State of the Week: Will Missouri Become a Right-to-Work State?

By SBE Council at 7 November, 2016, 2:16 pm

by Raymond J. Keating-

Small Business Policy Index 2016: Missouri ranked 24th among the 50 states.

SBE Council’s “Small Business Policy Index 2016” ranks the 50 states according to 50 different policy measures, including a wide array of tax, regulatory and government spending and performance measurements.

Small Business Tax Index 2016: Missouri ranked 23rd among the 50 states.

SBE Council’s “Small Business Tax Index 2016” ranks the states according to 25 different tax measures. Among the taxes included are income, capital gains, property, death, unemployment, and various consumption-based taxes, including state gas and diesel levies.

Why “Right-to-Work” Matters

Currently, 26 states rank as right-to-work states, with West Virginia being the latest state to pass a right-to-work law.

What does that mean? As explained in SBE Council’s “Small Business Policy Index”:

“A right-to-work state means that employees generally are not forced to become labor union members or pay dues to unions. Such worker freedoms offer a more dynamic, flexible workforce, and a more amenable environment for increased productivity and improved efficiency.”

Missouri is not a right-to-work state, but that could change depending on the outcome of the governor’s race in November.

As reported by St. Louis Post-Dispatch, “If Republican nominee Eric Greitens is elected on Nov. 8, Missouri will almost certainly, almost immediately become America’s 27th ‘right-to-work’ state. If he isn’t, it probably won’t.” The state’s legislature passed a right-to-work law in 2015, but failed to override the veto from Governor Jay Nixon, a Democrat who is term limited.

Given the hostility to right-to-work laws by labor unions, this is a key issue that has raised the national visibility of the contest between Republican Greitens and Democratic Party nominee Chris Koster. National labor unions are laser-focused on this race.

In the end, entrepreneurs, businesses, workers and citizens in right-to-work states reap an assortment of rewards. A June 2015 NERA Economic Consulting study reported:

• “There is a large body of rigorous economic research on the effects of RTW laws on economic performance. Overall, that research suggests that RTW laws have a positive impact on economic growth, employment, investment, and innovation, both directly and indirectly.”

• “RTW laws directly affect economic performance through their impact on business location decisions, especially in heavily unionized industries such as manufacturing.”

• “RTW laws do not lead to lower average wages in either unionized or non-unionized industries. There is some evidence that the long-run effect of RTW laws is to raise wage rates as a result of increased productivity.”

• “Private sector employment grew by 17.4 percent in RTW states between 2001 and 2013, more than double the 8.2 percent increase in non-RTW states.”

• “Output has also grown faster in RTW than in non-RTW states, rising by more than 30 percent between 2001 and 2013, compared to 20 percent in non-RTW states. Seven of the 10 states with the largest growth in real output over this period are RTW states.”

• “The gap in manufacturing output is even greater — real manufacturing output rose by 35 percent in RTW states between 2001 and 2013, compared with 19 percent in non-RTW states.”

• “Higher growth rates translated into higher personal incomes: personal income in RTW states rose by nearly twice as much as in non-RTW states between 2001 and 2013 — 27.7 percent vs. 15.3 percent.”

Whether or not a state is a right-to-work state matters, and this election will tell the story in Missouri.

Other Key Points on Missouri

• Missouri imposes a relatively low property tax burden.

• Missouri imposes low gas and diesel taxes.

• Missouri imposes no state death tax.

• Missouri imposes a fairly low energy regulation burden.

• Missouri has the second lowest level of state and local government spending.

• Missouri ranks fairly well in terms of highway cost efficiency.

• Missouri has a relatively high crime rate.

• Missouri has fairly poor protections against eminent domain abuse.

• Missouri ranked 12th among the states in terms of electricity costs, according to an SBE Council analysis.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP: The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website here.