2. Copyright 2008 The McGraw-Hill Companies 34-1 34 Labor Market Institutions and Issues: Unionism, Discrimination, and Immigration

3. Copyright 2008 The McGraw-Hill Companies 34-2 Chapter Objectives Who Belongs to U.S. Unions; the Basics of Collective Bargaining; Why Unions are in Decline; and the Effects of Unions on Wages, Efficiency and Productivity The Types and Costs of Discrimination, Economic Theories of Discrimination, and Current Antidiscrimination Issues The Extent and Effects of U.S. Immigration

4. Copyright 2008 The McGraw-Hill Companies 34-3 What is a Labor Union? An association of workers, each of whom transfers the right to negotiate wage rates, work hours, and working conditions to the association

5. Copyright 2008 The McGraw-Hill Companies 34-4 Types of Unions  Craft or trade union--members practice the same craft--plumbers, etc.  Industrial union, workers in the same industry--auto, steel  Public employees union, members are government employees--teachers, police, etc.  Employee Associations: American medical association, etc--not really unions but similar in many ways

6. Copyright 2008 The McGraw-Hill Companies 34-5 Brief History of Unions Early unions, groups of craft workers Knights of Labor, early attempt at a national union of all workers Problems faced by the Knights, skilled-unskilled debate In early days, courts very anti-union

7. Copyright 2008 The McGraw-Hill Companies 34-6 AFL, American Federation of Labor, formed in 1883 Attempted to organize the skilled craft unions

8. Copyright 2008 The McGraw-Hill Companies 34-7 Congress of Industrial Organizations (CIO) Formed in 1938, attempt to organize the industrial workers Auto and Steel industries among their first successes AFL-CIO merged in the 1950’s Some unions are affiliated with the AFL-CIO, others are independent

9. Copyright 2008 The McGraw-Hill Companies 34-8 What are the major laws affecting unions? Norris-La Guardia Act of 1932 Wagner Act of 1935 Taft-Hartley Act of 1947 Labor Management Reporting & Landrum-Griffin Act 1959 Civil Rights Act of 1964

10. Copyright 2008 The McGraw-Hill Companies 34-9 Norris-LaGuardia Act, 1932 Outlawed yellow-dog contracts in which workers agreed to not join unions in order to get a job Restricted injunctions against unions

11. Copyright 2008 The McGraw-Hill Companies 34-10 Wagner Act, 1935 (national labor relations act) Gave workers the right to join unions if majority of workers vote to Required management to engage in good faith bargaining Created national labor relations board

12. Copyright 2008 The McGraw-Hill Companies 34-11 Taft-Hartley Act, 1947 Closed shops illegal, union shops illegal if state passes right to work law Certain strikes illegal Cooling off period can be ordered in national emergency cases

13. Copyright 2008 The McGraw-Hill Companies 34-12 What is a Closed Shop? An arrangement in which a firm may hire only union labor ( have already joined the union prior to employment)

14. Copyright 2008 The McGraw-Hill Companies 34-13 What is a Union Shop? An arrangement in which a firm may hire nonunion labor, but every worker hired must join the union by a certain date. Agency shop: nonunion workers either pay dues or donate equivalent amount to charity.

15. Copyright 2008 The McGraw-Hill Companies 34-14 Landrum-Griffin Act, 1959 Unions must hold elections, keep financial records

16. Copyright 2008 The McGraw-Hill Companies 34-15 Civil Rights Act, 1964 Required unions to adopt affirmative action policies in order to hire more women and minorities

17. Copyright 2008 The McGraw-Hill Companies 34-16 Unionism In America Business Unionism: concern with pay, working conditions, benefits, and not with overthrowing capitalism. Also, in US, as opposed to other countries, our unions are not a distinct political party.

18. Copyright 2008 The McGraw-Hill Companies 34-17 Decline of Unionism in the US Union Membership: only 12.5 percent of wage and salary workers in US now in unions, down from about 25 percent some decades ago. The Decline of Unionism: causes? –Structural-Change Hypothesis –Managerial-Opposition Hypothesis

19. Copyright 2008 The McGraw-Hill Companies 34-18 Structural-Change Hypothesis Employment has shifted away from traditional union strongholds: decline of manufacturing, rise of service industries, more foreign competition Greater numbers of women and part time workers in labor force Movement to the Southern states, the sun- belt, right to work states Very success of unions in raising wages may have led to substitution of machinery and nonunion workers, etc.

20. Copyright 2008 The McGraw-Hill Companies 34-19 Managerial-Opposition Hypothesis Argues that managerial opposition to unions has intensified, reducing union growth. Early 1980’s, air traffic controllers fired Wal-Mart anti union tactics?

21. Copyright 2008 The McGraw-Hill Companies 34-20 Unionism In America Union Membership as a Percentage of the Employed Labor Force, Selected Nations Denmark Sweden Italy Australia Germany United Kingdom Hungary United States South Korea France 0 20 40 60 80 100 Source: Statistical Agencies in Individual Countries, Latest Data 12.5%

22. Copyright 2008 The McGraw-Hill Companies 34-21 Unionism In America Percentage Unionized by Industry in 2005 Government Transportation Telecommunications Construction Manufacturing Mining Retail Trade Agriculture Finance Total U.S. Workers 0 20 40 60 80 100 Source: Bureau of Labor Statistics 2.7% 1.6% 5.2% 8.0% 13.0% 13.1% 21.4% 23.4% 36.5% 12.5%

23. Copyright 2008 The McGraw-Hill Companies 34-22 Unionism In America Percentage Unionized by Occupation in 2005 Teachers Protective Services Transportation Workers Production Workers Social Workers Legal Workers Managers Food Workers Sales Workers Total U.S. Workers 0 20 40 60 80 Source: Bureau of Labor Statistics 4.3% 3.3% 4.4% 5.6% 16.5% 17.1% 19.0% 37.0% 38.5% 12.5%

24. Copyright 2008 The McGraw-Hill Companies 34-23 Collective Bargaining The Work Agreement –Wage and Hours Cost of Living Adjustments (COLAs) Seniority and Job Protection Grievance Procedures

25. Copyright 2008 The McGraw-Hill Companies 34-24 Collective Bargaining The Bargaining Process –Demands –Bargaining in Good Faith –Strike –Lockout –National Labor Relations Act (NLRA) –National Labor Relations Board (NLRB)

26. Copyright 2008 The McGraw-Hill Companies 34-25 Economic Effects of Unions The Union Wage Advantage: recall in ch. 26 the 3 ways that unions can try to raise wages: but have they done so? Research finds an average 15% union wage advantage over nonunion workers in the same industry. However, appears to be little affect on the overall average level of wages received by labor.

27. Copyright 2008 The McGraw-Hill Companies 34-26 Economic Effects of Unions Efficiency and Productivity: how do unions affect worker productivity? –Negative View Losses via Featherbedding and Work Rules Losses via Strikes Losses via Labor Misallocation Graphically…

28. Copyright 2008 The McGraw-Hill Companies 34-27 Economic Effects of Unions Effects of the Union Wage Advantage on the Allocation of Labor Sector 1 Union Sector 2 Nonunion Employment Wage Rate D u = MRP D n = MRP WuWu WnWn WnWn WsWs Wage Rate N1N1 N2N2 N1N1 N3N3 00 A B C D E Area B Represents Misallocation of Labor and Decline IN Economic Efficiency

29. Copyright 2008 The McGraw-Hill Companies 34-28 Economic Effects of Unions Efficiency and Productivity –Positive View Longer-Run Positive Impacts: The Shock-Effect Reduced Worker Turnover –Exit Mechanism –Voice Mechanism Increased Informal Training Mixed Research Findings

30. Copyright 2008 The McGraw-Hill Companies 34-29 Labor Market Discrimination Types of Discrimination –Wage Discrimination –Employment Discrimination –Occupational Discrimination –Human Capital Discrimination Costs of Discrimination

31. Copyright 2008 The McGraw-Hill Companies 34-30 Labor Market Discrimination Discrimination and Production Possibilities Capital Goods Consumer Goods 0 KdKd CdCd X Y Z Discrimination Causes a Failure to Achieve Productive Efficiency Efficient Combinations D

32. Copyright 2008 The McGraw-Hill Companies 34-31 Economic Analysis of Discrimination Taste-for-Discrimination Model –Discrimination Coefficient –Competition and Discrimination O34.1

33. Copyright 2008 The McGraw-Hill Companies 34-32 Economic Analysis of Discrimination Taste for Discrimination Model African-American Wage Rate (Dollars) African-American Employment (Millions) 0 D3D3 D2D2 D1D1 S 121618 6 $9 8 More Discrimination Less Discrimination

34. Copyright 2008 The McGraw-Hill Companies 34-33 Economic Analysis of Discrimination Statistical Discrimination –Labor Market Example –Profitable, Undesirable, but Not Malicious Occupational Segregation: The Crowding Model –The Model –Effects of Crowding Graphically…

35. Copyright 2008 The McGraw-Hill Companies 34-34 Economic Analysis of Discrimination Wage Rate BBB M M W 343464 DxDx DyDy DzDz Occupation X Occupation Y Occupation Z Economics of Occupational Segregation Quantity of Labor (Millions) Quantity of Labor (Millions) Quantity of Labor (Millions) By Crowding Women Into One Occupation (Z)… Men Enjoy Higher Wages in the Other Occupations (X and Y) 000 Eliminating Occupational Segregation

36. Copyright 2008 The McGraw-Hill Companies 34-35 Antidiscrimination Policies and Issues Equal Pay Act 1963 Title VII of the Civil Rights Act of 1964 Affirmative Action Requirement –Supportive View –Opposing View Reverse Discrimination Recent Developments

37. Copyright 2008 The McGraw-Hill Companies 34-36 Immigration (omit) Legal Immigrants Unauthorized Immigrants Economics of Immigration –Wage Rates and World Output –Income Shares G34.1

38. Copyright 2008 The McGraw-Hill Companies 34-37 GLOBAL PERSPECTIVE Immigration U.S. Immigrants by Country of Origin, 2004 Mexico India Philippines China Russia Vietnam Dominican Republic El Salvador Canada South Korea 0 30 60 90 120 150 180 210 65,472 54,632 45,942 36,646 30,064 30,049 29,285 23,437 19,441 176,664 Source: U.S. Citizenship and Immigration Services

39. Copyright 2008 The McGraw-Hill Companies 34-38 Immigration The Simple Economics of Immigration Wage Rate United States Mexico Quantity of Labor (Millions) Quantity of Labor (Millions) DuDu DmDm a A b d D B WeWe Wage Rate WeWe cfFC WuWu 00 WmWm Immigration to the United States Impacts Jobs and Wage Rates

40. Copyright 2008 The McGraw-Hill Companies 34-39 Immigration Complications and Modifications –Costs of Migration –Remittances and Backflows –Full Employment versus Unemployment –Fiscal Impacts Immigration: Two Views

41. Copyright 2008 The McGraw-Hill Companies 34-40 Allegations of Discrimination in Hiring of Women in Major Symphony Orchestras Orchestrating Impartiality “Blind” Auditions by Hiding Candidates behind Screens 1970 Only 5% Were Women Screened Auditions Increased Probability of a Woman Hiring by 50% Without Screens Was Only 10% But With the Screens 35% Today About 25% of Top Orchestra Members Are Women Directors Demonstrated a Clear Bias Toward Men in Hiring Last Word

42. Copyright 2008 The McGraw-Hill Companies 34-41 Key Terms American Federation of Labor and Congress of Industrial Organizations (AFL-CIO)American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) independent unions business unionism structural-change hypothesisstructural-change hypothesis managerial-opposition hypothesismanagerial-opposition hypothesis collective bargaining closed shop union shop agency shop right-to-work laws open shop cost-of-living adjustments (COLA)cost-of-living adjustments (COLA) strike lockout National Labor Relations Act (NLRA)National Labor Relations Act (NLRA) National Labor Relations Board (NLRB)National Labor Relations Board (NLRB) exit mechanism voice mechanism labor market discrimination wage discrimination employment discrimination occupational discrimination human capital discriminationhuman capital discrimination taste-for-discrimination modeltaste-for-discrimination model discrimination coefficient statistical discrimination occupational segregation affirmative action reverse discrimination legal immigrants unauthorized immigrants

43. Copyright 2008 The McGraw-Hill Companies 34-42 Next Chapter Preview… International Trade