Gessing provides expert testimony as “right to work” bill passes first House Committee in bi-partisan vote

Today in the House Business and Employment Committee, HB 75 which would make New Mexico the 25th state in the nation to adopt “right to work” legislation, passed with bi-partisan support. Rio Grande Foundation president Paul Gessing provided expert testimony which can be seen below. Next up is House Judiciary Committee:

Thank you for the opportunity to testify on the issue of whether to make New Mexico a “right to work” state. I believe that this is the most important single issue being addressed during the 2015 legislative session and I am pleased to be here.

Before I get started telling you what “right to work” is, I’d like to share with you what it is not.

“Right to Work” is not anti-union. Such laws simply restore individual choice over whether to join or not join a labor union. Moreover, federal law does not obligate unions to represent non-members. The National Labor Relations Act allows unions to sign “members’ only” contracts that apply only to dues-paying members. In 1938, the Supreme Court expressly upheld union’s ability to negotiate only on behalf of members. As William Gould, chairman of the NLRB under President Clinton, wrote, “the law now permits members-only bargaining for employees” — unions can exclude non-members from their contracts.

The second thing that “right to work” is not is that it is not an economic panacea. Supporters of the law hope that by adopting such a law New Mexico will be more economically-competitive. There is ample data to show that businesses, especially those providing high-paying jobs for skilled workers, tend to locate new facilities in “right to work” states far more often than they do in non-RTW states.

How do we know this? There are reams of data showing that RTW states create more jobs, are seeing faster population growth, and are experiencing faster personal income growth than their non-RTW brethren. And, while median incomes are higher in non-right to work states, once the cost of living is factored in, median incomes in RTW states are about $5,000 higher than in non-RTW states.

I’m happy to go into that data with the Committee in detail, but let’s look at real-world businesses and the site selection professionals who help businesses locate for a living.

The first and most famous case involves the airplane manufacturer Boeing which is primarily located in Washington State, a non-right to work state. In 2009, Boeing broke ground on a facility near Charleston, in South Carolina, which is a RTW state. The facility is expected to generate 3,800 jobs and invest $750 million over the next seven years.

Boeing’s move generated a great deal of controversy, but it was clearly a decision made in part to avoid future facility shutdowns. It is worth noting that Boeing’s employees are highly-skilled and well-paid. Boeing was not moving in search of lower wages, but to avoid having its technology and resource-intensive assembly lines beholden to frequent strikes.

Notably, Airbus, the European conglomerate and main competitor to Boeing, has 9 US facilities. As seen in Figure 1, only its Washington, DC-based government affairs division is located in a non-RTW state. Airbus could have chosen anywhere in the US to build its facilities having entered the market in 1990. It chose RTW.

They are not alone. Another foreign aircraft manufacturer, Embraer which makes regional and corporate jets, also could have built anywhere in the US. They chose RTW Florida as the location for not one, but two manufacturing facilities employing a total of 1,000 workers.

Of course, aviation is not the only manufacturing industry that favors RTW states. Even if Michigan’s shift to RTW is not included in the data, as Figure 2 illustrates, automobile manufacturing is increasingly moving to states that have RTW laws on the books.

It is no accident that manufacturers, especially those building new facilities, are choosing to locate in RTW states. After all, the people they trust to help locate their businesses also believe in the importance of RTW.

I just discussed the auto industry’s shift to RTW states. New Mexico was recently in the running for Tesla’s “gigafactory” which wound up choosing RTW Nevada for its facility. John Boyd, the principal at his namesake site selection firm said of New Mexico’s chances to lure Tesla “manufacturing companies look for reasons to scratch off states when considering where to build major facilities — and no right to work law is at the top of the list.”

Boyd also said, “I can’t underscore how critical right to work status is.” In conclusion, Boyd again reiterated the dire need for a right to work law in New Mexico saying, “New Mexico has enormous potential to become a manufacturing hub, especially if it were to adopt right to work legislation.”

Boyd is not alone. When Michigan went “right to work” in 2013, Site Selection Magazine interviewed several site selection experts on the issue. The following comments, all from professional site selectors relating to a real-world law passing indicate strong support for “right to work” laws:

Said Jason Hickey, principal of Hickey & Associates in Washington, D.C., “We believe there will be an enormous impact, especially for medium-tier companies who are poised to grow.”

Tracey Hyatt Bosman of BLS & Company in Chicago calls Michigan’s adoption of RTW “a dramatic demonstration of the state’s commitment to the transformation of their business environment.”

Bosman echoes other site consultants when she adds, “Some companies simply insist on locating in a right-to-work state. Michigan’s new legislation removes a roadblock and will bring the state’s extremely skilled work force into consideration for more projects.”

It was hard to find anyone in the site selection profession who saw a downside. Michigan’s swift reversal of decades of labor law.

Said Brent Pollina of Pollina Corporate Real Estate in Chicago, “Where it will have an effect is when there are companies who are looking for locations. Michigan will no longer be eliminated because they are not a right-to-work state. As a result, there should be a significant increase in the number of projects that Michigan receives because they are no longer being eliminated at the early stages of searches. The change also sends a strong signal to business and industry.”

As with any issue, if you look hard enough you can find those who will say RTW is “ineffective” or “not a factor” in businesses’ location decisions. However, I have never heard an economic development expert say RTW was a negative.

In conclusion, RTW costs taxpayers nothing. And, at a time when Washington is no longer a reliable base for our economy and with dramatically-reduced oil prices impacting our states’ most significant economic bright spot, there is no better or more important time for New Mexico to adopt a Right to Work law.

It is not a panacea, but a serious starting point for developing New Mexico’s under-developed private sector.

Thank you for your time and attention.