Dr Ali Sajjadi

We examine the effect of Right-to-Work (RTW) laws on employee welfare using the stacked difference-in-differences (DiD) methodology. We posit that RTW laws weaken collective bargaining power, increase free-riding, and ultimately reduce employee welfare. We document a significant employee welfare decline following RTW adoption, especially among firms in highly unionized industries. The deterioration is driven by reductions in employee involvement, profit-sharing, and work-life-balance provisions. Results remain robust to alternative specifications, local unobservables, endogeneity concerns, and multiple identification checks. Overall, our findings highlight important implications for policymakers, labour unions, and employers considering the broader consequences of RTW legislation.

Based on small firm statistic from DTI research in the UK (1998) more than 9,418,000 people are working in small firms with less than 50 employees, 2,544,000 people are working in medium size companies with less than 250 employees and 9,112,000 people are working in large companies with more than 250 employees. Although Small Medium Enterprises are providing more jobs in the society in compare to large organisations their investment in training programme is considerably less than large organisations. According to Cambridge Business Research Centre (1998) only 41% of people who are working in the small businesses with less than 50 employees are going to external training courses and most of these people are the business managers not the normal employees. This ratio is 57% for companies with 50 to 100 employees, 66% for companies with 100 to 250 employees and 81% for companies with more than 250 employees. Although the external training courses are not necessarily the most effective method of training they are obviously one of the most costly methods and these statistics are proving that Small Medium Enterprises are significantly investing less money in their human resources in compare to large organisations. This issue will become more severe when we realise that those small firms which are investing less in their human resources have got considerably higher failure rate in compare to the bigger firms. This importance is sometimes neglected in the Small Medium Enterprises (SMEs) (Storey, 2007) Westhead and Storey (1997) have concluded that employees in small organisations have less chance for training opportunities in compare to people in large organisations. They have provided two explanations for this situation; the first one is “Ignorance” which is saying business owners are not aware of the impact of Human Resource Development (HRD) programmes on their business results and they do not believe in the benefits of these investments.