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Right-to-Work Laws, Unionization, and Wage Setting

aUniversity of British Columbia, UK
bUniversity of British Columbia, Canada
cUniversity of Warwick, UK

50th Celebratory Volume

ISBN: 978-1-80455-126-4, eISBN: 978-1-80455-125-7

Publication date: 23 January 2023


This paper uses two complementary approaches to estimate the effect of right-to-work (RTW) laws on wages and unionization rates. The first approach uses an event study design to analyze the impact of the adoption of RTW laws in five US states since 2011. The second approach relies on a differential exposure design that exploits the differential impact of RTW laws on industries with high unionization rates relative to industries with low unionization rates. Both approaches indicate that RTW laws lower wages and unionization rates. Under the assumption that RTW laws only affect wages by lowering the unionization rate, RTW can be used as an instrumental variable (IV) to estimate the causal effect of unions on wages. In our preferred specification based on the differential exposure design, the IV estimate of the effect of unions on log wages is 0.35, which substantially exceeds the corresponding OLS estimate of 0.16. This large wage effect suggests that RTW may also directly affect wages due to a reduced union threat effect.




We would like to thank Solomon Polachek, Konstantinos Tatsiramos, and two anonymous referees for their comments on an earlier draft of the paper, and the Social Science and Humanities Research Council of Canada for research support.


Fortin, N.M., Lemieux, T. and Lloyd, N. (2023), "Right-to-Work Laws, Unionization, and Wage Setting", Polachek, S.W. and Tatsiramos, K. (Ed.) 50th Celebratory Volume (Research in Labor Economics, Vol. 50), Emerald Publishing Limited, Leeds, pp. 285-325.



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