Outline • Do Unions earn more? • Do Unions produce more? – Economic Approach – Intuitive Approach – Empirical Approach • If union workers are paid, then they should also be more productive Do they earn more?
• Daniel Mitchell (1980) est. 67%
• Estimate based on observations of 60 to 77 industries (manufacturing and non- manufacturing) • differentiating union and non-wage wages and benefits within these sectors Do they earn more? • Ruby Fichtaunbaum (2006) est. 18.84% (male) & 17.87% (female) • Estimation based on OLS regression model ln wij = Xijβ + δjunion + εij
• Observation based across different labour
segments Do they earn more? • Gregg Lewis (1963) est. 10%
• Freeman and Medoff (1984) est. 20%
• Barry Hirsch (2004) est. 15%
.: Unions do earn higher wages, although
observations vary on level of estimate 2 key theories to keep in mind • Efficiency Theory: The higher the wage, the more productive
• Human Capital Theory: The more one
invests into themselves, the more productive Economic Approach • Using Cobb-Douglas fn Y = AKαLβ , where β = 1 – α
Y/L = nY/nL = (nAKαLβ) / nL
• size of the labour force (n) can be substituted for
human capital • rather then average output per worker based on labour size; average output is on effectiveness of worker Intuitive Approach • Union more productive because… – Higher level of job satisfaction – Voice is heard through collective – Stable employment – Firms may only higher high skilled worker Intuitive Approach • Unions less productive because… – Restricted work practices – Adverse affect due to industrial action – Less investment by firms – Less trust in management Empirical Approach • Results are mixed • Abbas Valadkhani (2003) found that a 10% increase in wages lead to 1.7% increase in productivity • Allison Booth (2005) observed unions in Britain and found a –ve affect, although they did have a greater affect in early ’80’s (50 -60%) where union presence was high Empirical Approach • David Fairris (2006) observed a positive relationship with wage and productivity (21,21 15, 12), although productivity gap was never as high as wage gap
• Clark found a 6 – 8% productivity gap in
productivity by unions in cement industry between ’53 and ‘76 Conclusion • Although wage gap is consistently observable, productivity gap is not • Just like any other worker, Unions too can have their good and bad years • Each observer has their own form of collecting and analyzing data