By Susan Guyett
INDIANAPOLIS (Reuters) - Indiana became the 23rd state to pass anti-union "right-to-work" legislation on Wednesday and the first in the nation's manufacturing heartland, dealing a blow to organized labor by allowing workers to opt out of paying union dues.
Indiana's Republican governor Mitch Daniels signed the legislation into law immediately after it was given final approval in the state Senate, making Indiana the first state to adopt such a measure since Oklahoma did so a decade ago.
Daniels, governor since 2005 and a prominent spokesman for Republicans nationally, said he decided Indiana needed the controversial new law after several businesses decided to locate elsewhere.
"Seven years of evidence and experience ultimately demonstrated that Indiana did need a right-to-work law to capture jobs for which, despite our highly rated business climate, we are not currently being considered," he said in a statement after signing the bill.
Indiana is being closely watched by both major political parties in the presidential election debate over job creation and reviving the U.S. economy.
The Indiana state Senate vote of 28 to 22 was followed by calls of "shame, shame" from members of the public outside the chamber. Opponents of right-to-work call it "union busting" and say it will lower the wages of workers.
The vote drew thousands of protesters to the state capital in Indianapolis on Wednesday. Some shouted "Stop the Super Bowl," referring to the fact that the city will host Sunday's National Football League championship game.
About 2,000 people were inside the Capitol building, and large crowds were also on the outside as the vote took place, but no count of the crowd outside was available, according to Indiana State Police Captain David Bursten.
Republican state Senator Carlin Yoder, the bill's main sponsor, said it would not prevent anyone from joining a union.
"It is simply allowing those individuals to decide for themselves if they want to pay union dues or not," Yoder said during the floor debate on Wednesday.
DEMOCRATS TRIED TO DELAY BILL
Senate Minority Leader Vi Simpson, a Democrat, called the notion that many employers would be attracted to Indiana because of the law a myth.
"Right-to work is a race to the bottom, it's a downward spiral to lower wages and fewer benefits," Simpson said.
Indiana joins 22 other states with right-to-work laws, most of them in the South and West, and its action could encourage other states to pass similar laws. Similar bills have been introduced this year in Maryland, Missouri, New Hampshire, New Jersey, and West Virginia, according to the National Conference of State Legislatures.
Democrats and their union supporters tried to slow the bill by boycotting the legislature and other delaying tactics, but Republicans supportive of right-to-work control both chambers of the legislature and the governor's office.
John Sampson, president of the Northeast Indiana Regional Partnership, an economic development group, said he viewed passage of the bill as historic.
"I think this sends a clear message to the country that Indiana is going to lead in preparing a place for us to grow our economy and make a place for workers to be successful in the future," Sampson said. As for the argument that the bill would drive down wages and benefits, Sampson said "the marketplace sets wages, not unions."
Indiana passed similar legislation in 1957 but it was repealed in 1965.
"As working men and women did in the 1950s and 60s, this generation of Hoosiers will now rise up, join forces and repeal this anti-worker agenda again," Indiana State AFL-CIO President Nancy Guyott was quoted as saying on the organization's website.
Cummins Inc, a maker of U.S. diesel engines which employs more than 7,000 workers in Indiana, has not taken a stand on the new Indiana law, according to Janet Williams, a spokeswoman for the Columbus, Indiana-based company. Cummins' workforce includes union members.
"What matters for our ability to recruit workers and retain jobs is an educated workforce and a welcoming environment," Williams said.
There are five vehicle assembly plants in Indiana -- General Motors, Toyota, Honda, Subaru, and AM General -- as well as another 221 auto parts factories, according to Elm Analytics, an online automotive database.
In 2011, 11.3 percent of wage and salary workers in Indiana were members of unions, compared to 11.8 percent in the country overall, according to the U.S. Bureau of Labor Statistics.
Organized labor could be a significant issue during the 2012 election year. In addition to the Indiana action, Democrats and unions are hoping to recall Wisconsin's Republican Governor Scott Walker after he championed a new law that severely restricted collective bargaining powers of public sector unions in the state.
Ohio turned back similar attempts to curb public sector unions last year, voting in a state referendum against the proposal.
(Reporting by Susan Guyett, Bruce Olson and Ben Klayman, Editing by Mary Wisniewski, Paul Thomasch, Greg McCune and Cynthia Johnston)