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Is Wisconsin's Union Crackdown Good for Business?

Wisconsin Governor Scott Walker’s highly controversial plan to rein in public employee unions is still tied up in the courts. But one reason fellow governors are watching Wisconsin so closely — beyond the bare-knuckled politics — is Walker’s claim that, among other things, the plan would mean Wisconsin is “open for business.”

Wisconsin Governor, Scott Walker
Jewel Samad | AFP | Getty Images
Wisconsin Governor, Scott Walker

But do weakened labor protections make a state better for business? The evidence is mixed.

In the Workforce category of America’s Top States for Business, we do reward so-called “right to work” states, as well as states with a lower percentage of union members. That’s because while unions would argue their members are more productive and do higher quality work, few businesses see unions as a selling point when deciding where to invest.

But “Workforce” is but one of our ten overall categoriesof competitiveness, and a strong finish here doesn’t guarantee a top ranking overall. Look at Florida. With weak unions and an abundance of available workers, Florida boasted America’s top workforce in last year’s rankings. But the Sunshine State finished 28th overall, hobbled by a weak economy, high costs, and a substandard education system.

In Wisconsin, a traditionally schizophrenic state — the birthplace of public employee unions and the Republican party — Walker hopes to accentuate the state’s right wing personality, and perhaps improve Wisconsin’s anemic 29th place ranking in our study last year.

“As your governor, I make this pledge,” Walker said in his inaugural address in January. “Wisconsin is open for business!”

Walker’s plan goes beyond weakening the state’s public employee unions, taking direct aim at the state’s $3.6 billion budget shortfall.

“We’re broke! We don’t have any more money,” Walker said earlier this year.

On the chopping block: health care and education, including a controversial restructuring of the state’s vaunted university system (full disclosure: I am a proud alumnus of the University of Wisconsin at Madison).

But critics note the state would not face the budget predicament it’s in were it not for the generous business incentives and tax cuts implemented by Walker soon after he took office. And in the delicate balance of competitiveness, every action by a state to improve its standing has some sort of reaction.

If Wisconsin pursues cuts in healthcare in order to improve its economy, the state could risk its standing in our Quality of Life category. The state finished in the middle in that category last year — number 29 — and would have done considerably worse were it not for Wisconsin’ relatively solid healthcare system.

In Education, where Wisconsin finished a respectable number 12, the state finished in the top half in every metric with the exception of class size. Cutting the state education budget does not necessarily mean Wisconsin’s education system will suffer — we do consider per-pupil spending, but we also look at the outcomes of education including test scores. Still, a key ingredient of a successful business is an education system that produces skilled workers and offers a knowledge base that companies can tap into.

Wisconsin’s Walker is betting that if he can fix the state’s economy, the rest of the competitiveness mix will fall into place. He may be right, but it is no sure thing.