What Do Unions Do A 20th Anniversary Retrospective

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What Do Unions Do?A 20th Anniversary
Retrospective

• Bruce E. Kaufman
• Andrew Young School of Policy Studies
• Georgia State University
• Atlanta GA

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Table of Contents

• 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

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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

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Three Dimensions of WDUD

• Theory
• Empirical Evidence
• Policy Implications

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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.

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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

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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

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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

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Benefit effect

• 20-30 higher in union firms

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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

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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 RD
• Negative effect on employment growth but not firm
  failure

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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

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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

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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.

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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)

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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 firms rule-making/administration
  function.
• At its worst, anarcho-pluralism.
• F-M omit adversarial and bargaining effects of
  voice

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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?

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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

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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. Blairs third way does
  not need a strong labor movement.

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Speaking of a Third Way..

• The Big Question is there a better way to
  achieve F_Ms 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?
• Wouldnt this option close the representation/part
  icipation gap? Why do Freeman and Dunlop
  Commission oppose relaxing Section 8a2 of the
  NLRA?

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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.