Monopoly,efficient contract,and median voter models of union wage determination: A critical comparison

This article critically compares the monopoly, efficient contract, and median voter models of union wage determination. The models are first analyzed with respect to five theoretical issues: the aggregation of preferences, the principal-agent problem, strike costs, dynamics, and incentive compatibility. The models are then compared with regard to their ability to explain two features of union wage/employment determination: the asymmetric response of union wages to demand shocks and the wide variation in the presence of featherbedding restrictions in union contracts. While all three models suffer from significant short-comings, the median voter model is generally superior. The authors acknowledge the helpful comments of Hank Farber and the financial assistance received from the College of Business Administration, Georgia State University.     

The Ross-Dunlop debate revisited

An alternative interpretation of the Ross-Dunlop debate of the 1940s is provided, which reveals little difference in the opinions of these two theorists on the role of optimizing behavior and of economic factors in explaining trade union behavior. Importantly, both saw theories of union activity based on simple economic maximands as unable to incorporate some “political” features of those unions. The recent wave of economic analyses of trade unions however seems to have answered such criticism to a large extent. A survey of this work is provided to show how many of Ross’s “unanswered questions” can be explained by models where rational trade unions maximize relatively straightforward objective functions. This work is based on chapter 1 of the author’s M.A. thesis at the University of Melbourne. Many thanks are due to Ian McDonald for his generous help, and to Greg Whitwell for his comments on an earlier draft of this paper. The author is presently a graduate student at Yale University.     

The union wage effect in Canadian manufacturing industries

Data for Canadian manufacturing industries, at the two-digit level, are used to examine the component elements of the union wage effect. The results show that absence of compulsory union membership for all employees in the bargaining unit served by a union does not significantly impair the ability of the union to negotiate wage gains. That is, our results imply that there is little reason for unions to devote much effort to negotiating the stronger forms of union security — union or closed shops. A second implication of our results is that significant bargaining advantages may accrue to unions with an international (U.S.) link, relative to Canadian national unions.     

Single-peakedness and strategy-proofness of generalized median voter schemes

We identify, in a continuous multidimensional framework, a maximal domain of preferences compatible with strategy-proofness for a given generalized median voter scheme. It turns out that these domains are a variation of single-peakedness. A similar but stronger result for the discrete case and single-peakedness has been already obtained by Barberà et al. (1999). However, both results are independent and their proofs involve different arguments. Received: 27 July 1998/Accepted: 11 September 2000     

Some empirical observations of relevance to the analysis of union wage determination

Six important empirical characteristics of the union sector need to be incorporated into future research on wage determination. These are 1) the extent of unionization, 2) the statistical correlates of unionization, 3) divergent trends in union and nonunion earnings, 4) union/nonunion wage differentials, 5) the determinants of union and nonunion wage change, and 6) wage imitation. Examination of these characteristics suggests the following about union wage determination. Union wages have advanced relative to nonunion since the mid 1950s, despite relative shrinkage of the union sector. Union wage changes show less sensitivity to business-cycle pressures than nonunion. Limited spheres of wage imitation surround certain major union negotiations. These observations can be fitted into recent analyses of wage determination under long-term employer employee relationships, and have relevance for anti-inflation policy. Research for this paper was undertaken while the author was a Senior Fellow at the Brookings Institution and was supported by a grant from the Alfred P. Sloan Foundation. Views expressed should not be attributed to the Brookings Institution, its staff or trustees.     

The effect of type of union on member-nonmember wage differentials

The union-nonunion wage differential can be decomposed into bargaining and membership effects. While some analysts suggest that they are not separable and that bargaining power is a function of membership density, others argue that they are separable and that the former derives from monopoly power while the latter stems from socialization. Our results support the latter view. We derive estimates of bargaining and membership effects for workers covered by national, industrial, and craft union contracts as well as for all covered workers taken together. Since industrial and craft unions differ in structure and organization, we expect differences in the socialization effects among types of unions. It is clear from our results that union membership per se in each case gives a large positive wage advantage.     

The causes of union political involvement: A longitudinal analysis

This study examines the political involvement of unions over the 1978, 1980, and 1982 congressional elections. An empirical model focusing on the campaign contributions made by unions and the number of registered lobbyists employed by unions is elaborated and tested. The findings suggest that unions’ political activities are systematically undertaken and that they have increased dramatically over the past three elections. Specific characteristics of unions, such as membership size and dependence on governmental regulations, directly affect the political involvement of unions. Further, given the current economic and political climate, it is likely that this political action will continue to increase. The authors are grateful to Jack Fiorito, Cynthia Gramm, David Lewin, Frank Lichtenberg, two anonymous referees, and the participants in the labor seminars at the University of Illinois and the University of Iowa for helpful comments on an earlier version of this study.     

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.     

Empirics of the median voter: democracy, redistribution and the role of the middle class

This paper improves the empirical investigation on the effectiveness of the median voter theorem. Using high quality data, it is possible to directly observe individual net cash transfers in several countries and to investigate the effects of taxes and transfers on different social classes and in aggregate. This allows testing of both the “redistribution hypothesis” (more inequality leads to more redistribution in aggregate) and the “median voter hypothesis” (the middle class plays a special role in policy making). Results suggest acceptance of the former and reject on, or at least questioning, of the latter. Not only the gains from redistribution are negligible for the middle class, but also the link between income and redistribution is also lower for it than for any other class of income. Moreover, the strength of the median voter seems to fall over time. Finally, the amount of redistribution targeted to the middle class is lower in more asymmetric societies, a result that contrasts strongly with the median voter theorem.     

The level and growth of union/nonunion relative wage effects, 1967–1977

This paper pools cross-section data to obtain an estimate of the overall effects of unions on relative wages for the period 1967 through 1977. We found the average union wage premium for all workers to be roughly 24 percent, but that this premium varies substantially between subgroups of workers. Our analysis showed that real wage rates increased faster in the union sector than in the nonunion sector between 1967 through 1977. However, we found that this relative growth pattern in wages was caused by economic conditions rather than in any fundamental shift in the power of unions. We wish to thank James S. Cunningham, H. Gregg Lewis, and John Pencavel for helpful comments.     

Public sector union democracy: A comparative analysis

A congressional subcommittee held “union democracy” hearings in 1998 and 1999 to debate the impact and effectiveness of the union-democracy protections provided by the Land rum-Griffin Act which provides union members in the private sector and U.S. Postal Service certain democratic rights and protections. What was not resolved at that hearing was whether state sector or public employee union members should also enjoy the same democracy protections. We survey the existing 28 state sector collective bargaining laws and find that the majority of state legislation falls considerably short of the protections provided by the Labor Management Reporting and Disclosure Act. Moreover the consequences of limited state-enacted union-democracy protections are discussed and assessed to determine whether LMRDA jurisdiction should also cover public sector union members.     

The union image: Concept,programs and analysis

Several key labor leaders have expressed the need to improve the public image of unions. This paper defines the core elements of the current negative image and describes factors contributing to it. The basic direct and indirect approaches employed by unions to improve their image are systematically presented. It is concluded that prospects for image change are minimal due to limited image building efforts overall, lack of strategic thrust and union coordination, limited understanding of the nature of the image, and virtually no evaluation of image building efforts.     

Participation in union activities: A multivariate analysis

Multivariate analysis is used to estimate a model of member participation in local union activities. A sample of 387 members of the UAW living in the Detroit area was drawn from the1961 Detroit Area Study: Work Group Influence and Political Participation. It was hypothesized that participation would be positively associated with level of schooling, current wages, seniority, skilled jobs, job dissatisfaction, dissatisfaction with the local union, desire for another job, commitment to the labor movement, and getting along with others. OLS and Logit estimation techniques were used and support was found for all hypotheses except those related to wage levels and seniority.     

Union wage differentials and the effects of industry and local union density: Evidence from the 1980s

This study finds that the real union-nonunion wage differential has declined only slightly since 1985, a period of falling unionism. The study also finds that, in contrast to earlier research, local (geographic) union density positively affects union and nonunion wages. This paper has benefited from discussions with Bill Even and Barry Hirsch. The research support of the School of Business Administration Research Committee is greatly appreciated.     

State and local government wage differentials: An intrastate analysis

Previous estimates of state and local government wage differentials have been typically based on data aggregated across all states, and such aggregation may produce seriously misleading differential estimates. We estimate intrastate earnings differentials for the state and local sectors in Wisconsin, four other midwestern states, and two states outside the midwest. There is substantial variation in the differentials: aggregated differentials can be misleading. Our work also confirms that state and local government labor markets have reduced earnings dispersion and investigates the possibility that higher public sector earnings may attract an “over-qualified” work force. The authors thank the Wisconsin Policy Research Institute for financial support and members of the UWM economics seminar and Sammis White for detailed comments on earlier drafts.