Chapter Study Outline

18.1 Evidence and Institutional Background

  • A union is a collection of individuals who collectively operate within a given legal and social structure that engages in collective bargaining with an employer or group of employers on the terms and conditions of employment.
  • Craft unions consist of members of the same occupation and often cut across geographic and industrial boundaries.
  • Industrial unions cut across occupational boundaries by organizing labor within a given industry.
  • The basic union building block is a union local, which elects union representatives, establishes a constitution, and establishes its own bylaws.
    • Craft union locals are usually organized along geographic lines.
    • Industrial union locals are organized along industrial lines, such as a firm or an individual plant.
  • Union locals belong to larger national or international unions.
    • The balance of power between the national or international union, which determines which body has the right to negotiate with the employer, is determined by the union’s constitution.
    • The balance of power decision is largely pragmatic.
  • The majority of unions belong to a federation of unions, such as the AFL-CIO.
  • During the twentieth century, union membership reached its peak of 35 percent in 1955 and has since fallen to 7.6 percent in 2008.
  • Public-sector union density rates have increased from 12 percent in 1957 to 37 percent in 2008.
  • Union membership is greatest among those states closest to a large body of water and lowest in the interior states, varies markedly across industries, and is systematically related to gender and race.
  • Changes in U.S. labor laws have had a large effect on trade unions.
    • Before 1930 the U.S. courts regarded trade unions as a manifestation of monopoly power and used antitrust statutes to halt the formation of these unions.
    • After the Great Depression, the Norris-LaGuardia (1932) and Wagner (1935) Acts substantially increased union power by allowing unfettered association of workers who wished to establish a union.
    • The Norris-LaGuardia (1932) and Wagner (1935) Acts rendered yellow-dog contracts, which employers had relied on to stymie union formation, and any sort of punishment for joining a union unenforceable in court.
    • The Taft-Hartley (1947) and Landrum-Griffin (1959) Acts later served to rein in union power by disallowing several union tactics to intimidate firms and attract members and allowing states to establish right-to-work laws, which do not allow any workplace to restrict employment to union members only.

18.2 Union Coverage

  • The extent of union coverage in the United States can be understood using a supply and demand framework.
    • Unions supply representation services, and workers demand these services.
    • The supply of union representation increases with the level of membership dues and the demand for union representation decreases with the level of membership dues.
  • Factors that shift the demand and supply schedules, such as legal restrictions, employer bias, and the ease of negotiating without union representation, explain the observed changes in union-density rates.
    • Initial increases in union membership in the United States can be explained by union-friendly legislation, such as the Norris-LaGuardia (1932) and Wagner (1935) Acts and Kennedy’s Executive Order 10988, which gave federal workers the right to unionize‚Ķ
    • There is much controversy in the attempts to explain the decrease in union density from the 1950s onward.
      • The structural changes of the economy, including the increased labor force participation of women, altered the work force to include higher proportions of groups that are traditionally less likely to be unionized.
      • The opposition effect is grounded in the idea of increased political and managerial recalcitrance toward unions which shifts the supply schedule of union representation to, ceteris paribus, a lower equilibrium level.
      • Economic changes such as the increased openness of the U.S. economy and the deregulation of major industries may have decreased the benefits of union membership and shifted the demand for these services.

18.3 The Economic Impact of Trade Unions

  • The wage gap between union workers and non-union workers, which is relatively easy to measure, is defined as the difference between the wage of union workers and the wage of non-union workers.
  • Economists have focused on measuring the causal effect of trade unions on earnings.
    • The causal effect is the relative increase in earnings that is directly attributable to the presence of the union.
    • The causal effect allows economists to calculate the union wage gain, or the difference between the wage of a union worker and the wage of a worker in a world without unions.
    • In general, the wage gap is not equal to the wage gain.
  • The spillover effect decreases the wages of non-union workers when a relatively high union wage in industry A causes the displacement of workers from industry A to industry B and decreases the wage in non-unionized industry B.
  • The threat effect occurs when firms in industry B watch firms in industry A unionize and, because the firms are fearful that their workers will also unionize, attempt to lower the gains from unionization for their workers by increasing wages.
  • The wage gain from unionization is also difficult to estimate because workers who are currently unionized may be fundamentally different from workers who are not currently unionized.
  • The consensus among economists is that the wage gain from unionization is 15 percent relative to the wage of a non-unionized workers in the same industry.
  • In general, unions are found to decrease employment and a firm’s profits .
  • The effect of unions on worker productivity is ambiguous.