INDIANA, like many manufacturing states in the Midwest, has long felt the pain of seeing jobs go overseas. In his seven years as Republican governor, Mitch Daniels's response has been to offer a strong diet of pro-business legislation. In the past few years Indiana has cut its corporate tax rate by nearly 25%, established one of the highest R&D tax credits in the country and started work on a $10 billion infrastructure-improvement plan.
Until recently, though, Mr Daniels had resisted calls to make Indiana what is known as a “right-to-work” (RTW) state. RTW legislation allows employees to decide whether to financially support a union. Without such laws unions can insist that all workers pay dues to help fund the cost of negotiating a contract with an employer, whether or not they wish to formally join the union. Now, however, Mr Daniels says he believes the state needs to sign up as well. The new legislation was passed by the state Senate on February 1st and was signed by Mr Daniels that very day, making Indiana the 23rd RTW state in America—and the first such state in the nation’s old manufacturing belt.
Proponents argue that it is wrong to force anyone to contribute money to a union. Unions counter they face a “free rider” problem whereby non-affiliated workers receive the benefits of union negotiations without contributing financially. The governor, meanwhile, says the new laws will simply make the state more attractive to business.
Evidence from the Indiana Economic Development Corporation suggests that many employers do indeed want these laws. This group says that somewhere between a quarter to a half of companies in the state planning to relocate insist upon going to RTW states.
Few companies, though, are willing to go on the record to say exactly why they prefer to locate in RTW states though the reason is pretty obvious—in a nutshell, they make for weaker unions. It is a sensitive subject and companies fear picketing and other similar reprisals. However, Remy International, an electrical-engineering company based in Pendleton, Indiana, has stated that it plans to build another factory in America some time next year: but that in the absence of RTW legislation it will not build it in Indiana.
In an interview with Stateline, a news service that looks at trends in state policy, a vice-president of Remy, Jay Pittas, argued that RTW legislation makes it easier to negotiate flexible work rules, and means that unions are more likely to agree to a merit-based system of employment rather than a one based on seniority. The company, however, now declines to comment further on the subject.