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Is 'right to work' law a competitive advantage?

A worker makes denim jeans in Michigan.
Ty Wright | Bloomberg | Getty Images
A worker makes denim jeans in Michigan.

When Michigan officially became the nation's 24th right-to-work state in March, Gov. Rick Snyder, who pushed the deeply controversial law through the Legislature in December, hailed it as a boost for the state's economic recovery.

"I think it will bring jobs to Michigan," he said.

Right-to-work laws bar so-called "closed shops," where workers are required to join a union and pay union dues or pay equivalent fees as a condition of employment. Businesses say they like right-to-work laws because they make it more difficult for unions to organize workers and raise wage and benefit costs. Unions say the laws infringe on workers' collective bargaining rights.

With the Michigan law in effect for only a matter of months, it is still too early to tell whether it has made a difference. Michigan's unemployment rate—while far from its highs during the financial crisis—remained above the national average at 8.4 percent in May. Michigan has enjoyed a surge of manufacturing jobs, but that began following the auto bailout in 2009, when closed shops were still legal in the state.

(Read More: Top US States for New Manufacturing Jobs)

One immediate effect of the right-to-work law, however, was to improve Michigan's rank among America's Top States for Business. The Wolverine State moves to 29th place overall from 33rd last year. The improvement is led by a big jump in our Workforce category, which gives extra points to right-to-work states. We rank Michigan's workforce 15th this year, compared with 38th in 2012.

Right-to-work states dominate America's Top States for Business for 2013. In fact, Colorado is the only state among America's Top 10 states without a right-to-work law.

Right-to-work proponents consider Michigan's law a major victory. The state is, after all, the cradle of the American labor movement and the closed shop. But right-to-work laws remain deeply divisive in Michigan and across the country.

"No one should be forced to pay tribute to a union boss in order to get or keep a job," the 58-year-old National Right to Work Committee says on its website.

The committee and a sister organization, the National Right to Work Legal Defense Foundation, actively fight against closed shop rules. Right-to-work proponents have called for a federal law as opposed to the current patchwork of state statutes.

Organized labor, meanwhile, has pushed back hard.

(Read More: What Are the Top States for Business?)

"Right-to-work laws effectively defund the ability of workers to have a voice at their workplace," the AFL-CIO said after the Michigan law passed in December. "These laws have lowered wages, weakened benefits, raised the poverty rate and led to increased workplace injuries and deaths."

Academic research suggests the real impact of the laws is not nearly as dramatic as the debate suggests.

Michigan State University researchers Dale Belman, Richard Block and Karen Roberts examined state economies from 1998 through 2000 and concluded in 2009 that right-to-work laws "seem to have no effect on economic activity."

In fact, they found, unions in general seem to have little impact, despite conventional wisdom.

"In the developed U.S. economy, unionized firms are able to use productivity enhancements to offset any higher costs associated with collective bargaining."

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Ball State University researcher Michael Hicks found last year that there has been plenty of upheaval in states that have adopted right-to-work legislation, but he said it was difficult to establish a cause-and-effect relationship.

States that changed their right-to-work laws have "experienced significant variations in their manufacturing sectors," he wrote.

But because the issue is so politically charged, Hicks said it was impossible to tell whether the laws were responsible for the changes, or whether the economy was on the move for other reasons. Hicks examined 50 years' worth of data and concluded, "The impact of right-to-work (RTW) legislation is difficult to disentangle from other business friendly policies."

"One reasonable interpretation is that other factors matter more than RTW in determining the size of the manufacturing industry in a state," he wrote.

(Read more: The Cheapest States to Live)

What is clear, however, is that most states with right-to-work laws are quick to point them out as they compete for business.

"Virginia is a right-to-work state," says the Virginia Economic Development Partnership on its website. "At 5.5 percent, Virginia has the fifth lowest unionization rate in the country."

"The savings that Georgia generates for businesses are significant," says the Georgia Department of Economic Development. "Georgia is a right-to-work state."

The states without right-to-work laws tend to look for something else to tout.

By Scott Cohn, CNBC Senior Correspondent. Follow him on Twitter @ScottCohnCNBC.

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  • CNBC's senior correspondent and lead investigative reporter, Scott Cohn also appears on "NBC Nightly News with Brian Williams," "Today" and on MSNBC.

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