March 10, 2013

Right-to-work states may have edge

Paul Grasso, Just Sayin'

— Let me begin this column by stating that it’s neither pro-union nor anti-union.

It’s a column about economic development and competitiveness in a changing business environment. A business environment where attracting both direct foreign investment and manufacturing operations that are returning to the U.S. is becoming more competitive every day.

It’s about New York competing with right-to-work states.

Right-to-work legislation doesn’t prohibit forming a union; it allows a worker a choice as to whether or not to join the union.

In January, Michigan became the 24th state to enact a right-to-work law. Many viewed the Michigan legislation as “anti-union legislation,” and it might have been. Others viewed it as Michigan’s strategy to gain a competitive advantage (primarily against Ohio) to attract new investment and to create jobs in Michigan.

Is right-to-work a competitive advantage? Business leaders seem to think so.

According to the Indiana Economic Development Council, subsequent to Indiana enacting right-to-work legislation in February 2012, 200 companies have announced that they would move to Indiana or expand existing operations; half cited the right-to-work legislation as influencing their decision.

Last June, Forbes announced its top ten “Best Places For Jobs And Careers.” Nine of the top-ten cities were in right-to-work states.

In response to Michigan adopting right-to-work legislation, the president of the Indiana Chamber of Commerce said, “In 30 to 50 percent of projects and investment, if you’re not a right-to-work state you don’t even get a chance to step in the batter’s box and take a swing. Indiana would have been happy to be the only right-to-work state in the Midwest for a long, long time.”

Business leaders in Pennsylvania believe that becoming the first right-to-work state in the northeast will give Pennsylvania its competitive advantage. Nate Benefield of Pennsylvania’s free-market Commonwealth Foundation said, “Indiana and Michigan are states that we directly compete with. We’re playing catch-up, but our immediate neighbors, New York and New Jersey, are even less competitive than Pennsylvania is.”

On the flip side, union leaders argue that while companies benefit by being in a right-to-work state, workers may not benefit. Wages in right-to-work states are generally lower than in unionized states, about 10 percent lower.

They also argue that it is difficult to distinguish the effect of right-to-work laws because companies make decisions on a host of factors, such as incentives, energy costs and infrastructure.

Since the odds are better that I’ll score a date with Heidi Klum before New York becomes a right-to-work state, if right-to-work is a game changer, how does New York improve its competitive advantage?

To be more competitive, New York needs to refine its value proposition, the compelling reason why a business should locate or remain here. The value proposition needs a strong messaging effort as well. The state closing its office in Quebec at a time when other states are opening or expanding their offices in Quebec doesn’t really send the right message.

Improving its business environment is going to require New York to become more competitive with its tax structure, its workforce-development programs and its incentive programs (which have been under attack recently, and rightfully so. Incentives shouldn’t be give-away programs. They should be partnerships in which there’s a shared risk and a shared reward), the trifecta for companies looking to locate or expand.

In the governor’s reorganization of the Empire State Development Corporation, he announced the newly created position of vice-president for business attraction, which is great, but it may be more important to create a position of vice-president for business retention and expansion. Economic developers report that 80 percent of a region’s net new job growth comes from existing businesses.

It only makes sense to focus on companies already here to ensure that we keep them here and help them grow. If we take them for granted, we do so at our own peril.

New York needs a business environment where it’s easier for existing businesses to succeed; a business environment that new businesses will find compelling enough to want to locate here.

However, at the end of the day, if companies are using right-to-work status as a gatekeeper in their decision-making on where to locate, New York may not get many chances to “step in the batter’s box.”

That isn’t pro-union or anti-union; it’s simply the reality.

Paul Grasso is the president & CEO of The Development Corporation, Clinton County.