Today’s News Journal article “Seeking Delaware manufacturing jobs, GOP targets unions” talks about the concept of a “right to work zone”, which differs from Right to Work in that RTW laws covers whole state while a RTW zone covers only a specific geographic area. Senator Greg Lavelle has proposed one this year; he did the same last year.
As expected, the unions were out in full force against it:
“Sam Lathem, president of the Delaware AFL-CIO, the umbrella organization representing Delaware unions, called Lavelle’s legislation a “desperate reach” that would lead to lower wages.
“We need to find a way to re-create and grow the middle class. Right-to-work isn’t going to do that,” Lathem said.”
The News Journal article pointed out the problem, though whether John Starkey intended to do so is another idea.
“Now Republicans are reviving a proposal they hope will revitalize Delaware manufacturing. But the plan, which would make it harder for unions to organize, is controversial and deeply polarizing in a state where the governor’s office and the General Assembly are controlled by Democrats, who still count union members among their staunchest base supporters.
Markell, a Democrat, appears poised to oppose the legislation. A spokeswoman said available studies on whether right-to-work legislation creates jobs are “inconclusive at best.”
“Gov. Markell remains focused on efforts that employers tell him are most important for job and economic growth, such as providing training for a skilled workforce and spurring innovation,” spokeswoman Kelly Bachman said.”
To quote from Hamlet, “Ay, there’s the rub.” You can see very quickly why even just a zone- not the whole state, but an area to try this idea out- is considered a threat to organized labor and those who benefit from it.
Here’s the summary of the Law, SB 54:
“This Act allows the Director of the Delaware Economic Development Office to create right-to-work zones as part of its inducements to bring new businesses to Delaware and requires these zones to be offered for manufacturing businesses hiring at least 20 employees. It also exempts those manufacturing businesses from their gross receipts taxes for their first 5 years.”
Let’s talk about these zones. Suppose GM’s former plant on Boxwood road was turned into a right to work zone, along with say 1000 square acres surrounding the plant’s legal boundaries. Only businesses locating in these zones would be able to receive the benefit, and with only 1000 square acres there would be a limit. However, those businesses which do receive a space in the RTW zone would be able to avoid the problems which modern day labor unions bring: namely, the political activity (including which many union members may not agree with) and the pressure to give workers more money and benefits even if the company is unprofitable or if doing so makes the company unprofitable. They can make an effort to grow manufacturing and if the effort succeeds, then more zones can be replicated, or perhaps if the General Assembly and Governor see the benefit of one, they can enact a RTW law for the entire state.
On the chance the law is not beneficial, or even proves detrimental, the zone can be removed and the rest of the state is unaffected or the law can be repealed if the zones are a failure.
Now, other factors will affect the success or failure of these zones. Notice that the gross receipts tax would not apply for five years. This is because our state’s gross receipts tax is a job-killer; businesses who meet a certain income threshold pay a tax on all revenue over the threshold, not counting profit and loss. So even if your business has a bad year, you still get socked with higher taxes.
Electricity is expensive in this state, about 23% higher than the national average. Plus, the crime reputation for Wilmington, and to a lesser extent Dover, absolutely gives a negative vibe to outsiders looking to relocate a business or build a new factory. Don’t let anyone tell you Wilmington’s crime problem isn’t hurting the reputation of the entire state.
But RTW zones might give the state a chance to attract capitalists without having to “invest” (subsidize) large businesses to move here, because most of the biggest “investments” go to major companies like Fisker, Bloom, Kraft, etc.. If you owned a casual sit-down restaurant, and the only way you could get customers is to pay them anywhere from $30-50 to get them into the store, who is going to look at customers coming in and say “yes, this is a successful restaurant” just because a few customers are inside your restaurant now?
We hope the state will look at ways to improve our economic climate, to attract businesses and “job creators” of all types, from start-ups to established companies, from sole proprietorships to multinational corporations, to anyone who has job opportunities for Delawareans and is willing to invest in our state for the long-term. These goals are achievable, they work, and they offer a new chance to get our economy going again.
By the way, the courts have found right to work zones are legal. What is not currently legal (and is being challenged) is right to work at the County/City level. This is due to how local government entities are structured.
Lastly, if you need more proof that manufacturing in Delaware is in serious trouble:
Delaware manufacturing employment
Source: U.S. Department of Labor, Bureau of Labor Statistics
Yes, we have lost roughly 40% of our manufacturing jobs, and most of these workers are NOT in a private sector labor union, which has even lower numbers. Given the situation, what can and should unions do to keep their members supporting their unions? How could union leaders improve their offering which helps both workers and employers?
In our next blogpost, we’re going to introduce a new concept called “Union Economies”. This idea is pretty interesting, and it comes from our friends at the Mackinac Center.
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