Labor Unions:

1
Labor Unions Facts and Figures
2
Union Membership by Industry, 2000

• Unionization tends to be higher in the goods
  producing industries such as manufacturing and
  construction.

• Unionization tends to be lower in service
  industries such trade and finance, real
  estate, and insurance.

• Unionization is high in transportation,
  communications, and utilities due to low labor
  demand elasticities.

3
Union Membership by Occupation, 2000

• White-collar workers such as managers and
  sales workers tend to have low unionization
  rates.

• The low white-collar worker unionization
  rates are because they have higher wages and
  some managers are exempt from unionization.

4
Union Membership by Public Sector Status

• Public sector workers have a much higher
  unionization rate than private- sector workers.

• The unionization rate of public sector
  workers rose rapidly in the 1960s and 1970s
  when laws allowing public-sector workers to
  unionize were passed and public sector managers
  did not aggressively fight the unionization of
  their workers.

5
Union Membership by Demographic Group, 2000

6
High Unionization States, 2000

7
Low Unionization States, 2000

8

• Unionisms Decline

9
Union Membership

• The unionized sector is a minority component
  of the labor force.

• Unionism is on the decline in the U.S.

• The number of union members peaked at 20
  million in 1980 and has fallen to slightly more
  than 16 million now.

• The percent of labor force that is unionized
  fell from 30 in 1950 to 12 now.

10
Causes of Decline in Unionism

• Structural changes
• The structural-change hypothesis is the labor
  force and economy has changed in ways that are
  unfavorable to unions.
• Employment growth has been greater in
  traditionally nonunion sectors such white-collar
  jobs, services, women, small firms, part-time,
  and Southern states.

11
Causes of Decline in Unionism

• The union wage differential increased in the
  1970s
• Unionized firms switched to nonunion methods of
  production where possible.
• Nonunion firms expanded output and employment due
  to their lower costs.
• Criticisms
• Other countries have had similar structural
  changes and their unionism has not decreased.
• Unions have been able to unionize traditionally
  nonunion workers in the past.

12
Causes of Decline in Unionism

• Managerial-opposition hypothesis
• The managerial-opposition hypothesis argues that
  the increased union wage advantage in the 1970s
  caused firms to fight unions more aggressively.
• Firms may hire permanent strike breakers,
  illegally fire pro union workers, hire
  consultants, etc.

13
Causes of Decline in Unionism

• The substitution hypothesis
• The substitution hypothesis argues that the
  government and employers now provide services
  that were previously provided by unions.
• The government now provides services such as
  workers compensation and health and safety laws
  that unions used to provide.
• Some firms try to prevent unionization by using
  grievance procedures and providing
  worker-management communication methods.

14
Causes of Decline in Unionism

• Other factors
• Unions have decreased their organizing efforts.
• The National Labor Relations Board, which
  oversees unionization efforts, became less
  pro-union under Reagan-Bush.

15
Causes of Decline in Unionism

• Relative importance
• Freeman concludes that the total decline in
  unionization is due to
• Structural changes (40).
• Increased managerial-opposition (40).
• Decreased union organizing (20).
• Krueger argues nearly all of the recent decline
  in unionization is due to decreased demand for
  unions among nonunion workers.

16
Union Responses to Decline

• Increased mergers among unions
• Example NEA and AFT.
• Changes in strategies
• Unions have increased organizing efforts and
  targeted white-collar workers.
• Unions have tried to avoid strikes and used work
  slowdowns in their place.

17

• Are Unions Maximizers?

18
Economic Models

• Economists have attempted to examine what unions
  are attempting to maximize.
• Some possible goals are
• Wage rate
• Maximizing the wage rate would minimize
  employment.
• Unions and their members are concerned about
  employment and so this is not a realistic goal.

19
Economic Models

• Wage bill
• Unions may maximize the wage bill or the number
  of workers employed times the wage rate.
• This goal has problems when the labor demand
  curve is elastic.
• Unions would have to decrease the wage rate to
  maximize the wage bill.
• Unions may make workers no better off than they
  would be without a union.

20
Political Models

• These models argue unions dont try to maximize a
  single goal.
• Union leaders act as politicians responding to
  demands of union members, employers, government,
  and other unions.
• Union leaders consider the well-being of their
  members and the survival of the union and their
  own leadership.

21
Synopsis

• Union goals are multidimensional.
• Unions are concerned about wages and employment.
• Unions probably put more emphasis on the wage
  rate.

22
Union Wage Advantage

• If we could compare wage rates in a given
  labor market, where all conditions were held
  constant except for the presence of the unions,
  we could calculate a pure measure of the
  unions wage advantage.

• The pure wage advantage is (Wu-Wn)/ Wn 100.

• Unions may influence the wage rates of
  nonunion workers as well as the wage rates of
  their own workers in the real world.

23
The spillover effect suggests that as a
union is able to raise wage rates from Wn to Wu,
employment in the union sector will fall by Q2
- Q1.

The reemployment of these workers in the
nonunion sector, will reduce wages from Wn to
Ws, which means the measured wage advantage
(Wu-Ws)/ Ws overstates the pure wage
advantage.
The threat effect is that nonunion employers
raise wages from say Wn to Wt to prevent
unionization.
The threat effect causes the measured wage
advantage (Wu-Wt)/Wt to understate the pure
wage advantage.
24
Other Effects on Nonunion Wages

• Wait unemployment
• Some of the workers who become unemployed when
  union increase the wage rate in the union sector
  may prefer to wait for a job in the union sector
  rather than take a job in the nonunion sector.
• This reduces the spillover effect and its
  resulting overstating of the pure wage advantage.

25
Other Effects on Nonunion Wages

• Superior-worker effect
• The higher wages at union firms will allow them
  to hire better workers.
• This causes the measured wage advantage to
  overstate the pure wage advantage.

26
Union Wage Advantage

• The union wage advantage rose in the late
  1970s as union wages were protected from
  inflation with cost of living adjustments,
  but nonunion wages were not.

• The union wage advantage was relatively
  stable in the high teens from the mid 1980s to
  the mid 1990s.

• The union wage advantage has fallen from the
  high teens in 1994 to 15 percent now.

27
Variations in Union Wage Advantage

• The union wage advantage is greater for the
  following
• Recessions
• Construction workers
• Black males
• Blue-collar workers
• Less-educated workers

28
Total Compensation

• Total compensation is the sum of wages and fringe
  benefits.
• Union workers have more fringe benefits than
  nonunion workers because
• Union workers have higher wages and want to buy
  more fringe benefits.
• Union workers are older.
• Unions are able to express workers preferences
  for more fringe benefits.
• Union workers have greater job tenure and thus
  are more likely to collect a pension.

29
Increasing Inequality

• Unions increase income inequality in three ways
• Increasing the wages of union workers and
  lowering the wages of nonunion workers through
  the spillover effect.
• Increasing the wages of skilled blue-collar
  workers relative to unskilled blue-collar
  workers.
• Increasing the demand for skilled labor within
  unionized firms.

30
Decreasing Inequality

• Unions decrease income inequality in three ways
• Equalizing wages within firms.
• Unions try to make pay tied to jobs and not
  individual workers.
• Unions seek a wage policy of equal absolute
  dollar wage increases for workers.
• Equalizing wages across firms.
• Unions seek to standardize wage rates among
  firms.
• This enables unions to protect their wage
  advantage.

31
Decreasing Inequality

• Reducing the white-collar to blue-collar
  differential.
• The empirical evidence is that unions reduce
  income inequality on net.