Copyright © 2009 Pearson Education, Inc. 13- 1 Topic 8 (Chapter. 13) Unions

Copyright © 2009 Pearson Education, Inc. 13- 1

Topic 8 (Chapter. 13)

Unions


Table 13.1: Union Membership and Bargaining Coverage,

Selected Countries, 2004


Union

Norris-LaGuardia Act of 1932: outlaw yellow-dog contract

National Labor Relations Act of 1935: rules for collective bargaining

Taft-Hartley Act of 1947: restricted some union activity (right-to-work laws)

Landrum-Griffin Act of 1959: regulate internal union policies (increase union democracy)



Figure 13.1: Union Membership as a Percentage of All Workers, by Sector,

United States,1973-2006


Table 13.2: Percentage of U.S. Wage and Salary Workers Who Are Union Members,

by Selected Characteristics, 2006


Figure 13.2: Effects of Demand Growth and the Wage Elasticity of Demand on the

Market Constraints Faced by Unions


Figure 13.3: Union Maximizes Utility Subject to the Constraint of the

Labor Demand Curve


Figure 13.4: Employer Isoprofit Curves


Figure 13.5: The Contract Curve—The Locus of Efficient Contracts


Figure 13.6: The Demand for and Supply of Unionization


Demand and Supply

Demographic change: % female workers up D shifted left.

Changing industrial mix: increase in service sector (high price elasticity) perceived benefit from union is small, establishment size is small D shifted left

Regional shift: to the Sunbelt where right-to-work laws are effectiveS shifted left

Competitive pressures: foreign competition and deregulation high price elasticityD shifted left

Employer resistance: S shifted left


Table 13.3: Union Representation Elections and Unfair Labor Practice

Complaints Issued by NLRB, 1970-2005


Figure 13.7: Hick’s Bargaining Model and Expected Strike Length


Implications

UR schedule: if costs to workers of being strike fall, then heighten the resistance (unemployment insurance, unemployment rate..)

EC schedule: if firms can pile inventories, are less profitable, face an elastic demand curve, can hire replacement workers, then heighten the resistance

Strikes are wasteful: require certain bargaining protocol that will help to avert future strikes. (start bargaining earlier, limit the number of contract items,..) then why do they occur? since threat as such is a weapon (retaining credibility)

Strikes give signals (to know the true level of profits)


Union wage effects

R=(Wu-Wn)/Wn

Four possible reactions

1) Spillover effect

2) Threat effect

3) Wait unemployment

4) Shifts in labor demand


Figure 13.8: Spillover Effects of Unions on Wages and Employment


Figure 13.9: Threat Effects of Unions on Wages and Employment in

Nonunion Sector


Wait unemployment and shifts in labor demand

Wait unemployment: waiting for union jobs to open up. Not everyone who loses a job in the union sector will spill over into the non union sector moderating downward pressure on nonunion wages

E(w) = w*probability of getting jobShift in labor demand: unions put effort

to increase product demand


Evidences (wages)

Union wage differential in US is 10-20%Private sector differential > public sectorUS > UK, Germany, Austria, AustraliaUnion reduce the earnings gapBigger during economy expansion. Also

hard to replace capital for laborMixed evidences on spillover and threat

effect: threat effect dominated within cities, spillover effect dominated within industries


Evidences (others)

Ignoring non-pecuniary conditions of employment may be misleading (union firms tend to have less-flexible hours, faster work paces, overtime..)

Union has adverse effect on employmentThe effects of unions on productivity and

profits are mixed: “pressure” or “voice”? (workers suggestions and preferences can be communicated). Productivity may be higher, but stock prices are lower for unionized firms.


Normative analyses

Potential reductions in social welfare:-Strike waste resources-Use of excess workers create wastage-Mobility of workers are restricted.

Potential increases in social welfare:-Voicing of request and collective bargaining

(also solve free-rider problems) -Share monopoly profits-Give “shock” for better management

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Copyright © 2009 Pearson Education, Inc. 13- 1 Topic 8 (Chapter. 13) Unions