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Copyright © 2009 Pearson Education, Inc. 13- 1
Topic 8 (Chapter. 13)
Unions
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Table 13.1: Union Membership and Bargaining Coverage,
Selected Countries, 2004
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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)
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Figure 13.1: Union Membership as a Percentage of All Workers, by Sector,
United States,1973-2006
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Table 13.2: Percentage of U.S. Wage and Salary Workers Who Are Union Members,
by Selected Characteristics, 2006
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Figure 13.2: Effects of Demand Growth and the Wage Elasticity of Demand on the
Market Constraints Faced by Unions
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Figure 13.3: Union Maximizes Utility Subject to the Constraint of the
Labor Demand Curve
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Figure 13.4: Employer Isoprofit Curves
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Figure 13.5: The Contract Curve—The Locus of Efficient Contracts
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Figure 13.6: The Demand for and Supply of Unionization
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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
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Table 13.3: Union Representation Elections and Unfair Labor Practice
Complaints Issued by NLRB, 1970-2005
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Figure 13.7: Hick’s Bargaining Model and Expected Strike Length
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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)
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Union wage effects
R=(Wu-Wn)/Wn
Four possible reactions
1) Spillover effect
2) Threat effect
3) Wait unemployment
4) Shifts in labor demand
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Figure 13.8: Spillover Effects of Unions on Wages and Employment
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Figure 13.9: Threat Effects of Unions on Wages and Employment in
Nonunion Sector
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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
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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
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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.
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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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