1 / 12

The impact of trade unions

The impact of trade unions. Outline 1. Unionism & union objectives 2. Economic models of union effects 3. The effects of unions - evidence . 1. Unionism & union objectives. A trade union is

Jims
Download Presentation

The impact of trade unions

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

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

  2. 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

  3. 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?

  4. 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?

  5. 2. Economic models of union effects • The effect of unions depends on • the structure of the firm’s product market • competitive • monopsony • Several models • a) monopoly union model* • b) bilateral monopoly* • c) right-to-manage model • d) efficient bargains model

  6. 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

  7. Monopoly union facing producers under perfect competition W1 £ S D O Q1 fig Q of labour

  8. 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

  9. Bilateral monopoly S1 (=ACL1) MCL1 No union No union MRPL £ Monopsony: no union W1 O Q1 Q of labour fig

  10. 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

  11. 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

  12. 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

More Related