Institute for Research on Labor and Employment

The empirical literature on the wage effect of 'right-to-work' (RTW) legislation remains fairly ambiguous with studies producing contrasting results. In this article, we address this issue by exploring the impact of RTW on wage heterogeneity between socio-demographic and occupational subpopulations in the U.S. Using data from the 2012-2014 Current Population Survey, we employ two analytical techniques for estimating the wage effect of RTW legislation. First, we utilize multi-level regression to observe the effects of state-level RTW legislation on individual hourly earnings and wage differences while controlling for socio-demographic and occupational characteristics of individual workers as well as developmental and regulatory characteristics of states. Second, we utilize propensity-score matching (PSM) to observe the wage difference between similar workers located in RTW and non-RTW states. According to estimates from the fully specified multi-level regression models, private workers in RTW states earn 1 percent less than workers in non-RTW states. However, according to estimates from the PSM approach, private workers in RTW states earn about 6 percent less than similar workers in non-RTW states. The results show RTW legislation reduces hourly wages, but the magnitude of the wage effect is dependent on the specification of regression models and the statistical approached use to estimate the treatment effect of RTW legislation. Additionally, we also find RTW both suppresses and exacerbates existing wage inequalities between socio-demographic subpopulations.