The%20impact%20of%20trade%20unions

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The impact of trade unions

• Outline
• 1. Unionism union objectives
• 2. Economic models of union effects
• 3. The effects of unions - evidence

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1. Unionism union objectives

• A trade union is
• a continuous association of wage-earners for the
  purpose of maintaining or improving the
  conditions of their working lives. (Webb Webb
  1896)
• Objectives
• a) Improved wages
• b) Improved terms conditions
• c) full employment
• d) industrial democracy
• e) voice in government
• .collective bargaining

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1. Unionism union objectives

• International comparisons of unionism (1994)
• Country Membership Coverage
• France 9 95
• Germany 29 92
• Sweden 91 89
• UK 34 47
• Japan 24 21
• US 16 18
• Importance of coverage
• Flexible labour markets?

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1. Unionism union objectives

• Union membership, 1970-90
• Country 1970 1980 1990
• France 22 18 10
• Germany 33 45 33
• Sweden 67 80 83
• UK 45 50 39
• Japan 35 31 25
• US 23 22 16
• Why has there been a decline?

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2. Economic models of union effects

• The effect of unions depends on
• the structure of the firms product market
• competitive
• monopsony
• Several models
• a) monopoly union model
• b) bilateral monopoly
• c) right-to-manage model
• d) efficient bargains model

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A) Monopoly union model

• Union has monopoly power in the labour market
• Firm operates in a competitive/monopolistic
  (product) market
• Effect on W E
• depends on union power
• ability of the firm to resist (market)
• Two outcomes
• a) W rise BUT E declines to reduce costs of
  production See Figure
• b) W rise E increases - productivity deal

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Monopoly union facing producers under perfect
competition

S
D
O
Q1
Q of labour
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B) Bilateral monopoly

• Union has power in the labour market
• Firm has power in the product market
• Outcome depends on bargaining
• strength of the union
• strength of the firm
• No equilibrium range of outcomes
• maximum W is where MCL MRP
• minimum W is given by the monopsony outcome
• See Figure 2

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Bilateral monopoly

Monopsony no union
W1
O
Q1
Q of labour
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3. The effects of unions - evidence

• A) The effect on wages
• union versus non-union wages
• US 10-20 more
• UK 10
• W. Germany 6
• unions also reduce wage dispersion
  skilled/unskilled white/non-white workers
• The effect on total compensation
• unionised firms - poor conditions
• higher wages to compensate

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3. The effects of unions - evidence

• B) Effects on employment
• unions reduce employment growth
• C) Effect on hours of work
• convert standard hours into overtime hours -
  higher pay
• D) Effect on productivity profits
• positive if voice effects occur
• negative if they succeed in introducing
  restrictive practices
• outcome depends on quality of union-management
  relationship

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Conclusion

• Unions are an important part of the economy
• Theoretically effect depends on market structure
• They do increase W and reduce E. Which model?
• Wider effects in practice