What Do Unions Do?
A 20th Anniversary Retrospective
Bruce E. Kaufman
Andrew Young School of Policy
Studies
Georgia State University
Atlanta GA
Table of Contents
1.
2.
3.
4.
5.
6.
7.
8.
9.
Introduction. The Editors
Theory of Union Behavior and Outcomes.
Bruce Kaufman, Georgia State University
What Unions Do: Insights from History
Bruce Kaufman, Georgia State University
Wage Differentials and Structure
David Blanchflower, Darmouth College, Alex Bryson, LSE
Wage/Income Inequality
David Card, University of California-Berkley, Thomas
Lemieux and W. Craig Riddell, University of British Columbia
Non-Wage Forms of Compensation
John Budd, University of Minnesota
Productivity and Firm Performance
Barry Hirsch, Trinity University
Union Voice
John Addison, University of South Carolina
Management and HR Practices
Anil Verma, University of Toronto
Table of Contents – contd.
10. Conflict and Dispute Resolution
David Lewin, UCLA
11. Behavioral Effects
Tove Hammer, Cornell university
12. Macroeconomic Performance
Dan Mitchell, UCLA
13. The Public Sector
Morley Gunderson, University of Toronto
14. International Dimensions
John Pencavel, Stanford University
15. Worker Demand for Unions & Union Decline
Robert Flanagan, Stanford University
16. Workforce Governance, Workers rights, Union Democracy
Samuel Estreicher, New York University
17. Political Action
John Delaney, Michigan State, Marrick Masters, University of
Pittsburgh
Three Dimensions of WDUD
• Theory
• Empirical Evidence
• Policy Implications
WDUD: The Bottom Line
• Negative Monopoly Wage Face and Positive
Collective Voice Face
• “The empirical evidence showed that the positive
effects of the CV face outweighed any negative
effects of the MW face on the social balance
sheet” (R.F. 1992)
• “The policy implication was that the nation
should consider new initiatives in labor relations
to arrest and reverse the decline in union
representation in the private sector.”
Theory: Critique
• What is New Here?
• The Webbs
MW face: “trade unions show no backwardness in
getting the highest wage possible”
CV face: industrial democracy
• Commons:
MW: goal of unions is wealth redistribution,
aggrandizement, protection
CV face: constitutional government in industry
Four Problems with F-M model
•
•
•
•
Assumption of Competitive Labor Markets
CV is too Narrowly Constructed
CV and MW are not separable
Ignores the Political Dimension of Union
Voice
Implication: Monopoly Effect can be
positive and Voice Effect can be negative
Empirical Evidence
• Wage effect
Private Sector: still high but modest
decline
21% (1975) to 17% (2000)
Public Sector: slight increase and
convergence 13.5% to 14.5%
Benefit effect
• 20%-30% higher in union firms
Inequality Effect
• Unions reduce wage inequality among men
(3 countries)
• Unions increase wage inequality among
women
• A portion of growing inequality is due to
union decline
Firm Performance effect
• Union effect on productivity level is about zero
• Union effect on productivity growth is also about
zero
• Profit effect is negative (some capture of
monopoly rents, also a tax on K)
• Union effect is negative on capital investment
and R&D
• Negative effect on employment growth but not
firm failure
Behavior effect
• Union workers have much lower turnover
rate. (But what is optimal?)
• Union workers also have significantly
lower job satisfaction
• Voice effect depends on quality/structure of
relationship
Management Resistance
• Mgt. Resistance explains part of the fall-off in
organizing success, but a portion of this is
endogenous (related to high union W and more
market competition)
• Evidence indicates declining worker demand for
unions
• Major source of density decline is attrition of
union firms/jobs
• Biggest culprit: decentralized bargaining
structure
Revised Picture
• Economic Function: Unions are labor market cartel that
raise W just like OPEC raises P. Naturally, in a
decentralized bargaining system union firms shrink and
management tries to avoid them.
• Unions also exist to provide protection against competitive
forces (e.g., sweatshops).
• The question is: does the union drive for “more” serve the
social interest?
• The Webbs, Commons, and Sen. Wagner said Yes, but
conditions have changed. Instead of unequal bargaining
power and economic recovery from depression, the key
issue is supply-side growth and jobs.
• F-M miss this historical shift. Their economic model is
actually anti-union.
Governance/Voice Function
• Unions also use bargaining power to change
internal firm governance.
• Shield workers from management authority
•
Gain democratic due process provisions
(grievance system).
• Make life easier in the shop (restrictive rules, the
effort bargain)
• Talk back to management without fear (the
scumbag effect)
Governance/Voice Function
cont.
• Also give workers a political voice in the polity
• The union voice effect is often negative because
(1) it is embedded in a politicized/adversarial
relationship
(2) it is simply an extension of bargaining to
the firm’s rule-making/administration
function.
• At its worst, “anarcho-pluralism.”
• F-M omit adversarial and bargaining effects of
voice
Microeconomic vs.
Macroeconomic Effects
• Even if unions have a positive voice effect at the
firm level, this is overwhelmed by their negative
effect on macroeconomic performance.
• Substantial union density, full employment, and
price stability are not mutually compatible unless
(1) incomes policy or (2) Scandinavian
corporatism. The result is inflation creep, higher
unemployment, and stop-go fiscal.monetary
policy.
• F-M ignore the macro effect of unions
• The “winter of discontent” anyone?
Policy Implications
• The F-M policy proposal is:
Increase density through labor law reform
Lower MW effect and increase CV effect
Major culprit: management who sabotages
what is in the social interest
Critique
• The #1 purpose of unions is to protect people and to
promote the class interests of labor.
Q1: do workers still need protection from markets
and employers?
Q2: are trade unions the best way to provide this
protection?
Q3: can unions survive in a competitive, global,
decentralized system?
Q4: does Labor as a class still need collective
representation in the economy and polity?
F-M do not broach Q1,2 & 4 and only modestly
consider Q3. Instead, they try to justify unions on
efficiency grounds and a vague appeal to voice. This
is very weak and doomed to fail in the current
environment. Blair’s third way does not need a
strong labor movement.
Speaking of a Third Way…..
• The Big Question : is there a better way to
achieve F_M’s goals than trade unions?
• If we are looking for more CV and less MW
effect then maybe other institutions may
accomplish the F-M goal more efficiently and
with less negative side effects than unions.
• What about a works council?
• What about fostering more nonunion employee
representation/involvement?
• Wouldn’t this option close the
representation/participation gap? Why do
Freeman and Dunlop Commission oppose
relaxing Section 8a2 of the NLRA?
A Closing Irony
• Freeman and Rogers (1999) note that:
– 1. Many American workers want more voice.
– 2. A Majority prefer a system that is non-adversarial
– 3. Only 10% prefer getting more voice through
additional laws
What do we observe:? In America more nonunion voice
is blocked by the NLRA, unions are declining, and so
the trend over the last 30 years in more law, Just what
people say they do not want!
What is the solution? More unions? But fewer people
want unions and they are increasingly not survivable.
So, the bottom line is that we are left with law,
nonunion forms of voice, and macroeconomic full
employment policy. If F-M and F-R really want to
solve the voice gap, alternative nonunion systems look
like a promising place to start.