What Do Unions in China Do? Provincial-Level Evidence on Wages,Employment, Productivity,and Economic Output

Utilizing provincial-level data from the period of 1994–2008, this article studies the relationship between union density and wages, employment, productivity, and economic output in China. The findings indicate that union density does not affect average wage levels, but is positively associated with aggregate productivity and output. We discuss if and to what extent these findings are consistent with the familiar two faces of unions model and alternative explanations relevant in the context of Chinese labor and union institutions.     

Union productivity effects and economic efficiency

Because they lack formal theoretical foundations, existing empirical models of union productivity effects tell us little about why such effects occur and what their impact is on economic efficiency. This paper attempts to fill this gap by developing three alternative formal models of union productivity effects with contrasting implications for economic efficiency and then assessing which is most consistent with the available empirical evidence. While it turns out that an “agency” model, which predicts positive union efficiency effects, seems to be able to predict the observed results best, the evidence is far from conclusive. Further tests are suggested to distinguish the models. The author would like to thank Richard Freeman, James Medoff, and participants in the University of Western Ontario labor workshop for many helpful comments.     

Unions and productivity: Evidence from academe

In order to test competing hypotheses about the effect of unions on labor productivity, we examine research performance in a sample of 889 Ph.D.-granting departments (175 unionized) in public universities. We find no support for the hypothesis that unions enhance productivity in academe. If we compare union and nonunion departments endowed with (sample) mean amounts of labor and capital, we find that unionization is associated with a 17 percent reduction in output of published articles and a 9 percent reduction in peers’ survey evaluations of a department’s level of scholarly achievement.     

Teachers’ unions, productivity, and minority student achievement

I estimate the unionlnonunion productivity differential for minority students attending public high schools. Education production functions are estimated for minority students attending union schools and for minority students attending nonunion schools using achievement scores as the measure of output and the individual student as the unit of observation. The union/nonunion productivity differential for average minority students is positive. However, the productivity differential is negative for minority students attending schools where the majority of students are nonminority, but the productivity differential is positive for minority students attending schools where the majority of students are minorities.     

Union membership,economic rents,and migration behavior

This study represents an extension of the human capital paradigm as it relates to an individual’s decision to migrate. It differs from previous studies by incorporating union membership, a labor market variable, into the model. In effect, the National Labor Relations Act of 1935 granted a monopoly bargaining position to unions. The theoretical implication of a union’s monopoly bargaining position is that union wage levels will increase relative to nonunion wages. The increase of relative wages results in union membership granting a property right that possesses positive net present value and hence reduces an employed union member’s probability of migrating. Additionally, the supra-competitive remuneration of union members results in a surplus of labor supplied to union firms. Employers respond by using quality screening to hire workers from the larger labor pool. As a result, unemployed union members will on average possess higher levels of human capital, which will increase their probability of migrating above that of their unemployed nonunion cohorts.     

The impact of labor unions on the passage of economic legislation

This paper examines the political power of labor unions. A model of the decision of an interest group to contribute to a political campaign is developed and tested. The empirical evidence indicates that interest groups, and unions in particular, use political contributions in a systematic and coordinated manner. Unions give money to candidates with relatively little seniority (who might otherwise not be elected) and to candidates from districts with about the average number of union members. Such candidates might otherwise not vote as the union would desire. The influence of campaign contributions and of union membership on the voting of congressmen on issues of interest to unions is also investigated. Union membership is sometimes significant and campaign contributions are always significant in explaining voting on minimum wages, wageprice controls, benefits for strikers, and OSHA and CETA appropriations. The indirect economic effects of labor unions — those effects which occur because unions influence legislation — may be as important as the direct effects which occur through collective bargaining.     

Unionization and productivity in commercial banking

This paper examines the net effect of unions on productivity in the commercial banking industry. The focus of the study is on three methodological issues. First, an attempt is made to determine whether individual unions have a differential impact on banking productivity. The influence of unions on output per man-hour was initially estimated by including a union dummy variable in a Cobb-Douglas formulation of bank production. Separate binary variables were then entered into alternative specifications of the model to test the heterogeneity hypothesis. This hypothesis postulates differential productivity effects among the individual unions operating in the commercial banking sector. Second, the sample banks were paired on a case-by-case basis to assure the homogeneity of the two groupings: i.e., union and nonunion. Sample homogeneity is necessary because of the assumptions of identical production functions and output prices between the groups. Third, a complete covariance model was specified in order to estimate the impact of unionization on each parameter of the production function. In general, the unionized banks were less productive than their nonunion peers. It should be noted, however, that the standard errors were large in all the specifications. Moreover, the labor relations problems associated with one union had a large impact on the sector results.     

Déjà vu for airline industrial relations

Fifteen years after deregulation, labor relations in the airline industry returned to thestatus quo ante, as union power, particularly ALPA’s, still dominates. Without a long-term shift in bargaining power between the parties, costs and productivity have not changed much. Labor accounts for 60 percent of the cost difference between strong and low-cost carriers. American, Delta, United, Northwest, and USAir would require some combination of labor cost concessions or productivity increases of $1.6 billion to match the productivity-adjusted labor costs for low-cost carriers’ flight crews. To remain competitive, strong carriers and unions must develop strategies to deal with anachronistic work rules, provisions to contract out work, and premium pay for airline employees.     

The effect of the extent of unionism on union and nonunion wages

This paper provides estimates, derived from micro wage equations, of the effects of unionism on the wages for both union and nonunion labor. These equations control not only for union status, but also include measures of the extent of unionism in product and labor markets. The results suggest,inter alia, that an increase in the extent of unionization in an industry has substantial positive effects on the wages of nonunion as well as union workers. Increases in the extent of union coverage within an occupation, however, have little or no effect on nonunion wages.     

Wages,productivity, and costs in union and nonunion hospitals

This paper considers the effects of labor unions on the economic performance of hospitals. Two data sets are considered. The first includes 275 hospitals from 13 urban areas; the second includes 114 hospitals from Ohio. The analysis is designed to determine whether or not union-induced productivity improvements occur within the rather noncompetitive hospital market and questions whether or not there are cost differences between union and nonunion hospitals. On the question of productivity, both data sets indicate that positive effects occur in the hospital sector. The answer to the second question is less clear. The primary data set indicates that unionized hospitals actually have lower costs than their nonunion counterparts, while the Ohio sample indicates that unionized hospital costs are lower, but not significantly so. The author wishes to thank Donald R. Williams and an anonymous referee for their valuable comments.     

The effect of collective bargaining on production technique: A theoretical analysis

A general equilibrium approach is used to model the union effect on capitalintensity of the union and nonunion sectors. Unlike earlier general equilibrium approaches, union power is assumed to be affected by the production technique chosen. The labor relations literature argues that union power is enhanced by a high capital to labor ratio. This assumption is built into a simple two sector (union and nonunion), general equilibrium model. It is found that failing to account for the effects of capital intensity on union power results in an understatement of unions’ ability to redistribute income from capital to labor. The author thanks Jan Brueckner and an anonymous referee for helpful comments and suggestions.     

The effect of unionization on safety in bituminous deep mines

This article examines the impact of unionization on safety in underground coal mines. An accident causation model is used to isolate the effect of unionization from other injury rate determinants. Results indicate that union mines experience more disabling injuries per year than nonunion mines,ceteris paribus. Previous studies attributed higher union injury rates to poor nonunion reporting practices. The data examined here suggest that other factors, including the UMWA’s job bidding system, low productivity, labor characteristics, and other institutional factors contribute to high injury rates at union mines. The authors acknowledge the helpful comments of Michael G. Finn, Clark G. Ross, and C. Louise Nelson. This research grew from work funded under contract DE-AC05-760R00033 between the Department of Energy and Oak Ridge Associated Universities. The views expressed and responsibility for errors or omissions belong to the authors.     

Immigration and the Transformation of American Unionism

Does immigration hamper union organizing in the United States? The prevailing literature strongly suggests that it does and for two reasons: first, immigrants increase the labor pool and diminish union influence over the labor market. And second, immigrants may be harder to organize than native workers. In this dominant view, unions are well served to restrict immigration and have always done so. But how, then, to explain the fact that American labor has long been deeply divided over the response to immigration? Drawing on new archival research and interviews, this paper uncovers a neglected side of American labor history in which many union leaders have extended solidarity to immigrants and sought to organize them. Moreover, analysis of time series data on immigration and union density corroborates the implicit theory of this alternate account of labor history: immigration has, in fact, no statistically significant effect – either positive or negative – on union density over time. Depending on specific conditions and strategies, unions can and have been successful in organizing during periods of high immigration.     

Industrial relations reform in Britain since 1979

Important changes to British industrial relations law were undertaken by the Thatcher and Major governments. A succession of legislative measures narrowed the scope of labor union action in pursuit of a dispute, made unions financially responsible for torts committed by their members, removed government support for collective bargaining, abolished the closed shop, and reformed unions' internal structures. At least in part as a result of these measures, union density and the coverage of collective bargaining have fallen; strikes have become rare; and Britain’s productivity performance has improved. The unions and the Labour Party have largely become reconciled to measures which they initially fiercely opposed, and the influence of these reforms is likely to endure even though the Conservatives have lost office.     

Formalization,collectivization, and the demand for union services

Formalized collective bargaining rather than individual employer-employee negotiation is the fundamental characteristic of a unionized labor market. Formalization involves the substitution of rules for employer discretion. Collectivization substitutes simultaneous decision making on behalf of all workers in a unit for a set of individual employee decisions. Formalization and collectivization are present in nonunion as well as union labor markets and their extent varies within as well as between these two sectors. In particular, individuals may negotiate where they belong in a union environment, and the presence of rules invites negotiation over their interpretation. Nevertheless, because formalization and collectivization are obvious concomitants of trade union organization, their costs to both employers and employees should explain the probability of union organization, as well as the incidence of such antecedents of the modern trade union as the Italian padrone who acted as foreman, pay-master, and employment agency for newly-arrived immigrants to the United States; and the Indianjamdar, a construction industry recruiter-foreman. Our occasional observations of union-induced costreductions may appear to counter the implicit assumption in much of the trade union literature that unions always induce suboptimal combinations of factor inputs and factor payments (nonunion firms could choose union-induced parameters on their own and do not). Because these cost reductions may be accompanied by increased costs imposed by unions, however, the cost reductions discussed below imply nothing about overall effects of unions on employers or employees. I wish to thank John Pencavel for helpful comments on earlier versions of this paper. For further analysis of these points, see Flanders (1968). See Epstein and Monat (1973) for a discussion of the services provided by labor contractors.     

Works Councils and Firm Productivity in France

This paper utilizes establishment-level data to explore the impact of works councils on firm productivity in France. A variety of empirical techniques is employed, including fixed effects and regression discontinuity designs, to identify this impact. We estimate the works council effect on productivity in union and nonunion settings, and investigate the extent to which alternative forms of worker voice and information sharing might substitute for the works council’s impact in production. We find no evidence of a positive impact of works councils on firm productivity in any of our results, and some limited evidence of a negative effect in some of the findings. There is no indication that estimated impacts on productivity vary with union status. However, a notable finding is that worker voice and information-sharing human resource practices are prevalent in French firms regardless of works council status, and are found to have positive and statistically significant effects on firm productivity.     

The effect of unionization on labor productivity: Some additional evidence

Following Brown and Medoff (1978), a number of studies have investigated the effect of unionization on labor productivity using a log-linear, Cobb-Douglas model of technology. To derive this model, a first-order Taylor-series approximation to the intrinsically nonlinear unionization variable is made; the resulting linear equation is estimated with generalized least-squares (GLS) techniques. We demonstrate that this approximation introduces a bias that necessarily results in an overstatement of the absolute value of the exact union productivity effect. We illustrate the magnitude of this bias by comparing GLS estimates of the linear Brown-Medoff model with GLS estimates of the exact, nonlinear relationship, using aggregate time-series data from the private domestic sector of the U.S. economy.     

The effects of management practices on union election returns

This paper examines the importance of management suppression tactics on union activity in the United States. NLRB data on individual certification elections which have recently become available for the period 1972–1976 are merged with structural, demographic, and industry characteristics of the 96 largest SMSAs to ascertain the role of strategy versus structure in explaining union outcomes. The measures of election-generated membership outcomes are voter participation, the margin of pro-union votes, and union wins. Union suppression practices under study include consent elections, election delays, formal objections after unions win a certification election, elections overruled because of management unfair labor practices, elections held by management petition, and the number of unfair labor practice charges per representation election. Five of the six measures of suppression are significant determinants of some facet of union expansion after adjusting for structural characteristics of the area work force.     

EXPLAINING INDUSTRY LABOR PRODUCTIVITY MOVEMENTS

The paper investigates the importance of three shocks at the industry level for explaining industry labor productivity movements; industry demand shocks, supply shocks, and labor supply shocks. The results from vector autoregressions show that the two supply shocks are the main determinants of labor productivity movements, where increases in labor supply are associated with persistently declining labor productivity. Labor supply shocks can explain from 65% to 73% of labor productivity variation at a three-year horizon in the trade and services industries. ( JEL O, O3, J22, L6-L9)     

Reconsidering union wage effects: Surveying new evidence on an old topic

I examine evidence on private sector union wage gaps in the United States. The consensus opinion among labor economists of an average union premium of roughly 15 percent is called into question. Two forms of measurement error bias downward standard wage gap estimates. Match bias results from Census earnings imputation procedures that do not include union status as a match criterion. Downward bias is roughly equal to the proportion of workers with imputed earnings, currently about 30 percent. Misclassification of union status causes additional attenuation in union gap measures. This bias has worsened as private sector density has declined, since an increasing proportion of workers designated as union are instead nonunion workers. Corrections for misclassification and match bias lead to estimated union gaps substantially higher than standard estimates, but with less of a downward trend since the mid 1980s. Private sector union gaps corrected for these biases are estimated from the CPS for 1973–2001. The uncorrected estimate for 2001 is .13 log points. Correction for match bias increases the gap to .18 log points; further correction for misclassification bias, based on an assumed 2 percent error rate, increases the gap to .24. Reexamination of the skill-upgrading hypothesis leads to the conclusion that higher union gap estimates are plausible. The conventional wisdom of a 15 percent union wage premium warrants reexamination.