Right-to-Work, A Michigan Legislative Priority Come 2023?

Michigan’s Right-to-Work Law may very well be a legislative priority come 2023.

The Right-to-Work law was approved in 2012, allowing workers to opt out of paying dues in union represented jobs while still receiving the benefits of being in a union. When Right-to-Work passed Michigan was led by Republicans, but this is about to change in the State.

Following the November General Election there will now be 20 Democrats and 18 Republicans making up the Michigan State Senate and 56 Democrats and 54 Republicans making up the Michigan House of Representatives. Additionally, Democrats continue to hold the top elected seats—Governor, Secretary of State and Attorney General.

With about a month left until the 2023 legislative session kicks off there is speculation that a repeal of this law may be priority for Democrats.

What do we know about unions in Michigan?

First off, organized labor unions were created to advocate for better wages and safer working conditions for employees. In Michigan, some of the largest union organizations include the United Auto Works, the International Brotherhood of Teamsters and the Michigan Education Association.

Since 2010 the percentage of employed individuals in Michigan who are members of unions declined from 16.5 percent in 2010 to 13.3 percent in 2021, according to the Bureau of Labor Statistics.  In 2021 there were about 540,000 union members in Michigan, with an additional 80,000 wage and salary workers also being represented by a union, according to the BLS. The percentage of employees who are in unions in Michigan reached its peak in 1989 when 26 percent of the workforce was in a union. As noted earlier, Right-to-Work was passed in 2012, and union membership has not exceeded the 2012 percent of employee union representation of 17 since then.

The percentage of employed individuals represented by a union has declined in Michigan, but not as much as membership. According to the BLS, in 2021 15.3 percent of employed individuals in Michigan were represented by a union, a decline from the 17.3 percent representation in 2010 and the 16.6 percent representation in 2020.

While union membership and representation has declined over the last decade, the larger argument at the moment (or so it seems) is what would repealing Right-to-Work in Michigan do for the economy?

One argument is that Right-to-Work states have a higher probability of recruiting manufacturing companies, according to a recent Bridge Michigan article. And, while this may be the case, what will be the wages of those jobs and would they attract employees?

In terms of manufacturing jobs, establishments and wages we know that, overall, those have all increased since 2010, as is shown in the charts below with data from the Michigan Department of Technology, Management and Budget.

In 2010 there were 475,671 manufacturing employees in Michigan and by 2021 that number increased to 585,885. There was a dip in the number of employees in 2020; in 2019 there were 625,766 employees and in 2020 that decreased to 584,818. That number is starting to trend upward again.

There has been a steady increase in the number of manufacturing establishments since 2010 as well, with there being 13,860 manufacturing establishments in Michigan in 2010 and 17,837 in 2021, according to the Michigan Department of Technology, Management and Budget.

Finally, the average weekly earnings of manufacturing employees have also increased since 2010 but they have not kept up with inflation. As shown in the third chart below, the average weekly earnings of a manufacturing employee in Michigan in 2010 was $1,149, and by 2021 that increased to $1,379. The earnings in that time frame increased by 16 percent but inflation between 2010 and 2021 affected the dollar by 36 percent. In other words, the wage increases did not keep up with inflation.

As political leaders and organizations begin to layout their legislative priorities for the upcoming year it will be interesting to see what tops the list. Area news outlets are reporting that expanding the Earned Income Tax Credit and gun reform are some of the issues that will make its way to the 2023 legislative sessions. At the national level, according to a New York Times article, applications for union elections this year are on pace to approach their highest level in a decade, and according to an August, 2022 Gallup Poll 71 percent of Americans currently approve of labor unions, and 40 percent of union members say their membership is “extremely important.“

Whether or not Right-to-Work will resurface as a top issue in Michigan remains unknown though.

Small Businesses Growth in Michigan is Occurring, But at What Pace?

The growth of small businesses, or lack thereof, in Michigan varies depending on the sources.

While we know business closures have declined since the height of the pandemic and business applications continue to be submitted, anecdotes around employment in Southeastern Michigan tell a story that larger companies, which often have the capacity to offer higher wages and additional benefits, are gaining and retaining more employees than smaller businesses.

The data that we do know is that, according to a May 2022 press release from Gov. Gretchen Whitmer’s office there are 902,000 small businesses in Michigan which employ 1.9 million individuals.  We also know that unemployment in Detroit and Michigan has seen an overall decline. In September of 2022, according to the Michigan Department of Technology, Management and Budget the unemployment rate for the City of Detroit was 7 percent; the unemployment rate for the State of Michigan was 4.1 percent. These are two of the lowest unemployment rates each area has seen in over two years. When comparing unemployment rates by county between September of 2021 and September of 2022 we again see that unemployment rates for September of 2022 were down from the year prior. Overall, Livingston County had the lowest unemployment rate of 2.1 percent in September of 2022 and Wayne County experienced the largest decline with its unemployment rate changing from 7.3 percent in September of 2021 to 4 percent in September of 2022.

While low unemployment rates are one sign of a strong economy, according to a recent Detroit News article, 88 percent of respondents in a Goldman Sachs survey said small businesses are struggling compared to larger businesses. The reason? According to the survey, 42 percent of respondents said they lost employees to larger businesses that are paying more. With inflation continuing to rise, this is not surprising.

However, despite such challenges laid out by survey respondents, according to the 18th Annual Small Business Association of Michigan Entrepreneurship  Score Card, since 2020 small businesses in Michigan have outperformed the U.S. as a whole in terms of percent growth in businesses open and business revenue.

According to the scorecard, between January of 2020 and Feb. 6, 2022 small businesses in the State of Michigan have opened at a rate of 8.5 percent. In the U.S. small businesses have opened at a rate of 3.1 percent in that time frame. The Michigan rate represents an increase in small business revenue of 24.2% compared to 8% for the U.S., the report stated.

As displayed in the first chart below, the Southeast Michigan Council of Governments (SEMCOG) obtains data for the U.S. Census Bureau on small business applications in Michigan. According to this data, there 730 High-prosperity Business Applications during the week of November 18, 2022 and 250 Small Business Applications with Planned Wages. While the data for each category can shift somewhat dramatically from week-to-week, there is an overall trend of business applications in Michigan increasing since September of 2022 yet decreasing from both earlier in 2022 and since the beginning of the pandemic.

According to SEMCOG, high-Propensity Business Applications (HBA) are applications for a federal Employer Identification Number (EIN) where the characteristics of the application indicate that it is more likely to form a business with payroll. Businesses Applications with Planned Wages (WBA) are a subset of HBA that indicate a first wages-paid date, increasing the likelihood that such a business will have a paid employees.

While the data shows businesses continue to open in Michigan, business closures slowed through April of 2022 (The last time such data was available through SEMCOG) compared to early on in the pandemic. According to SEMCOG data obtained from through the Census Bureau’s Small Business Pulse Survey, 4.3 percent of the 900,000 single-location businesses sample size closed during the week of April 9, 2022. The highest percent closure of this sample size was 9.2 percent during the week of November 20, 2020.

One way to help keep small businesses open is to shop local. This is the goal of Small Business Saturday, which occurs the Saturday after Thanksgiving. This is a campaign that American Express began in 2010 to help support small businesses in the midst of the Great Recession. It has certainly seen success over the years, with 51 million shoppers in the U.S. spending more than $23 billion at small businesses in 2021, according to American Express. However, the real takeaway here should be that for every $1 spent at a small business, it is estimated that $0.68 of those funds remain in the local economy (or, for every $100 spent, $68 remains in the local economy). This is something we should consider as part of our regular shopping habits, and not just one day a year.