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Types of Labor Unions

Decline in Union Membership. In the 1950s, around one-third of the labor force was unionized.By 1983, 20% of the labor force was unionized.By 2007, only 12.1% of the labor force was unionized.. Private versus Public Sector Unions. Unionization rates are much higher for public sector employees t

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Types of Labor Unions

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    1. Types of Labor Unions 1. Craft union. 2. Industrial union. 3. Public employee union.

    2. Decline in Union Membership In the 1950s, around one-third of the labor force was unionized. By 1983, 20% of the labor force was unionized. By 2007, only 12.1% of the labor force was unionized.

    3. Private versus Public Sector Unions Unionization rates are much higher for public sector employees than for private sector employees. In 2007, 35.9% of public sector employees were union members, versus 7.5% of private sector employees.

    4. Largest Labor Unions (2005) Union Membership National Education Association 2.73 million Service Employees International Union 1.51 million American Federation of State, County & Municipal Employees 1.46 million International Brotherhood of Teamsters 1.40 million United Food and Commercial Workers 1.38 million American Federation of Teachers .83 million United Steelworkers .75 million International Brotherhood of Electrical Workers .70 million

    5. Demand Curve for a Union As a kind of cartel, a labor union has market power and faces a downward sloping demand curve for its labor. Thus, a labor union faces a trade-off between wages and employment.

    6. Demand Curve for a Union

    7. Union Goals Given the trade-off between wages and employment, all unions tend to have certain predictable goals: 1. Reduce the elasticity of demand for union labor. 2. Increase the demand for union labor. 3. Decrease the supply of union labor.

    8. Reducing the elasticity of demand for union labor Reducing the elasticity of demand for union labor means that fewer jobs will be lost with any wage increase. See the next two slides.

    9. More Elastic Demand Curve

    10. Less Elastic Demand Curve

    11. Union Goals The elasticity of demand for union labor can be reduced by: a. Reducing the availability of substitute factors. See Example 2A on page 25-3. b. Reducing the availability of substitute products. See Example 2B on page 25-3.

    12. Union Goals The demand for union labor can be increased by: a. Increasing product demand. See Example 3A on page 25-4. b. Increasing the MPP of union workers. See Example 3B on page 25-4. c. Increasing the prices of substitute factors. See Example 3C on page 25-4.

    13. Union Goals The supply of union labor can be reduced by: 1. Closed shop – requires union membership as a condition for employment. 2. Union shop – requires employees to join the union within a specified time.

    14. Taft-Hartley Act The Taft-Hartley Act of 1947: 1. Prohibited closed shop agreements. 2. Gave the individual states the power to pass right-to-work laws.

    15. Right-to-work Laws Right-to-work laws prohibit union shops. In the right-to-work states, every shop must be an open shop. Right-to-work laws reduce union bargaining power.

    16. Collective Bargaining A union might use the threat of a strike to negotiate a wage rate above equilibrium. Collective bargaining will generally result in higher wages and fewer workers employed.

    17. Without a Union

    18. After Collective Bargaining

    19. Monopsony Monopsony – a lone buyer in a factor market. An example of a monopsony employer would be a company that is the only employer in a small town. See Example 5 on page 25-6.

    20. A monopsony has market power and faces an upward sloping labor supply curve. A monopsony’s MFC curve will be twice as steeply upward sloping as its labor supply curve. Monopsony

    21. Example 6: Monopsony Employer

    22. Example 6: Monopsony Employer

    23. Monopsony A monopsony will employ workers where MRP = MFC in order to maximize profits. Compared to a perfectly competitive employer, a monopsony will employ a lesser quantity of labor at a lower wage rate.

    24. Example 7A: Monopsony

    25. Union and Monopsony Workers employed by a monopsony have a strong motivation to form a union. A union negotiating with a monopsony may be able to obtain a higher wage rate and a greater quantity of labor employed.

    26. Example 7A: Monopsony

    27. Union and Monopsony

    28. Unions and Wages Research indicates that unions increase the wages of union employees, but decrease the wages of nonunion employees. See Example 8 and 9 on pages 25-9 and 25-10.

    29. Unions and Wages Higher union wages will also result in higher prices for union made products. See Example 10 on page 25-11.

    30. Unions and Productivity The traditional view holds that unions hurt productivity due to: 1. Strikes. 2. Unnecessary staffing requirements (featherbedding). 3. Keeping willing employers and employees apart.

    31. Unions and Productivity An alternative view is that unions increase productivity by: 1. Providing union workers with a collective voice. 2. Attracting higher quality workers.

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