Former Michigan Governor Jennifer Granholm Makes the Case for Right to Work Laws

In his weekly column, Columbus Dispatch reporter/columnist Joe Hallett writes that States need to stop poaching jobs from one another. The piece is a classic Hallett column that is long on problem citing/lamenting and short on problem solving. Hallett’s column comes from his conversation with former Michigan Governor (and beauty pageant winner) Jennifer Granholm. Unwittingly, Hallett makes the case for a policy — Right to Work — that we presume he and Governor Granholm would describe as “right-wing and extreme.”

The thrust of the column focuses on the practice of states using corporate pork to steal businesses from one another and seems to conclude by taking a swipe at Ohio Governor John Kasich. More interesting are the tidbits from Governor Granholm on taxes and regulations that Hallett throws out. Specifically, Hallett relays his conversation with the one-time beauty queen:

“With Michigan bleeding jobs and tax revenues, Granholm said she followed the corporate playbook in her attempt to close a huge state budget deficit and make Michigan more competitive. ‘In listening to the business community, I cut takes 99 times, and I ended shrinking government more than any state in the nation. In my two terms, I cut more by far than any state in the nation. And yet, we still have the highest unemployment rate. There was no correlation.’ Granholm conceded that streamlining business regulations and lowering taxes — Kasich’s economic recovery mantra — are helpful, but they aren’t a panacea…[l]abor costs, help with start-up costs and proximity to markets are other factors.”

Let’s take Governor Granholm’s statements on being Governor Less Regulation and Lower Taxes as unequivocally true (our friends at the Mackinac Center may have a different view and we encourage them to provide a clarifying comment below).

Hallett and Governor Granholm fail to mention why streamlining regulations and lowering taxes aren’t helping the northern states (located within 50 percent of the U.S. population and with low start-up costs) compete against the southern and western states. Instead, Hallett ignores the obvious answer and pleads for an end to corporate pork (with which we enthusiastically agree). The reason Michigan and Ohio can’t compete is that the southern and western states already have fewer regulations and lower taxes, so “catching up” with those states still leaves the proverbial elephant in the room weighing down the northern states. Plus, those states are also pushing for lower taxes and fewer regulations, so the northern states are perpetually behind them. The elephant, which Governor Granholm does hint at, is labor costs, or, more specifically, unionized labor costs (see: General Motors and the United Auto Workers).

As I noted in Six Principles for Fixing Ohio, “Of course, tax and regulatory burdens also impact a state’s economy. Although many of the forced unionization states have heavy tax burdens and many of the worker freedom states have light tax burdens, some heavily taxed worker freedom states (Idaho, Nevada, and Utah) had the strongest sustained job growth from 1990 to today. Similarly, a few moderately taxed forced unionization states still had weak job growth (Indiana, Illinois, and Missouri). The combination of both a heavy tax burden and forced unionization is deadly when it comes to job growth, as 11 of the 15 worst performing states are ranked in the top 20 for high tax burdens.” If Ohio and the other states from Missouri to Maine want to truly compete with Texas, Georgia, and South Carolina, then those states need to enact laws that protect the rights of workers not to join a labor union to get a job. After all, depending on the National Labor Relations Board to protect unions from competing is not a long-term strategy for success; rather, it is a short-term finger in the dike as the flood of worker freedoms washes over the dike. The Bureau of Labor Statistics’ data over the last twenty-one years shows why Right to Work laws result in more jobs.

From 1990 to 2011, states that protected the freedom of workers not to join a union to get a job netted 10,742,600 jobs — even after the massive housing and construction job losses in states like Nevada, Florida, and Arizona — as forced unionization states (including Ohio) netted just 6,715,500 jobs. Keep in mind that the vastly superior net job growth in worker freedom states was done despite having nearly 60,000,000 fewer residents! Over twenty-one years, forced unionization states had private sector job growth change of just 11 percent compared to 34 percent in worker freedom states. The top five states are all worker freedom states (Nevada, Utah, Idaho, Arizona, and North Dakota). In contrast, the fifteen states with the weakest job growth are all forced unionization states that form a block from Missouri to Maine, plus California and Hawaii.

Governor Granholm’s Michigan, by the way, ranked as the 48th worst state in the country for private sector job growth from January 1990 to March 2011. Over those twenty-one years, Michigan netted just 18,200 private sector jobs. And, yes, she is correct that Michigan lost more government jobs from 2000 to 2011 than any other state — 8 percent fewer to be exact — leaving Michigan with 618,800 government jobs, or 5,200 fewer government jobs than it had in January 1990. As for the private sector during Governor Granholm’s tenure, it lost 687,800 jobs from January 2000 to March 2011, or 17 percent. Michigan was dead last in private sector job growth. That means Michigan lost more than two times the percentage of private sector jobs as it lost government jobs

Look for our next report in mid May on Right to Work that will help folks see the forest for the trees.

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3 comments on “Former Michigan Governor Jennifer Granholm Makes the Case for Right to Work Laws

  1. Jarrett Skorup on said:

    I’m not sure former Gov. Granholm’s answers pass the smell test.

    While it is true that government employees at the state level over her term fell slightly, but the cost per worker skyrocketed.

    See here: http://www.michigancapitolconfidential.com/14745
    and
    Here: http://www.michigancapitolconfidential.com/14876

    In fact, pay and benefits are up nearly 50% since the beginning of the decade: http://www.michigancapitolconfidential.com/14328

    The analogy would be like a business firing one of it’s 10 workers, doubling the other 9 employee’s salaries, and then claiming it “cut” while the company’s overall payroll skyrocketed.

  2. admin on said:

    From James Hohman’s post on the Mackinac Center’s website (http://www.mackinac.org/12160):

    “Gov. Jennifer Granholm argues (with some remorse) that during her seven-year tenure, Michigan has cut more from its budget than any other state. The claim is dubious, but another milestone about which she does not boast is verifiable: Since Gov. Granholm’s first inauguration in January 2003, Michigan has led the nation in tax increases.

    States rely on four major taxes to finance their general operations: income, sales, business and tobacco taxes. Gov. Granholm has signed into law increases in three of these: tobacco taxes in 2004 and business and income taxes in 2007. Only two other states, Maryland and New York, have increased all three of these taxes since 2002.

    Michigan’s governor is now looking to run the table by expanding the sales taxes to include services. According to the Gongwer Michigan Report, when combined with a proposed reduction in the rate from 6.0 percent to 5.5 percent, the change is projected to extract an additional $900 million annually from Michigan residents. This tax hike would go into effect on Dec. 1, 2010, with the increased revenue gradually offset by business tax cuts phased in over the following two years.

    Setting aside the veracity of the budget cut claims, the apparent contradiction in a state being both a leader in tax increases and budget cuts is resolvable: Actual tax revenues (as opposed to rates) are largely determined by the health of a state’s economy, and Michigan’s health has been poor for going on 10 years.

    Over the next two years, the governor’s proposed sales-tax-hike-now and business-tax-cut-later will transfer an additional $881 million from the struggling private sector to state government. This will make Michigan less competitive, and is unnecessary when there are many ways to cut government operations and payroll costs.

  3. Greg Longworth on said:

    Once they are out of office they change their tune and admit that they were wrong its just like that Joe Sustake from PA now he sounds like a conservative give me a break

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