The Competitive Edge and Right-to-Work
Passage of right-to-work laws in competing states takes the edge off the South’s non-union advantage in industry recruitment. Other assets become more crucial — such as high-tech skills stacked on top of a non-union culture.
Marcel Debruge, a partner with law firm Burr & Forman, advises companies North and South about labor issues.
Photo by Randal Crow
Last December, Michigan, a longtime hub of the nation’s auto industry, became the 24th state to pass right-to-work legislation. Gov. Rick Snyder signed into law two bills banning mandatory union membership for public- and private-sector employees as a condition of employment. The bills also forbid unions from requiring workers to pay dues.
Michigan is the second Midwestern state to adopt right-to-work after Indiana approved a similar measure last February. Right-to-work laws weaken labor unions, like the United Auto Workers (UAW), because they require unions to represent every company employee, whether they’re dues-paying members or not. The UAW’s membership, which reached more than 1.5 million at its peak in 1979, has fallen to just over 380,000 today.
Experts agree that other heavily unionized Midwestern and Northeastern states could eventually pass right-to-work laws to lure car manufacturers and other companies that want to locate where unions are less powerful, like Alabama, which adopted right-to-work legislation decades ago. Alabama has enjoyed an emerging car industry since the late 1990s. But some analysts say that as more states join the right-to-work bandwagon, Alabama and other Southern states will have to compete harder to attract auto-related manufacturing companies.
“The Southern states, broadly, won’t be able to promote that issue [right-to-work] the way they have been able to in the past,” says Bill Visnic, senior editor at Edmunds.com. “In the long run, it will transform the landscape some, but there’s not going to be some giant boom in car manufacturing anytime soon, as far as we know. The environment will remain reasonably static. The most potentially direct effect will be for some time in the future, whether it’s a year from now or five years from now. If there’s a car company that decides that it will build a significant new plant, whether it’s a car assembly plant or an engine plant, or something of reasonable capital investment, Alabama and the other existing right-to-work states will find themselves competing with northern states.”
Birmingham labor attorney Marcel Debruge, a partner with Burr & Forman LLP, who has represented companies involved in union issues, says the votes in Indiana and Michigan represent a fracture in the wall between right-to-work and non-right-to-work states and should serve as a wake-up call to organized labor.
“What we’ve seen in our part of the world, in Alabama in particular, is the emergence of an automotive sector,” Debruge says, “and that’s not just because Alabama is a right-to-work state. Certainly, in my opinion, it has helped Alabama, because prospective employers can look forward to a community where they’re going to build a plant and to a government structure that isn’t necessarily beholden to organized labor, which has been the case in the Midwest. Alabama should continue to be a preferred place to start up a manufacturing operation, because it’s a state that puts an emphasis on growing business. It’s a business-friendly culture.”
Alabama’s Legislature passed a right-to-work law back in 1943, four years before passage of the national Taft-Hartley Act. The Act restricted several labor union practices and placed limits on unions’ ability to organize strikes.
Fifty years later, Mercedes-Benz in 1993 selected Vance as the site for a $300 million, state-of-the-art factory to produce its new sport utility vehicles. Alabama, which lobbied strenuously for Mercedes, sweetened the deal by offering the automaker a set of incentives that topped more than $100 million. Six years later, in 1999, Honda chose Alabama to build a new assembly plant to make its Odyssey minivan and engines. In 2002, Hyundai picked Montgomery as the place for its new assembly plant. Then in 2003, Toyota announced that it would build its first V-8 engine plant outside of Japan in Huntsville.
So far, Alabama’s auto industry has flourished. Alabama is now home to more than 350 automotive-related companies and suppliers. In 2010, the state’s automakers manufactured more than 711,000 cars, up 52 percent over the previous year, according to a January 2012 Accelerate Alabama Strategic Economic Development Plan report.
Though proponents of right-to-work say the law encourages employment growth, others disagree. A 2011 report by Sylvia Allegretto and Gordon Lafer of the Economic Policy Institute, a nonprofit, non-partisan think tank, found no direct connection between passage of right-to-work laws and an increase in jobs. The study, which points to Oklahoma as a case study, found that manufacturing employment in that state fell in the years after it passed right-to-work in 2001.
And there is evidence that companies consider many other factors when deciding where to locate. In the winter 2011 issue of Area Development magazine, the publication’s annual Corporate Survey — in which small manufacturers made up about three-fourths of the poll — found that right-to-work ranked 16th among the factors influencing location decisions, well below other considerations that were in the top 10, such as highway availability, which was number one, followed by labor costs, tax exemptions, occupancy or construction costs, state and local incentives and corporate tax rates respectively. The availability of skilled labor came in seventh.
In fact, Visnic says that as more states turn right-to-work, Southern states will probably have to “up their game” on what their incentive packages offer prospective companies. In addition, they must convince auto makers that they can provide a workforce that has the high-tech skills needed in today’s car assembly plants.
The need for workers with high-tech skills is especially critical now, since automakers have steadily increased the use of robotics in their assembly plants, says Lew Drummond, executive director of the Alabama Automotive Manufacturers Association (AAMA).
“All of the people coming out of our educational institutions, whether they work in the assembly plant or work in management programs or quality control or manufacturing engineering, have to have those advanced-level skills to keep the industry coming,” says Drummond.
“That’s a difference maker right there,” Drummond says, “and it’s becoming more competitive. China, certainly, is stepping up to the plate. India is stepping up to that. The chancellor for the post-secondary schools and the state superintendent of K-12 schools and the colleges and universities all understand that they have to step up to provide the education, skills and training that advanced manufacturing requires today.”
Mercedes-Benz has already teamed up with Shelton State Community College and the University of Alabama to offer the Mechatronics training program. The program trains students in electrical, mechanical, computer and robotics so they have the technical skills needed to make Mercedes vehicles. Other programs like the Alabama Industrial Development Training (AIDT), under the state Department of Commerce, are also helping to train workers.
“We’re benefiting from a workforce that’s motivated and that’s excited by the fact that we have these manufacturing jobs,” says Debruge, “and we’re seeing opportunity in a state where we really need it. For Alabama, as long as we continue to make this a good place to build a plant and to expand a plant, as long as we maintain a culture of a union-free focus, just like South Carolina, Tennessee and Georgia, we should be well positioned to be able to compete with off-shore manufacturing and with our neighboring states in the Southeast through the incentives we give and through the focus we have. This is a business-friendly place for manufacturing, and we need to stay focused on that.”
Gail Allyn Short is a freelance writer for Business Alabama. She lives in Birmingham.