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Copyright © 2009 Pearson Education, Inc Topic 8 (Chapter. 13) Unions
Copyright © 2009 Pearson Education, Inc Table 13.1: Union Membership and Bargaining Coverage, Selected Countries, 2004
Copyright © 2009 Pearson Education, Inc 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)
Copyright © 2009 Pearson Education, Inc
Copyright © 2009 Pearson Education, Inc Figure 13.1: Union Membership as a Percentage of All Workers, by Sector, United States,
Copyright © 2009 Pearson Education, Inc Table 13.2: Percentage of U.S. Wage and Salary Workers Who Are Union Members, by Selected Characteristics, 2006
Copyright © 2009 Pearson Education, Inc Figure 13.2: Effects of Demand Growth and the Wage Elasticity of Demand on the Market Constraints Faced by Unions
Copyright © 2009 Pearson Education, Inc Figure 13.3: Union Maximizes Utility Subject to the Constraint of the Labor Demand Curve
Copyright © 2009 Pearson Education, Inc Figure 13.4: Employer Isoprofit Curves
Copyright © 2009 Pearson Education, Inc Figure 13.5: The Contract Curve— The Locus of Efficient Contracts
Copyright © 2009 Pearson Education, Inc Figure 13.6: The Demand for and Supply of Unionization
Copyright © 2009 Pearson Education, Inc 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 effective S shifted left Competitive pressures: foreign competition and deregulation high price elasticity D shifted left Employer resistance: S shifted left
Copyright © 2009 Pearson Education, Inc Table 13.3: Union Representation Elections and Unfair Labor Practice Complaints Issued by NLRB,
Copyright © 2009 Pearson Education, Inc Figure 13.7: Hick’s Bargaining Model and Expected Strike Length
Copyright © 2009 Pearson Education, Inc 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)
Copyright © 2009 Pearson Education, Inc Union wage effects R=(Wu-Wn)/Wn Four possible reactions 1)Spillover effect 2)Threat effect 3)Wait unemployment 4)Shifts in labor demand
Copyright © 2009 Pearson Education, Inc Figure 13.8: Spillover Effects of Unions on Wages and Employment
Copyright © 2009 Pearson Education, Inc Figure 13.9: Threat Effects of Unions on Wages and Employment in Nonunion Sector
Copyright © 2009 Pearson Education, Inc 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 job Shift in labor demand: unions put effort to increase product demand
Copyright © 2009 Pearson Education, Inc Evidences (wages) Union wage differential in US is 10-20% Private sector differential > public sector US > UK, Germany, Austria, Australia Union reduce the earnings gap Bigger during economy expansion. Also hard to replace capital for labor Mixed evidences on spillover and threat effect: threat effect dominated within cities, spillover effect dominated within industries
Copyright © 2009 Pearson Education, Inc 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 employment The 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.
Copyright © 2009 Pearson Education, Inc 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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