Unions and Collective BargainingPart VI

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Topic 4
Unions and Collective BargainingPart VI
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Unions and Collective Bargaining

• Unions have strong influence on Canadian labour
  market
• Basic Facts
• For 34 of the Canadian paid workers (16 in the
  US, data 1994), wages and other conditions of
  employment are determined by collective
  bargaining

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Unions and Collective Bargaining

• The influence of unions may extend further than
  is suggested by the union membership rate. The
  wages and benefits negotiated for unionized
  workers set a standard for non-unionized workers
• However, unionization has declined since 1980 in
  most developed countries (Canada, 1980 36,
  1994 34 US, 1980 22, 1994 16), with the
  exception of Scandinavian countries (Sweden, 1980
  80, 1994 91)

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A Study on Bargaining Power and Wages

• An interesting empirical study on the effect of
  bargaining power on settled wage is the conducted
  by Currie and McConnell (1991, Collective
  Bargaining in the Public Sector The Effect of
  Legal Structure on Dispute Costs and Wages,
  American Economic Review)
• They examine the effects of changes in the public
  sector collective bargaining legislation (such
  reforms that provide workers the right to strike)
  on settled wages, using contract-level data on
  Canadian public-sector for the period 1964-1987

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A Study on Bargaining Power and Wages (cont.)

• Following the Nash cooperative solution, they
  predict that the collective bargaining
  legislations that provide higher relative
  bargaining power to the union will have a
  positive effect on settled wages (i.e., generate
  higher settled wages)
• Their empirical findings support their
  theoretical predictions for example, giving
  workers the right to strike (and therefore,
  increasing the bargaining power of the union)
  significantly increases the settled wages by
  about 2 percent

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Studies on Wages and Strikes

• Kennan and Wilson (1990, Can Strategic
  Bargaining Models Explain Collective Bargaining
  Data?, American Economic Review Papers and
  Proceedings)
• Card (1992, Strikes and Bargaining A Survey of
  the Recent Empirical Literature, American
  Economic Review Papers and Proceedings)

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Studies on Wages and Strikes (cont.)

• These studies report the following empirical
  regularities on settled wages and strikes in
  Canadian and US collective bargaining
  negotiations
• Strikes are relatively rare, occurring in about
  15 percent of labor bargaining negotiations
• Most strikes are short, 21 days being the median
  duration
• As the duration of the strike increases, the
  eventual negotiated wage falls

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Studies on Wages and Strikes (cont.)

• These empirical regularities are best modeled
  using screening bargaining models under
  incomplete information
• Kennan and Wilson, 1989, Strategic Bargaining
  Models and Interpretation of Strike Data, Journal
  of Applied Econometrics