated wages and benefits and safe working conditions—without having to pay any union dues. By undermining the funding base of union activities, RTW laws ultimately work against the financial well-being of all workers. The Economic Policy Institute notes that:
Wages in RTW states are 3.1 percent lower than those in non-RTW states, after controlling for a full complement of individual demographic and socioeconomic factors as well as state macroeconomic indicators. This translates into RTW being associated with $1,558 lower annual wages for a typical full-time, full-year worker. The relationship between RTW status and wages remains economically and statistically significant under alternative specifications of our econometric model… No matter how you slice the data, wages in RTW states are lower, on average, than wages in non-RTW states. As shown in great detail in Gould and Shierholz (2011), these results do not just apply to union members, but to all employees in a state.
The pattern of earnings growth in Wisconsin relative to Minnesota since the adoption of RTW laws in Wisconsin in 2015 is consistent with these findings. The Bureau of Labor Statistics (BLS) defines “earnings” as “remuneration (pay, wages) of a worker or group of workers for services performed.” On-line average hourly earnings data for private sector workers from the BLS’s Division of Current Employment Statistics (CES) is available for the period from 2007 to 2017.* In 2007, average hourly earnings in Minnesota were $23.14—$2.68 more than in Wisconsin ($20.46).
From 2007 to 2015, annual average hourly earnings growth in Minnesota and Wisconsin tracked closely. By 2015, Minnesota’s average hourly earnings surpassed Wisconsin’s by $2.60—nearly the same margin of difference as in 2007.
In 2015, Wisconsin enacted its RTW law. Since that time, average hourly earnings growth in the Badger State slowed relative to Minnesota. From 2015 to 2017, Minnesota average hourly earnings increased by $2.35, compared to a $1.27 in Wisconsin. Minnesota’s average hourly earnings in 2017 were $28.42—$3.69 more than in Wisconsin ($24.73). Within a two year period, the hourly earnings gap between the two states increased by 42%.
In 2017, average hourly earnings in Minnesota are 8.0% above the U.S. average and higher than in any other Midwest state. Meanwhile, Wisconsin’s average hourly earnings slipped 6.0% below the national average.
The extent to which adoption of RTW laws in Wisconsin is responsible for the slowing of earnings growth in the Badger State vis-à-vis Minnesota cannot be quantified. However, the reduced rate of earnings growth in Wisconsin since becoming an RTW-state is consistent with research from EPI and others that indicates that the so-called “right to work” comes at the cost of reduced wages for workers.
*On-line CES average hourly earnings information is restricted to private sector workers. This data is not available for years prior to 2007.
