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June 2012
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Right-to-work law an important economic tool

By JIM WATERS The Bluegrass Institute

Respected economists Arthur Laffer and Stephen Moore claim the most important tools in a state's economic toolbox are a right-to-work law and lower taxes.

The economists' analysis of states with humming economies versus those with sputtering ones - along with the experience of Kentucky's economic development experts - seem to confirm their assertion.

While I recently showed in this column that states with the largest union membership increases in 2013 also were right-to-work states, Laffer and Moore highlighted new Census Bureau data revealing that the same "tool" also positively impacts population growth.

They conclude: "The South and Sunbelt regions of the country continue to grow, while the Northeast and Midwest continue to shrink."

According to Laffer and Moore, Raleigh, Austin, Las Vegas, Orlando, Charlotte, Phoenix, Houston, San Antonio and Dallas were among the fastest-growing areas last year while Cleveland, Detroit, Buffalo, Providence and Rochester were among metro areas suffering the biggest population losses.

The growing areas in their list contain stark similarities, as do those with significant declines: Population growth is happening in right-to-work areas while those that deny that individual liberty are losing out.

The economists observe that the fastest growing states "are following the Reagan model by reducing tax rates and easing regulations. They also offer right-to-work laws as an enticement for businesses to come and set up shop."

States losing population, meanwhile, "are implementing the Obama model of raising taxes on businesses and the wealthy to fund government 'investments' and union power."

Which model does Kentucky embrace?

Hint: Between 2002 and 2012, the population of 25-34 year-olds in right-to-work states grew by a robust 11.2 percent while Kentucky lost 1.1 percent of that same population group.

Laffer and Moore state: "The contrast sets up a wonderful natural laboratory to test rival economic ideas."

It also gives governors of robust states opportunity to challenge states, like Kentucky, where political leaders - particularly in the governor's office and House of Representatives - refuse to support lower taxes and right-to-work laws.

Texas Gov. Rick Perry was doing just that recently in his speech at a Lincoln-Reagan Day Dinner in Murray.

"I can promise you: I get up every morning and I'm nervous about what (Gov.) Bobby Jindal's doing in Louisiana, and I know for a fact that Rick Scott's over there in Florida looking at his tax code, his regulatory code; he's trying to pass major tort reform in Florida today. It makes me nervous," Perry said. "But you know what? I don't worry about Kentucky. â ¦ You think (Tennessee Gov.) Bill Haslam's not sitting down there, kind of looking up here going 'which of those businesses am I going to come get this time' because he's a right-to-work state, he doesn't have a personal income tax."

Florida Gov. Scott last year invited Kentucky businesses to purchase "one-way ticket" to his state while touting its low tax rates and business-friendly atmosphere.

But it's not just governors of other states that understand how empty a toolbox is without a right-to-work policy.

"Our economic developers deal with it every day, and we talk about our toolbox - what we have in our communities, what we have to help build and create those jobs in Kentucky and to have that capital investment," said Hal Goode, president and CEO of the Kentucky Association of Economic Development, while announcing his organization's support for a right-to-work law.

"And while there are opposing viewpoints that cite a variety of contradictory economic statistics to favor their position, the reality for the professional economic developer is very clear: all too often Kentucky is not even considered or is quickly eliminated from consideration for new or expanded business projects that are out there," Goode said.

Jim Waters is president of the Bluegrass Institute, Kentucky's free market think tank.

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