The Fraser Institute

The Fraser Institute

September 03, 2013 06:32 ET

The Fraser Institute: Ontario Facing a Looming Competitive Hurdle as Neighbouring States Adopt Worker Choice Laws

VANCOUVER, BRITISH COLUMBIA--(Marketwired - Sept. 3, 2013) - With neighbouring states enacting worker choice laws, Ontario needs to consider similar policies if it is to remain competitive, concludes a new report published today by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.

"Michigan and Indiana recently adopted worker choice laws and Ohio will likely follow. This puts increased pressure on Ontario's ability to compete, especially in manufacturing," said Jason Clemens, Fraser Institute executive vice-president and co-author of The Implications of US Worker Choice Laws for British Columbia and Ontario.

Worker choice laws, also known as right-to-work laws in the U.S., allow workers to opt out of paying union dues. A wide body of academic research has found that right-to-work laws result in lower union membership while increasing economic and employment growth.

In U.S. states with worker choice laws, unionization in the private sector is 3.9 per cent. In states without worker choice laws, private sector unionization is 10.0 per cent. Compare that to Ontario, where private sector unionization in 2012 was 15.3 per cent.

"Worker choice laws don't prevent unionization but they give workers a choice. And when workers have a choice, they choose unions less often," Clemens said.

"The result of that lower rate of unionization is higher economic and employment growth. Evidence from the United States clearly shows that states with worker choice laws experience a 1.8 per cent increase in GDP as well as a 1.0 per cent increase in employment."

In The Implications of US Worker Choice Laws for British Columbia and Ontario, authors Clemens, Niels Veldhuis, and Benjamin Zycher examine the effects of right-to-work laws in the U.S. and apply the findings to Ontario.

They conclude that worker choice laws would conservatively increase total economic output in Ontario by $11.8 billion (about $874 per capita) and increase employment by almost 57,000 jobs.

The study also looks closely at the experience of Oklahoma, which became a right-to-work state in 2001. Oklahoma provides a unique example of the effects of right-to-work policies because it shares a border with seven states, four of which adopted right-to-work laws well before it did.

A conservative application of the econometric findings in the study, combined with the data on the Oklahoma experience, suggest that a right-to-work policy would increase manufacturing output in Ontario by about $4 billion per year. Over a 25-year period, manufacturing output would be higher by more than 13 per cent.

"The evidence shows that workers and their families would have more job opportunities if the provincial government moved towards some form of worker choice policies," said Veldhuis, who is also Fraser Institute president.

"With Ontario struggling to regain its competitiveness, the absence of worker choice laws may leave the province at a disadvantage when it comes to attracting new business investment, especially in light of the changes in Michigan, Indiana and potentially Ohio."

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The Fraser Institute is an independent Canadian public policy research and educational organization with offices in Vancouver, Calgary, Toronto, and Montreal and ties to a global network of 86 think-tanks. Its mission is to measure, study, and communicate the impact of competitive markets and government intervention on the welfare of individuals. To protect the Institute's independence, it does not accept grants from governments or contracts for research. Visit www.fraserinstitute.org.

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