actual doctrines/remedy in the employment equation. Their principal finding is that
aggregate employment is on average 2.9 (1.8) percent lower following a state’s
recognition of tort (contractual) damages for wrongful termination in a fixed effect model
in which the regressors include gross state product and the growth in gross state product.
The crucial issues here as elsewhere are that the instrument should have a direct causal
impact on the exception to at-will and no effect on the outcome indicator other than
through its influence on the at-will exception. As noted by Autor, Donahue, and Schwab
(2001, pp. 33-35), two of the variables selected as instrument (court activities in
neighboring states and the presence of a right to work law) have a substantial regional
component relating to the South (the former negatively and the latter positively). Since
the South has grown persistently faster than other U.S. regions since 1930, there is a
correlation between the two instruments and preexisting growth rates which has the effect
of biasing the results toward finding that wrongful discharge laws lower employment.
Accordingly, the appropriate estimation strategy is to give each state its own time trend.
In their replication of the Dertouzos and Karoly model including a linear state trend,
Autor, Donahue, and Schwab (2001, Table 18) fail to obtain statistically significant
coefficient estimates for the instrumented wrongful-termination doctrines.7
(iii) Right to Work Legislation. Plus ça change?
The 1935 National Labor Relations Act (NLRA) required employers to bargain in good
faith with unions that represented a majority of their employees, and made it illegal for
employers to interfere with their employees’ right to organize effectively. Further, section
8(c) of the NLRA allowed employer-union agreements requiring union membership as a
condition of employment. The 1947 Labor-Management Relations Act (Taft-Hartley),
which restricted some aspects of union activity (by identifying unfair labor practices on
the part of unions), still permitted union (if not closed) shops, but unequivocally
authorized states to adopt right-to-work laws prohibiting these arrangements under
section 14(b). As a matter of fact, 12 states had rules prohibiting at least some forms of
compulsory unionism prior to Taft-Hartley, so that the main technical legal effect of this
section was to remove the possibility for unions to challenge right-to-work laws in court
on grounds of federal supremacy.