Union rent seeking and import competition

conclusion We empirically evaluate two issues: (1) how the union rent seeking responds to import competition and (2) whether union bargaining power, as proxied by the proportion of the labor force in an industry that is unionized, moderates the impact of import com-petition on union wage differentials. Unlike other studies, our emphasis is on the influ-ence of import competition on union rent seeking, rather than on union wages per se. Our primary results indicate that while import competition negatively and significantly affects union rent seeking, the extent of unionization does not substantially influence the impact of import competition on the union wage differentials. This is a somewhat surprising result since the literature suggests that union wages are greater in the pres-ence of stronger unions.     

Compensation of Foreign and Domestic Nurses in the US

This study tests the union skill homogeneity hypothesis by examining whether the erosion of foreign-domestic wage differentials reported in past studies varies by union status. We argue that the common practice of unions negotiating standardized wages promotes skill homogeneity that allows high credential-low unmeasured skill foreign nurses the opportunity to receive wages that match high credential domestic nurses without foreign nurses relying heavily on their labor mobility. Findings show returns to domestic experience accrue faster for foreign nurses belonging to a union compared to returns for non-union foreign nurses. In general, findings on pension coverage indicate foreign nurses also benefit from belonging to a union, while findings on employer sponsored health care benefits indicate a lack of any notable differences in the receipt of this compensation by foreign and union status.     

Wage Differentials of Transportation Industries: Deregulation Versus Regulation

This article investigates the wage differentials of similar occupations in three for-hire transportation carrier industries, railroad, truck, and motor bus, under regulation and deregulation. The estimation results indicate that the union wage gaps among all occupations have widened under deregulation. Specifically, the union wages of railroad occupations have increased relative to those of truck drivers and the union wages of truck drivers have increased relative to those of motor bus drivers. Further, wage gaps for all occupations for this period are greater among nonunion than among union workers.     

American trade unions and public approval: Can unions please all of the people all of the time?

Public opinion about labor unions has long been viewed as an important determinant of industrial relations outcomes. Yet, analyses of changes in union popularity over time have been largely qualitative and have focused on the impact of short-term idiosyncratic events. This paper provides a quantitative analysis of the determinants of American public approval of unions from 1936 to 1991. Hypotheses relating to the union wage advantage, strike activity, the national unemployment rate, and World War II, receive the strongest support. The implications of these results for organized labor and future research on attitudes toward unions are discussed.     

Whatever happened to the monopoly theory of labor unions?

This paper argues that unions act in accord with the conventional cartel or monopoly model. The basic premise is that it is useful to ask what a “union maximizes” because if more wealth is available, union decision-makers have an incentive to capture it for themselves or their membership. In the formal model, unions negotiate wage rates which maximize the monetary surplus above the supply price of labor, providing an endogenous answer to the questions of how union employment and wages are simultaneously determined. Comparative static analysis yields empirical predictions about the behavior of union employment, wage rates, and union-nonunion wage differentials. I would like to acknowledge helpful comments by Richard Anderson, Ray Battalio, Hugh Macaulay, Michael Ormiston and Akira Takayama on earlier drafts of this paper. The usual caveat applies.     

Interfirm wage differentials in a local labor market: The case of the fast-food industry

We examine interfirm wage differentials among fast-food restaurants in Atlanta, Georgia to determine the degree to which these differentials correspond to the predictions of competitive theory. While no definitive test is possible, given our inability to control all sources of wage variation, the evidence nevertheless suggests that the wage structure is largely shaped by competitive forces, albeit in a relatively complex manner due to differences in a host of factors that the simple version of the theory holds constant. Evidence is also found, on the other hand, that the supply curve of labor to the individual firm slopes upward for experienced workers and that a small noncompensating wage differential may exist that is related to variation in each restaurant's ability to pay.     

Do unions always decrease wage dispersion? The case of Brazilian manufacturing

The literature on the impact of unions on wages has established that unionized workers earn a wage premium when compared to their nonunion counterparts and that the dispersion of wages within the union sector is lower than in the nonunion sector. I examine the validity of these findings in the context of a developing country labor market and show that unionism does create a positive wage differential but that wage dispersion is greater in the union sector. These findings are explained by the greater variance in the characteristics of unionized workers, the vulnerability of nonunion workers to market conditions, and the structure of wage bargaining.     

WAGES,RENTS, AND HETEROGENEOUS MOVING COSTS

The model of compensating differentials in regional labor and land markets was formalized by Roback (1982) . The model interprets regional differences in constant quality wages and rents as compensating firms and residents for inter‐regional differences in amenities. This paper extends the Roback model to allow for moving costs which vary among a city's residents and businesses. This modification of the model generates new interpretations of regional differences in rents and wages. The theoretical results suggest that the interpretation of inter‐city rent and wage differentials as compensating is misguided, that such differentials are inappropriate as weights in Quality of Life (QOL) comparisons, and stresses the importance of local housing market parameters in the determination of these differentials. The importance of amenities is retained, but housing supply becomes the main other determinant of regional rents. Housing supply was ignored in the literature following on Roback's initial insight. We show that interactions between amenities and housing supply will bias QOL rankings. Finally, we support the empirical importance of heterogeneous moving costs by demonstrating the effects of exogenous supply constraints on local housing prices. (JEL R31)     

LABOR IMMOBILITY AND THE FORMATION OF GENDER WAGE GAPS IN LOCAL MARKETS

Family ties have an important effect on the wage gap between male and female workers because wives are often more geographically tied to their husband's location, which may not be the best market for the wife's skills. Theory implies a testable inverse relationship between urban size—reflecting labor market size—and male-female wage differentials. Our results indicate that the wage gap between married men and women narrows with urban size. About 17 percent of the wage gap between married men and women can be accounted for by urban size—or, more fundamentally, by geographic immobility due to the family tie constraint.     

Membership and wage impact of right-to-work laws

This paper examines the effects of “Right-to-Work” laws on union membership and on the earnings of union and nonunion members. Using regression analysis, we find that once the simultaneous equations bias between the degree of unionization and RTW laws is eliminated, RTW laws have no statistically significant influence on union membership. Similarly, using a human-capital earnings model, we find that RTW laws have no significant influence on the wages of all workers, union workers, or nonunion workers. However, we did find evidence that such laws may promote aggressive union wage policies resulting in a larger union/nonunion relative wages advantage in RTW states than in non-RTW states.     

TRADING UNCERTAINTY, ENFORCEMENT AND LABOR UNIONS

It is shown that when contracts can be perfectly enforced, trading uncertainty leads to discrimination among workers with the same skills and experience. In this case anti-discrimination laws lead to inefficiencies. In the absence of perfect enforcement, anti-discrimination practices may be used as enforcement devices and need not lead to inefficiencies. In particular, firms may wish to precommit to an anti-discrimination policy, say by inviting in a labor union, in order to offer credible insurance to its workers. This leads to an equilibrium in which union workers get a higher wage than non-union workers, but unions do not have monopoly power.     

A Note on Dual Internal Labor Markets and Wages of Temporary Workers: Evidence from Linked-Employer-Employee Data

I use linked employer-employee data from the German Federal Statistical Office to estimate within-firm wage differentials between temporary workers with fixed-term contracts and workers with permanent contracts in the context of dual internal labor markets. Wage-tenure profiles of permanent workers are estimated separately for each firm to obtain a proxy for the prevalence of internal labor markets. Temporary workers earn significantly lower wages in firms with steeper wage-tenure profiles. This finding is consistent with the segmentation in a primary permanent workforce with high wages and a secondary temporary workforce with low wages, if internal labor markets are more prevalent.     

Native‐Migrant Wage Differential Across Occupations: Evidence from Australia

We investigate wage differential by migrant status across white‐collar and blue‐collar occupations in Australia. Migrants are observed to have a higher wage; this difference, however, does not exist once we control for covariates. The unconditional wage differential varies over wage distribution as well as by occupation. Significant wage differentials are found above the median: positive for white‐collar workers and negative for blue‐collar workers. Using recently developed decomposition methods based on Firpo, Fortin, and Lemieux (2009) we decompose wage differentials across their distribution. Overall, the wage advantage of migrants reflects their superior labour market characteristics, and in particular, their levels of education. We find that English language proficiency plays an important role in wage differences among immigrants from non‐English speaking countries.     

Union-nonunion wage differentials and the functional distribution of income: Some simulation results from a general equilibrium model

During the past two decades, a number of studies have established the ability of unions to obtain wages for their members that exceed the payment to similar but nonunionized workers. This article investigates empirically the impact that this wage differential has on the real incomes of union labor, nonunion labor, and capital. The analysis is accomplished by solving explicitly a numerically specified general equilibrium system with and without the union wage premium. Comparison of real factor incomes in each equilibrium yields the desired information. The findings indicate that union labor gains as a result of the differential, while nonunion labor and capital lose. This outcome is realized both in terms of real income levels and in a redistributive sense. I would like to thank Nick Carlozzi and Aris Protopapadakis for valuable comments and Mary Agnes McPeak for excellent research assistance. Remaining errors are my responsibility alone.     

Union wage differentials for covered members and nonmembers in Great Britain

I present the first longitudinal estimates of covered union member and covered nonmember wage differentials in Great Britain. Crosssectional estimates show that covered union members receive a premium of about 10 percent over other workers, but covered nonmembers have no significant wage differential. Longitudinal estimates that accounted for fixed effects, selectivity, and measurement error indicated that OLS estimates are downward biased. The “true” union wage differential is likely about 30–35 percent. There is a large negative selection effect to union membership. No robust estimate could be found for covered nonmembers. This paper has benefited from conversations with Martyn Andrews, Wiji Arulampalam, Alison Booth, Tim Hatton, John Hutton, George Jakubson, Costas Meghir, and Andrew Oswald. Alison Booth kindly made extensive comments on an earlier draft, which greatly improved the exposition. John Budd, Hank Farber, and Larry Katz directed me towards related work in the U.S. I am also grateful to seminar participants at the University of York University of Essex, and the CEPR Workshop on Labour Market Issues. Thanks to the ESRC Data Archive for supplying the Family Expenditure Survey (FES) data. All data, computer programs, and results alluded to in the text are available on request. The British Household Panel Study (BHPS) and FES data are available from the ESRC Data Archive at the University of Essex. The Panel Study of Manufacturing Establishments (PSME) data are available from the author on request.     

Cooperation,job security,and wages in a dual labor market equilibrium

By introducing cooperation among individuals working within a firm, this paper constructs a model generating a dualistic competitive equilibrium with differentials in wages and job security in an industry with product demand uncertainty. Primary firms offer high job security to promote cooperation and achieve high productivity. Secondary firms merely take advantage of ability to adjust employment. Wage differentials arise because cooperation is more productive among members of the same social group and thus different groups of workers face different labor demand. In contrast to the Arrow-Debreu economy, firms making long-term decisions and those making short-term decisions coexist in the equilibrium.     

MINIMUM WAGE EFFECTS WITH OUTPUT STABILIZATION

What are the effects of legal minimum wage rates on the U.S. economy? Does minimum wage legislation promote the economic self-interest of high wage union labor and impede the economic self-interest of capitalists as our earlier research [Cox and Oaxaca 1982] suggested? This paper uses a nine sector econometric/simulation model of U.S. industry from 1975–1978 to answer these questions in the context of stabilization policies which hold aggregate real output constant. While most simulated percentage effects are small, those for the unskilled workers themselves are not. A 15.7 percent increase in the average nominal wage rate of unskilled labor, as a result of minimum wage legislation, produced an 11 percent decrease in unskilled employment, 2.2 million jobs lost, while increasing the real wage of unskilled workers by 15 percent. Simulated changes in several key variables support our earlier observations that the self-interests of labor unions, with skilled workers, conflict with those of capitalists over the issue of minimum wage legislation.     

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.     

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.     

Amenities and the labor earnings function

Desirable locations are, other things equal, expected to be characterized by a mix of higher rents or lower wages. That is, if one area is more attractive than others, inmigration would occur, driving up the demand for land (hence raising rents) and increasing the supply of labor (hence lowering wages). The in-movement will continue until utility is the same across locations in equilibrium. Failing to hold constant amenities in the traditional earnings functions employed by labor economists will result, then, in omitted-variable bias if worker characteristics (years of schooling, union membership, and so on) are correlated with amenities. By way of illustration, our empirical analysis suggests that as much as 50 percent of the apparent return to unionization may be due to the impact of undesirable amenities, resulting in compensating higher wages, in areas of union strength — unionization is being credited with wage gains that properly should be attributed to climate and other (dis)amenities. Similar, though smaller, effects on other coefficients of the earnings function variables are presented.