Heterogeneity and union membership determination

This paper formalizes theoretical and empirical analyses of the determination of union membership. It is argued that an important (and usually ignored) consideration affecting the union status of workers is the externalities between (potential) union members: The gain a worker derives from unionization is affected by the characteristics of the workers who already belong to the union, and the gain union members derive from admitting an additional worker to membership depends on that worker’s characteristics. Thus, two conditions must hold if a worker is to join a union: (1) unionization should increase his wage, and (2) union members must benefit from adding him. The main implication of this analysis is that in a given industry/occupation a union is more likely to form among workers withlower rents. To test this proposition, I present an empirical analysis using data from the May 1979 Current Population Survey (CPS) Public Use Sample. A procedure for measuring worker’s rent is discussed and certain relationships between rent and union membership are identified. I am most indebted to Finis Welch for many valuable comments and suggestions throughout the preparation of this study. I have also benefited from comments made by Mark Killingsworth, Kevin Murphy, Mark Plant, the editor of this journal, and an anonymous referee. The generous availability of the computer facilities at Unicon Research Corporation is appreciated.     

Unions and fringe benefits: Additional evidence

Arguing that the fringe benefit demand function is probably discontinuous, a two-stage estimating procedure is used to estimate the continuous component of the function while correcting for selectivity bias. Results reveal an asymmetrical union impact on health and pension fringes. Although the union effect is positive for health insurance, it is nil for pension fringes. Nevertheless, unionism positively influences the likelihood that pension and health plans will be available to workers. I am grateful to the Oakland University Research Committee for grant support.     

WHAT DO UNIONS DO TO PENSION PERFORMANCE?

Unions can have either positive or negative effects on risk‐adjusted returns in pension plans. On the positive side, a union can improve monitoring of pension advisors and asset managers. On the negative side, the union may sacrifice returns by making investments that promote union goals. This paper discusses how the structure of the pension plan affects the union's ability and willingness to sacrifice returns to promote union goals. Using panel data on over 38,000 pension plans drawn from IRS Form 5500 filings between 1988 and 2008, we find the lowest performing plans are unionized multi‐employer plans. Among defined contribution plans, the underperformance of multi‐employer union plans disappears when the pension is controlled by individual participants. (JEL J32, J51)     

Pensions and job search: Survey evidence from unionized workers in canada

Research on the disincentives for quitting under employer-sponsored pension plans have limited generalizability as tests of the implicit contract thesis because of the way that job changing, pension back-loading, and plausible alternative explanations for pension effects have been operationalized. Using a unique data set that addresses some of these concerns, I find that pension back-loading and insecurity about the viability of a long-term employment contract are quantitatively the most significant determinants of job search intentions, followed by other seniority related benefits, such as vacation pay and shared investments in firm-specific training. No support for pension information, wage tilt, or efficiency wage arguments is found. Males and the better educated are also more likely to intend to search. Implications for theory, policy, and future research are discussed. I thank Morley Gunderson for helpful comments made on an earlier draft of this paper. Financial assistance from the Social Sciences and Humanities Research Council is gratefully acknowledged.     

Changes in Firm Pension Policy: Trends Away from Traditional Defined Benefit Plans

In light of the recent concerns regarding the solvency of Social Security’s Old-Age, Survivors and Disability Insurance (OASDI), private pensions may play an increasingly important role in retirement welfare of US retirees. However, the private pension landscape has evolved in ways that may result in lower private pension wealth for retirees. One recent such phenomenon involves the conversion of traditional defined benefit pension plans to cash balance plans, which results in lower pension benefits for many workers. In this study, I investigated how characteristics of the firm’s workforce influenced whether the firm converted their traditional pension plan to a cash balance plan and how these characteristics related to the firm’s pension plan policy more generally. Using the Longitudinal Employer-Household Data and pension plan data from the Department of Labor/Internal Revenue Service and the Pension Benefit Guaranty Corporation, I found little evidence of workforce age distribution effects on the likelihood of DB plan conversion to a cash balance plan in the 1990s. More generally, I consistently found positive associations between firms with older and more female workforces and defined contribution plans during the same time.     

Privatization of refuse removal and labor costs

We examine the labor-cost savings associated with privatization by comparing earnings and employment trends of public and private sector refuse workers. Findings suggest that high union earnings for workers in the public sector are a source of labor-cost savings in the refuse industry. Evidence on job changers does not indicate that earnings for this group of workers are a compensating differential. Metropolitan area employment findings suggest that municipalities are less likely to use union refuse workers in the public sector when a relatively small percentage of area residents belong to a union. The authors thank Jacqueline Agesa, Keith Bender, Maria Crawford, and Richard Perlman for valuable suggestions. Research assistance from Eric Blackburn is greatly appreciated.     

The effects of prevailing wage laws: A comparison of individual workers’ wages earned on and off prevailing wage construction projects

I evaluate the effects of prevailing wage laws using a unique data set that shows the wages paid to workers on prevailing wage projects and the wages paid to the same workers during the same time period for work on projects not covered by prevailing wage regulations. The wage comparison shows that workers are generally paid more for work on prevailing wage projects than they are for work on nonprevailing wage projects. Thus, prevailing wage laws likely do increase the cost of public construction. In addition, to the extent that the quality of construction is improved, prevailing wage laws appear to be an inefficient mechanism by which to achieve additional quality, as the regulations often result in workers being paid more than they earn in the private market. This research was done originally for the Program Review and Investigations Committee of the Kentucky State Legislature. I thank the staff of the Program Review and Investigations Committee and the Legisla-tive Research Commission for assistance with data collection and Mark Berger for helpful comments. Due to confidentiality requirements, the data cannot be made available.     

Retirement plan participation and features and standard of living of Americans 55 or older

This Issue Brief is the third in a series of Employee Benefit Research Institute (EBRI) publications based on data collected in 1998 and released in 2002 as the Retirement and Pension Plan Coverage Topical Module of the 1996 Survey of Income and Program Participation (SIPP). This report completes the series by examining the survey's more detailed questions concerning workers' employment-based retirement plans. Specifically, it examines the percentage of workers who are participating in a plan, and also workers' reasons for not participating in a plan when working in a job where a plan is sponsored; the features of, or decisions made concerning salary reduction plans; historical participation in employment-based retirement plans; and a comparison of the standard of living of individuals age 55 or older with their living standard in their early 50s. As of June 1998, 64.3 percent of wage and salary workers age 16 or older worked for an employer or union that sponsored any type of retirement plan (defined contribution or defined benefit) for any of its employees or members (the "sponsorship rate"). Almost 47 percent of these wage and salary workers participated in a plan (the "participation rate"), with 43.2 percent being entitled to a benefit or eligible to receive a lump-sum distribution from a plan if their job terminated at the time of survey (the "vested rate"). The predominant reason for choosing not to participate in a retirement plan was that doing so was unaffordable. The eligible participation rate for salary reduction plans was 81.4 percent. Fifty-six percent of all workers have participated in some type of retirement plan sometime during their work life through 1998. For those ages 51-60, almost 72 percent have ever participated in a plan. The median account balance in salary reduction plans in 1998 was $14,000. In 1998, 12.9 percent of salary reduction plan participants eligible to take a loan had done so, and the average outstanding loan balance was $5,196. Nearly 80 percent of those age 55 or older reported that their standard of living is about the same or better now than it was when they were in their early 50s. The incidence of both pension income and health insurance from a former employer had a significant impact on retirees' ability to maintain their standard of living. In addition, those who spent their entire most recent lump-sum distribution were more likely to have a much worse standard of living in retirement than those who rolled over their entire most recent distribution.     

Get High and Get Stupid: The Effect of Alcohol and Marijuana Use on Teen Sexual Behavior

Numerous studies have documented a strong correlation between substance use and teen sexual behavior, and this empirical relationship has given rise to a widespread belief that substance use causes teens to engage in risky sex. This causal link is often used by advocates to justify policies targeted at reducing substance use. Here, we argue that previous research has not produced sufficient evidence to substantiate a causal relationship between substance use and teen sexual behavior. Accordingly, we attempt to estimate causal effects using two complementary research approaches. Our findings suggest that substance use is not causally related to teen sexual behavior, although we cannot definitively rule out that possibility.Research for this paper was supported by grant number 5 R01 DA12692 from the National Institute on Drug Abuse to the National Bureau of Economic Research. We are indebted to Inas Rashad and Nasreen Khan for research assistance. We wish to thank Donald Kenkel, Jody Sindelar, David Salkever, David Bishai, Eric Slade, and two anonymous referees for helpful comments and suggestions. Our research is based in part on the Add Health project, a program project designed by J. Richard Udry (PI) and Peter Bearman, and funded by grant PO1-HD31921 from the National Institute of Child Health and Human Development to the Carolina Population Center, University of North Carolina at Chapel Hill, with cooperative funding participation by the National Cancer Institute; the National Institute of Alcohol Abuse and Alcoholism; the National Institute on Deafness and Other Communication Disorders; the National Institute on Drug Abuse; the National Institute of General Medical Sciences; the National Institute of Mental Health; the National Institute of Nursing Research; the Office of AIDS Research, NIH; The Office of Behavior and Social Science Research, NIH; the Office of the Director, NIH; the Office of Research on Womens Health, NIH; the Office of Population Affairs, DHHS; the National Center for Health Statistics, Centers for Disease Control and Prevention, DHHS; the Office of Minority Health, Center for Disease Control and Prevention, DHHS; the Office of Minority Health, Office of Public Health and Science, DHHS; the Office of the Assistant Secretary for Planning and Evaluation, DHHS; and the National Science Foundation. Persons interested in obtaining data files from The National Longitudinal Study of Adolescent Health should contact Add Health Project, Carolina Population Center, 123 West Franklin Street, Chapel Hill, NC 27516-3997 (email: addhealth@unc.edu). This paper has not undergone the review accorded to official NBER publications; in particular, it has not been submitted for approval by the Board of Directors. Any opinions expressed are those of the authors and not those of NIDA or NBER.JEL Classification: I10, I11     

Cities,unions, and the privatization of sanitation services

We analyzed 740 cities to determine whether they considered or adopted the contracting out of their sanitation collection service. The presence of a municipal sanitation union reduces the likelihood that a city considers the contracting-out option and the likelihood of adoption of the privatization alternative, but only in those cities which have cooperative relations with the union. The authors thank the Governmental Refuse Collection and Disposal Association and the Institute of Labor and Industrial Relations and the Research Board at the University of Illinois for generously supporting this research; Penni Falkinburg for some excellent research assistance; and John Delaney and Wally Hendricks for some very helpful comments.     

Pensions and the uses of ignorance by unions and firms

Pensions are contingent claims contracts that are often fashioned by collective bargaining under conditions of asymmetric information and market power. Pensions are not an employer’s or a union’s optimal contract; they represent compromise. Employers use pensions to minimize labor costs and to adjust to market changes. Pensions help unions improve and protect their members’ work lives and help unions to survive as institutions. When workers’ estimations of their pensions differ from their employers’ estimations a moral hazard can exist. Less mobile workers and those with less influence subsidize the pension benefits of other workers or reduce an employer’s costs. Econometric results based on data from the President’s Commission on Pension Policy show that certain workers, namely women, overvalue their plans, which provides an opportunity to lower labor costs and redistribute benefits. Unions have a contradictory effect on information. The author thanks participants in the Cornell University Collective Bargaining workshop and the Harvard Labor Economics workshop. I especially thank James Medoff for his comments.     

Union rent appropriation and ex post analysis

A data set of 106Fortune 500 firms is used to investigate the extent of union rent appropriation in 1977. The analysis identifies the existence of an appropriable asset with greater value in use than exchange as a necessary condition for union rent appropriation. The empirical analysis utilizes a new source of unionization data and explicitly addresses the problems associated with ex post analysis. The results suggest capital- and firm-specific efficiency are major sources for union rent appropriation. The authors thank Barry Hirsch for providing data used in this study and also thank Jon Nelson, David Macpherson, Mark Roberts, Chella Courington, seminar participants at The Pennsylvania State University, and an anonymous referee for helpful comments on an earlier draft of the paper. Machine readable copies of the unionization data and an appendix describing the programs used to generate the results are available from Ted W. Chiles at the Department of Economics, School of Business, Auburn University at Montgomery, 7300 University Drive, Montgomery, Alabama, 36117–3596.     

How employee involvement affects union commitment

I assess how employee involvement programs affect union commitment attitudes. Analysis of 229 survey responses indicates that participation attitudes have no effect on union commitment levels; previous participation has a positive effect; and organizational commitment has a negative effect. A similar pattern was observed on four subscales of union commitment: union loyalty, responsibility to the union, willingness to work for the union, and belief in unionism. I thank the employees, the unions, and the company at which this study was conducted. Also, I am grateful to suggestions and comments made by participants in the American University Department of Management Research Series. Finally, a word of thanks to Tom Case, Gordon Henry, David Jacobs, and Tom Vonk for their comments on earlier drafts of this paper.     

Complementarity of pensions and training under multiemployer plans

We compare firmoptimizing and institutional models of labor contracts to investigate how different types of pension plans affect employee training. Unlike previous stud-ies, we consider an expanded voice model of training and pension coverage in which worker and union preferences feed back on firm decisions, and we test for this bidi-rectional causality between pensions and training. A standard view is that firms pro-vide pensions to optimize their training costs. However, when pension coverage is treated as endogenous in a twostage least squares regression (the data are merged 1991 CPS samples), pensions have a negative effect on training. In contrast, when the pension is a definedbenefit, multiemployer plan, training and pensions are comple-ments, consistent with both optimizing and institutional models. We are grateful for excellent research assistance from Michael Ash, Bhashkar Mazumder, and Judith Ruha and for suggestions from Dale Belman, David Card, B.J. Lee, David MacPherson, and John Turner.     

Union commitment and membership support for political action: An exploratory analysis

Union political activity has always been controversial, even among union members. Research has shown that a sizable minority of union members question the propriety of union political involvement and disagree with union leaders on public policy issues. It has also shown, however, that union members’ commitment to the union may be positively associated with members’ political support. This study extends this research by statistically estimating the relationship between union commitment and members’ support for their national union’s political involvement. Based on the questionnaire responses of several hundred local union members, the findings support a positive relationship between union commitment and political support. The authors wish to thank John Delaney and Cynthia Fisher and an anonymous referee for their comments on an earlier draft of the paper. They also wish to thank the numerous union participants in the study.     

Profiles of union organizers from manufacturing and service unions

This study uses data on 229 organizers from eight unions to assess differences in characteristics of organizers employed by manufacturing and service unions. The results suggest that a new breed of organizer is entering the labor movement through service unions-organizers who are younger, more highly educated, more socially mobile, and have less experience in the union movement than organizers from manufacturing unions. This article is based on data collected for a dissertation written at the Graduate School of Business at Columbia University. I gratefully acknowledge the support of committee members David Lewin, James Kuhn, Casey Ichniowski, and Seymour Spilerman of Columbia and Charles A. O’Reilly III of the University of California at Berkeley. I thank John Delaney for his many helpful insights and suggestions during the course of my research and Shannon Ratcliff and Rick Fuentes for comments on an earlier draft of this paper. This research was financially supported by the Industrial Relations Research Center and the Management Institute at Columbia University and the Department of Management at Texas A&M University.     

Unions as value-adding networks: Possibilities for the future of U.S. unionism

VII. Conclusions The decline in private sector union density in the U.S. coincided with increased innovation at the local level. One trend in particular, value-adding unionism, may offer some hope for those who believe that workers, the economy, and the nation benefit from strong, independent trade union movement. Unions that can add value to firm performance while at the same time fulfilling their responsibilities to represent the collective and individual interests of their membership have greater appeal to potential union members seeking opportunities for both representation and participation. Since they add economic value to firms, they may also reduce the level of managerial resistance that we have seen in recent history. Farber and Western (2001) argue that the overall U.S. decline in union density is almost entirely due to falling employment in unionized firms and increases in nonunion firms. This value-adding approach offers one strategy to preserve and expand union employment in firms where it is already established, thus slowing or reversing the decline. Moreover, as structural changes in the economy have led to shifts away from sectors with high levels of union density, they have at the same time put a premium on the ability of firms to respond quickly to changes in the marketplace and the competitive environment. Value-adding unions can provide the infrastructure for organizational networks that facilitate the communication and coordination necessary to adjust to such changes. Thus, new forms of representation that provide unions and their members with greater opportunities in decision making, management, and governance can add value to both management and labor. I thank Charles Heckscher and Bruce Kaufman for comments on earlier drafts of the paper and the National Science Foundation, Rutgers University, and MIT for financial support.     

Youth-adult differences in the demand for unionization: Are American, British, and Canadian workers all that different?

We examine demand for union membership amongst young and adult workers in Britain, Canada, and the United States. Using a model of representation advanced by Farber (1983, 2001) and Riddell (1993), we find that a majority of the union density differential between young and adult workers in all three countries is due to supply-side constraints rather than a lower desire for unionization by the young. This finding lends credence to two conjectures: first, tastes for collective representation do not differ substantially among workers (either by nationality or by age) and second, union representation can be fruitfully modeled as an experience-good. The experience-good properties of union membership explain the persistence of union density differentials (in this case between youth and adults) in the face of equal levels of desired representation. An earlier version of this paper appeared as Centre for Economic Performance (CEP) discussion paper dp515, January 2002. This paper was produced under the “Future of Trade Unions in Modern Britain” program supported by the Leverhulme Trust and with the financial help of the Social Sciences and Humanities Research Council (SSHRC) of Canada. We thank Jo Blanden, Andy Charlwood, David Metcalf, and Steve Machin for comments on an earlier draft. We dedicate this paper to our mentor and friend, the late Noah Meltz, who passed away as this paper was being written.     

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.