New Michigan legislature considering 3 job-killing policy changes
With Michigan unemployment already higher than peer states, lawmakers are considering policies likely to hurt the state's economy
On Nov. 9, AFL-CIO, one of Michigan’s largest public sector labor unions, was celebrating.
AFL-CIO President Ron Bieber issued a press release stating, “Michigan’s labor movement helped elect an unprecedented wave of pro-labor leaders on Tuesday… We now have the opportunity to repair the damage Republican leaders have done to our great state, and we are ready and eager to get to work.”
For better or worse, the newly elected lawmakers will change the disposition of state government. Michiganders and lawmakers alike will need to be vigilant, as misguided labor laws often mean higher prices, heavy government involvement in the workplace, and – ultimately – worsening job creation.
To begin, there are three major initiatives new lawmakers will likely be debating in some form over the next two years:
Right to work
Michigan has been a right-to-work state since 2013, which means laws are in place to prevent workers from being fired for choosing not to pay a union. With the change in power in the state legislature, the policy is expected to be under threat.
Democratic leaders, including House Speaker-elect Joe Tate, D-Detroit, have expressed their opposition to the law. Tate has stated that right to work has “negatively impacted the state.” He went on to say, “Obviously, labor has been (and) is a part of the fabric of the state of Michigan. Our workers here should be supported and treated with dignity as well in the work that they do.”
State Sen. Dayna Polehanki and other state legislators took to Twitter to say that repealing the law will be a priority.
Their support goes all the way up to Michigan’s executive. When Gretchen Whitmer ran for governor in 2018, her economic platform called for overturning right to work, and she stated the law “had nothing to do with rights or work.”
Before they allow legislators to repeal the state’s right-to-work status, Michiganders should consider that right-to-work states hold a steady advantage in job creation and retention. Data shows that states with right to work laws attract business owners, giving them a larger share of jobs in sectors such as manufacturing, construction, utilities and information. Research also shows right-to-work states have higher income growth and jobs growth than states without right-to-work protections.
When looking for where to open a business, employers clearly factor in whether or not a state is right to work. Repealing the statute can be seen as a deterrent to businesses.
The availability of jobs makes right-to-work states a magnet not only for businesses but also for workers and families. Economics professor at the University of Kentucky, Kenneth Troske said right-to-work laws help states attract businesses because they “[send] a signal to businesses that, as a state, we are trying to make ourselves more open and friendly and flexible as possible for businesses that want to locate here.”
Prevailing wage
Prevailing wage laws require private employers to pay workers – whether they are union workers or not – higher-than-market wages for taxpayer-funded projects. The law forces private employers to pay close to union rates for work rather than a market rate. This law reduces job opportunities in the private sector by making it financially impossible to hire more staff.
Since prevailing wage requirements cost private employers more, they cost local taxpayers more, too, as the additional labor cost for a job can still be passed on to the local government. This prevents local governments from getting the most value out of limited resources – forcing property taxpayers to pay more for the same quality of work, since local construction codes and safety standards apply regardless of prevailing wage.
In many cases, local contractors will simply not bid on a project to avoid dealing with the burdens of prevailing wage requirements. This means fewer jobs to put people to work in local communities.
Tax Hikes
New tax hikes would not just harm big companies, but also thousands of small businesses. New taxes will take away the money independent employers could have used to expand, hire and invest in local economies still recovering from the economic shock of the pandemic-related shutdowns.
A tax hike would also hurt workers. One study found that increasing various taxes, including the corporate rate, would cause both employment and GDP to decline.
Economists have found that workers bear some part of the corporate tax, and the owners of businesses shoulder the rest. These owners, of course, include every family with an IRA, pension plan or other savings. The nonpartisan Joint Committee on Taxation estimated that workers bear 25% of the corporate income tax. Other estimates have concluded that workers bear 50% or more of the corporate income tax burden.
Whitmer has proposed $2.5 billion in new taxes and fees while vetoing multiple tax credits. Gas taxes are scheduled to increase on January 1, which will cause consumers to feel even more pain at the pump than they currently do.
As Michigan moves forward, taxpayers should be vigilant about the policies being proposed in Lansing. To thrive, Michigan’s families need their legislators focused on policies that grow the economy and create jobs, not ideologically-driven policies to appease special interests, government intervention in business, and new tax increases.
As a new legislature begins to form its policy agenda, it is important to recognize that achieving economic growth and creating jobs depends heavily on the state’s fiscal policies. At Mighty Michigan, we advocate that policymakers make job creation a top priority, and oppose legislation that will inhibit growth. We will continue this advocacy as the new legislature begins to roll out a policy agenda.