When Union Protections Vanish, Blue-Collar Workers Start Businesses to Survive

Losing a union job does not always mean finding a better one. For many workers in states that have adopted right-to-work laws, the path forward leads not to another employer but to a sole proprietorship, a side gig, a one-person operation cobbled together from necessity rather than ambition.

Researchers studying the aftermath of anti-union legislation in Michigan and Indiana found that affected workers became 53 percent more likely to enter self-employment compared to similar workers in neighboring Ohio and Kentucky, which kept stronger union protections in place. The study, published in Strategic Entrepreneurship Journal, used the staggered adoption of right-to-work laws as a natural experiment to isolate the effect.

Right-to-work laws prohibit union security agreements, meaning employees can opt out of unions and union fees. Proponents frame this as expanding worker choice. But decades of research show the practical effect: union membership drops, bargaining power erodes, and the workplace protections that blue-collar workers have historically relied on begin to disappear.

The Businesses Nobody Writes About

The surge in entrepreneurship following these laws looks nothing like the startup narratives that dominate business coverage. Nearly all the increase came from unincorporated businesses. Sole proprietorships. Single-person operations with no employees and limited growth potential. Economists typically read this pattern as necessity-driven entrepreneurship, the kind that emerges when traditional employment stops working.

The data revealed no meaningful increase in weekly wages after right-to-work laws took effect, but working hours crept upward and union membership fell by nearly two percentage points. Workers were putting in more time without seeing higher pay. Under those conditions, self-employment starts looking less like a bold career move and more like a survival strategy.

“For blue-collar and low-wage workers, the weakening of unions tends to mean longer hours, less security, and fewer benefits on the job,” explains Namil Kim of Yonsei University, one of the study’s coauthors. “Under these conditions, many of them turn to self-employment as a way to protect or replace their income.”

The research team, led by Daehyun Kim of the Max Planck Institute, tested alternative explanations. The rise in self-employment was not driven by increased layoffs or improved access to small-business financing. The pattern pointed consistently toward deteriorating job quality as the main push factor.

Who Feels It Most

Blue-collar workers and those earning low wages showed the largest increases in self-employment. These groups have historically depended most heavily on unions for predictable hours, job security, and benefits. When those protections weakened, the pressure to find alternatives intensified.

Twenty-six U.S. states have now adopted right-to-work laws. The study raises uncomfortable questions for employers who have welcomed reduced union influence. Experienced workers who leave for self-employment take institutional knowledge with them. Some may reappear as competitors. The talent drain creates costs that are harder to measure than union dues but potentially more consequential.

The findings complicate tidy narratives about entrepreneurship as a universal good. Starting a business can signal confidence in a promising idea. It can also signal that the traditional labor market has stopped offering a viable path. For many blue-collar workers navigating post-union workplaces, the choice to go it alone reflects the second reality far more than the first.

Strategic Entrepreneurship Journal: 10.1002/sej.70006