The impact of right-to-work legislation on foreign manufacturing employment in the United States

ABSTRACT

This study investigates the impact of right-to-work (RTW) policy on the growth of manufacturing employment in the United States. Of particular theoretical interest is the impact of RTW law intervention on manufacturing employment by foreign investors, compared to changes in the general patterns of manufacturing employment. Using the U.S. Census Bureau’s County Business Patterns data and the Bureau of Economic Analysis’s Foreign Direct Investment in the U.S. data, we compare changes in the number of total and foreign manufacturing jobs in Indiana, Kentucky, Michigan, West Virginia, and Wisconsin, five states that recently passed RTW legislation, with those in non-RTW regions. Results show that new RTW regions experience more growth in total manufacturing employment than non-RTW regions. In addition, foreign manufacturing employment also grows larger in new RTW regions than in non-RTW regions and to a greater extent than domestic manufacturing employment. We attribute these findings to foreign firms’ efficiency-based goal orientation and their footloose-ness.

KEYWORDS:

• Labour market policy
• regional development
• foreign direct investment
• manufacturing employment
• right-to-work legislation
• government intervention

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 We define the Midwestern U.S. states based on the U.S. Census Bureau region definition.

2 The RTW bill was passed in 2017 but did not take effect due to voters’ strong opposition.

3 https://www.transit.dot.gov/regulations-and-guidance/legislation/arra/american-recovery-and-reinvestment-act-arra