Labor Unions

Supply & Demand for Union Services

Demand Side: Other things equal, the higher the price of union services (as measured by monthly dues, initiation fees, & the value of time expected to devote to union activities), the lower the proportion of workers that will want to join a union. (We will discuss union services or benefits shortly.)

Supply Side: It is costly to provide union services. The higher the price of union services the more willing the unions are to provide the services.

Supply & Demand for Union Services

% of Work Force Unionized

Price of Union Membership

Supply & Demand for Union Services

Demand

% of Work Force Unionized

Price of Union Membership

Supply & Demand for Union Services

Supply

% of Work Force Unionized

Price of Union Membership

Supply & Demand for Union Services

Supply

Demand

% of Work Force Unionized

Price of Union Membership

Supply & Demand for Union Services

Supply

Demand

% of Work Force Unionized

Price of Union Membership

equilibrium

Supply & Demand for Union Services

Supply

Demand

% of Work Force Unionized

Price of Union Membership

P*

equilibrium

Supply & Demand for Union Services

Supply

Demand

% of Work Force Unionized

Price of Union Membership

P*

Q*

equilibrium

Union Membership

In 2011, 11.8 percent of employed wage and salary workers were union members.

Union membership varies with many factors.

2008 Union Membership (% of employed workers)by Gender, Race, & Hispanic Ethnicity

Group % Union Members

White Men 13.2

White Women 11.1

Black Men 15.9

Black Women 13.3

Hispanic Men 11.0

Hispanic Women 10.0

Union membership is higher among men than among women. Blacks are more likely than Whites to be union members, & Hispanics are less likely than non-Hispanics to be union members.(From the Statistical Abstract of the United States, 2010.)

2008 Union Membership (% of employed workers)by Age

Group % Union Members

16 to 24 yrs old 5.0

25 to 34 yrs old 10.7

35 to 44 yrs old 13.4

45 to 54 yrs old 16.0

55 to 64 yrs old 16.6

65 yrs & older 9.0

Union membership was higher among middle-aged workers & lower among younger & older workers.

(From the Statistical Abstract of the United States, 2010.)

2008 Union Membership (% of employed workers)by Sector

Sector % Union Members

Public Sector 36.8

Private Sector 7.6

Union membership is much higher among the public sector (government employees) than among the private sector.

(From the Statistical Abstract of the United States, 2010.)

2008 Union Membership (% of employed workers)by Industry

Industry % Union Members

Transportation & Utilities

22.2

Construction 15.6

Information 12.7

Manufacturing 11.4

Mining 6.9

Wholesale & Retail Trade 5.2

Financial Activities 1.8

Union membership varies with industry. Membership is considerably greater in transportation, construction, & manufacturing than in other industries.

(From the Statistical Abstract of the United States, 2010.)

2008 Union Membership (% of employed workers)by Selected States

State % Union Members

New York 24.9

North Carolina 3.5

Pennsylvania 15.4

New Jersey 18.3

Delaware 13.4

Maryland 12.6

Union membership ranged from a low of 3.5% for North Carolina to a high of 24.9% for New York.

(From the Statistical Abstract of the United States, 2010.)

Union Shop

An employer is a union shop if a worker must join the union within a specified time period in order to remain with the employer.

The argument in favor of the union shop concerns the “free-rider” problem. The workers get the benefits gained by the union and should therefore contribute to the union and not “ride free.”

The argument against the union shop is the individual worker rights argument. A worker should be able to decide if he/she wants to be a member of the union.

“Right-to-Work” Law

Many states, especially many southern states, have “Right-to-Work” laws.

These laws outlaw union shops & make it hard to unionize.

Strike

an attempt to deny the firm the labor services of all union members.

Whether a strike is successful in enabling a union to win concessions from management

depends on

• the monopoly power of the firm in the product market;• the ability of the firm to stockpile product in

anticipation of a strike;• the firm’s financial resources to withstand a strike; &• the union members’ financial resources to withstand a

strike.

Monopoly power of the firm in the product market

Note: To say that a firm has some monopoly power does not mean that the firm is necessarily a monopoly. Rather, it means that the seller has some control over the price of its product.

So, if a firm has some monopoly power, it can raise its price without losing all its business.

Consequently, it can pass some of the cost of higher wages along to its customers in the form of higher prices.

Thus, a union will be better able to win concessions from a firm with monopoly power.

Ability of the firm to stockpile product in anticipation of a strike

A firm that can stockpile its product is able to accumulate inventory.

Durable goods, such as cars, can be stockpiled; perishable goods, such as fresh fruit, can not be stockpiled.

If a firm can stockpile its product, then it will still have product to sell in the event of a strike.

Thus, the firm will be in better condition and able to hold out longer without giving in to union demands.

Thus, a union will be less able to win concessions from a firm that has a stockpile of product.

Firm’s financial resources to withstand a strike

A firm will greater financial resources can hold out longer during a strike without going bankrupt.

Thus, a union will be less able to win concessions from a firm that has considerable financial resources.

Union members’ financial resources to withstand a strike

If a union’s members have substantial financial resources, they will be able to hold out longer during a strike and still be able to pay bills and eat.

Thus the union will be better able to win concessions from the firm.

Firm’s Concession Curve

Because a strike imposes costs on a firm (loss of production, sales, & profit), the employer will pay more to avoid a strike of a particular length.

The longer the expected duration of strike, the greater the wage increase they are willing to concede.

Union’s Resistance Curve

Because a strike imposes costs on employees (loss of income), they will accept less to avoid a strike of a particular length.

The longer the expected duration of strike, the smaller the wage increase they are willing to accept.

There is an expected strike duration at which the employer & the union will accept the same wage. This point is the Settlement Point, where the employer & the union come to an

agreement.

Settlement Point

Expected duration of strike

% wage increase

Settlement Point

Firm concession curve

Expected duration of strike

% wage increase

Settlement Point

Union resistance curve

Expected duration of strike

% wage increase

Settlement Point

Firm concession curve

Union resistance curve

Expected duration of strike

% wage increase

Settlement Point

Firm concession curve

Union resistance curve

Expected duration of strike

% wage increase

settlement pt.

Settlement Point

Firm concession curve

Union resistance curve

Expected duration of strike

% wage increase

S*

settlement pt.

Settlement Point

Firm concession curve

Union resistance curve

Expected duration of strike

% wage increase

W*

S*

settlement pt.

Arbitration

when a third party is brought in to settle a dispute between labor & management

Types of arbitration include:Splitting-the-difference arbitrationFinal offer arbitration

Splitting-the-difference arbitration

The arbiter selects a solution halfway between the union’s offer & the employer’s offer.

Example:

union offer: $20

Employer offer: $10

Arbiter’s decision is halfway between 10 & 20 which is $15.

Final-Offer arbitration

The arbiter asks each of the two parties for their final offer and selects the offer that he/she thinks is most reasonable.

Example: union offer: $18Employer offer: $6If the arbiter thinks the appropriate wage is $15, he/she would pick the offer closest to that value, in this case, $18.

Union Membership Around the World

Internationally, union membership rates vary considerably. Membership in the United States is much lower than in many other countries.

Union Membership As a % of Total Paid Employees

Country Year Membership (%)China 2000 90.3Iceland 2000 89.4Norway 2000 70.6Brazil 1992 44.0France 1994 31.0Canada 1999 30.1United Kingdom 1999 29.5Australia 1998 28.1India 1997 26.2Germany 1998 26.1Japan 2000 21.5Singapore 1999 18.0U.S.A. 2002 13.3

Women have traditionally had lower union representation than men.There is no evidence that women have less of a preference for unions than men. In fact, survey evidence indicates that women tend to be more supportive of collective action to achieve goals than men and are more likely to vote for a union.

Gender Differences in Union Preferences

Women tend to be concentrated in industries and occupations where unionization is below average.Traditionally, unionization has been highest among blue-collar workers in manufacturing, whereas women have been concentrated in clerical and service occupations, which have lower rates of unionization. Within the manufacturing sector, women are concentrated in more competitive industries, while unionization is greater in monopolistic industries.

Reasons for Gender Differences in Union Membership

75% of the difference in unionization between men and women is explained by the underrepresentation of women in highly organized occupations and sectors.

Unions have been criticized for having made little effort to organize women workers and for not supporting women’s own efforts to unionize.Only recently has emphasis been placed on the provision of benefits such as parental leave and day care, which are important to women.

Effects of Union Policies on Women’s Union Membership

Male craft unions did not begin to admit women until the late 1800s and were not hospitable to women (and blacks) long after they no longer formally excluded them.

Union membership has declined from over 25% in the mid-1950s.

Union Membership Decline

Women’s unionization has declined more slowly than men’s. The change in the relative unionization of men and women is partly attributable to the decline in the size of the heavily unionized and predominately male manufacturing sector.

Also contributing is an increase in unionization in sectors in which women are heavily represented, such as the public sector, and among white collar and service workers, including clerical and health care workers.

What are the benefits of unions?They increase the wages of their members. Overall, the relative wage advantage of union members is about 17-18 percent.Research indicates that unions raise women’s wages at least as much as they raise men’s.As women become more attached to the labor force and gain seniority, the economic advantages of unionization to them may increase because unions tend to provide greater benefits to workers with more seniority.

Unions increase the fringe benefits of their members relative to nonmembers.

They provide members with nonpecuniary benefits by giving them greater opportunity to shape their work environment by communicating their preferences to employers through the collective bargaining process, and by providing for grievance procedures.

Unions have the potential to reduce tension between work and family by negotiating for family leave, on-site day care, and flexible schedules.

Other Benefits of Unions

On balance, unions reduce wage inequality among all workers by providing relatively high paying job opportunities for many less skilled workers.

This means that deunionization has contributed to rising wage inequality.

A Social Benefit of Unions

As long as women remain underrepresented in unions (compared to their representation in the labor force), the impact of unions is to widen the male-female pay gap, since men benefit from the union wage premium to a greater extent than women.The decrease in unionism has contributed to a reduction in the male-female wage gap because it has been associated with a decrease in the male advantage in unionization.

We have seen that unions offer many advantages to workers, such as higher wages and fringe benefits.

However, since the quantity of labor demanded is negatively related to wages, these higher wages are associated with lower employment.

Hence, the gains of the employed workers are at the expense of those who are not hired due to unionization.

The Glass Ceiling in Union Leadership

As in corporate America, women appear to face a glass ceiling, when it comes to union leadership positions.In 2012, only 15 percent of AFL-CIO executive council members were women.

Women have been more successful in attaining middle-level positions at the local level and some have even reached some top-level positions.However, among the 4 major elected posts (president, vice-president, treasurer, and secretary), women tend to be most heavily represented in the secretary position, which is the lowest rung.

1. Employed women usually have to juggle home and job responsibilities, leaving little time available for union activities.2. Election to leadership positions often takes years of working with the rank and file members to reach the top posts. This work usually starts when union members are in their 20s, which coincides with most women’s childbearing years.

Why do unions lack womenin key leadership positions?

3. Women often underestimate their abilities and are less likely to place themselves on the leadership track.

4. The underrepresentation of women in union leadership positions makes other women’s advancement more difficult, because it reduces the opportunities for women to receive informal mentoring and to find role models.

5. Women also often must contend with sexual harassment and the perception that women are not tough enough to negotiate contracts and participate in bargaining.

6. In addition, women frequently lack the education and experience required for leadership positions, such as union negotiating skills and institutional knowledge about union offices.

Efforts are being made to

• include women in executive positions,

• take greater account of women worker’s needs, and

• train women to develop their leadership skills.

Prospects for women in unions are improving.

What does the future hold concerning unions?

Trends suggest that unions are likely to continue to lose members in the future.

However, even if unions are unable to meet their membership goals, they are likely to remain a significant political & economic force.

The union movement was originally founded on white, older men.

Given the changing composition of the labor force, unions must reach out to different workers, including women & white-collar workers.

Unions have been making efforts to appeal to more diverse groups of workers.

What might unions do in the future?

Unions can evolve into a different type of organization.

They can shift away from being organizations concerned with employment & wage gains & towards being organizations that offer a variety of services & benefits to their members.

In so doing, they may have more success in providing value & a perceived need to their membership.

Edward Potter of the Employment Policy Foundation referred to this type of union as “the working person’s AARP.”