Trade-Offs in the Labor Union-CEO Compensation Relationship

We examine the relationship between union presence and CEO compensation. Based on the notion that the union taxes the firm's returns, we test whether unions successfully capture a larger share of the firm's returns with respect to the share captured by the CEO. On average CEOs in union firms are paid 19 percent less than those in nonunion firms, after controlling for several determinants of CEO pay. CEO compensation risk is lower in union firms because the reduced compensation risk is a trade-off for the lower level of CEO compensation.     

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.     

The compensation of national union presidents: Moderating effects of union size

Over the last forty years numerous reseachers from the fields of economics, finance, and human resources management have proposed and empirically evaluated a number of models in efforts to identify determinants of executive compensation. Recently, similar research efforts have been undertaken to identify compensation determinants for union officers, both at the local and national levels. As an extension of these works, this study found measures of union financial strength, job complexity, performance and tenure in office to be directly related to national union presidents’ compensation. Although union income and relative union member earnings were the strongest determinants of officer compensation for the sample of unions as a whole, analyses of three subgroups of unions based on size revealed very different findings for large as opposed to small and medium-sized unions.     

Financial and political resources of nine major public sector unions in the 1980s

Current research offers two potentially competing perspectives on union strength: membership and financial/political resources. We update and broaden the research on the financial and political resources of nine major public sector unions in the U.S. by reporting these unions’ financial assets, net worth, revenues, and political action committee (PAC) receipts during the 1980s and the early 1990s. We find that unions may expand their financial and political resources even though membership levels stagnate or decline. Overall, the unions have amassed larger asset bases, even though some have actually lost members. On a per member basis, federal executive branch unions do not appear as financially weak as the level of their financial resources suggests. Postal unions as a group are clearly the strongest in terms of per member financial and political resources. Federal executive branch unions have experienced a striking reduction in their PAC activity, while the postal and the state and local union PACs have grown substantially. Our analysis indicates that union membership may not adequately measure union strength.     

Union effects on productivity,personnel practices,and survival in the automotive parts industry

We estimate the effects of unions on productivity and compensation in the automotive engine and non-ornamental body parts manufacturing industry using data obtained from a detailed questionnaire and a series of personal interviews. We find no significant union productivity effect but a significant 30 percent compensation premium in firms organized by the United Auto Workers. Individual personnel policies were shown to differ significantly in the expected manner between the union and nonunion sectors. Finally, we use data on bankrupt firms to show how the failure to correct for sample selection bias might yield upwardly biased estimates of the union productivity effect. We would like to thank Elizabeth Savoca and an anonymous referee for their helpful suggestions.     

Workers, Unions, and Takeovers

How do takeovers affect workers?? wages and job security in the short-run? What role does the labor union play in mitigating these effects? I answer these two questions by analyzing wage and employment outcomes of over 4,000 public firms that were acquired between 1981 and 2002, using establishment-level data from the U.S. Census Bureau. I find that target establishments exhibit a net contraction in wages and employment, relative to comparable establishments after takeovers. Targets?? establishments in more unionized industries experience worse wage and employment outcomes after takeovers. These adverse effects are exacerbated when the establishment is located in a state with Right-to-work laws where unions face a less favorable bargaining environment. These findings indicate that target firms?? employees are negatively affected by takeovers and that their labor unions do not mitigate these negative effects.     

Why unions support mandated benefits

A complete explanation for union support of mandated benefits must recognize that (1) unions promote the interests of their members primarily by restricting entry into labor markets and (2) those restrictions reduce the competitive advantage which unionized firms realize from efficiently providing fringe benefits. Only by exerting pressure on unionized firms to provide particular fringe benefits and then lobbying government to mandate those benefits at nonunion firms can unions hope to overcome a problem of their own creation.     

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.     

Unions,politics, and protectionism

Conventional models of labor relations emphasize “business unionism,” that is, collective bargaining activities and outcomes. We argue that a more realistic model of behavior incorporates the union’s role as an agent of redistribution that seeks to benefit some members and union leaders primarily at the expense of other members, nonunion employees, and consumers. Union power to redistribute wealth is obtained from the special privileges that labor organizations obtain from government. This paper demonstrates how, as political entities, unions and their employers attempt to secure government-sanctioned wealth transfers through protectionism. The authors gratefully acknowledge research support provided by the Sarah Scaife Foundation and the Earhart Foundation.     

Union influence on plant size

Much research has focused on the direct effect of unions on production efficiency given set technology and plant scale. However, another path through which unions may influence productivity has received virtually no attention: the indirect productivity effect that unions may exert on the firm’s choice of plant size. We present a model in which firms explicitly consider the positive correlation between the probability of being unionized and plant scale in choosing plant scale and show that unions may prevent firms from fully exploiting economies of scale by their threat of organizing. Although it may be difficult to directly estimate this effect, there is ample casual empirical support that union status and plant scale are positively related.     

Bargaining for Success: Examining the Relationship Between Teacher Unions and Student Achievement

While many previous studies have identified a positive relationship between teachers unions and student achievement on standardized tests, little research to date has explored the channels through which unions might actually affect achievement. Utilizing multilevel random intercept models, we examine the effects of two categories of items commonly negotiated in teacher contracts—“industrial union” items and “professional union” items—on individual student math scores. Further, we assess the ability of these two clusters of variables to explain the positive union effect found in previous research. The results confirm that teachers unions are positively associated with student achievement and suggest that the industrial model explains moderately more of the union effect than the professional model; however, only the combination of both models is capable of reducing the union effect to nonsignificance. These findings are also confirmed in a supplemental analysis utilizing instrumental variables to account for the possibility of endogeneity. Finally, a decomposition of the union effect suggests that teachers unions are most beneficial to middle‐ and high‐achieving students. We conclude that through industrial and professional bargaining, teachers are able to secure higher salaries, credentialing, and greater autonomy which lead to improved student achievement.     

L’après-communisme et le déclin du syndicalisme à l’Est : leçons de Pologne et d’ailleurs

Trade unions in Eastern Europe have declined in almost all aspects since 1989, due not just to economic restructuring but to subjective factors such as reactions to communist-era legacies and skilled workers’ animosities towards the unskilled, which made union officials themselves skeptical of the value of unions. Starting around the turn of the new century, however, five factors now favor revival: survival imperatives of the union bureaucracy, incorporation into the European Union, emerging cross-border labor solidarity, a new generation of workers, and the end of postcommunism in the firm, or the dismissal of unessential workers, which means union officials no longer need to defend the unskilled. Three obstacles, however, continue to work against union revival: ideological (continued distrust of unions), organizational (plethora of small firms), and structural (location in the global economy). Organized labor is likely to remain weak, with a few stronger unions emerging in the manufacturing sector that are more elitist, male, and less class oriented than those in the past, while unions chiefly in the public sector would flounder. Such an arrangement is not conducive to stable liberal democracy.     

Perspectives on union corruption: Lessons from the databases

Most of the surprisingly small number of studies of union corruption done over the years have focused either on longitudinal analysis of particularly aggressive unions in their prime or on the relationship between union leaders and organized crime characters who have acquired middle names in quotes. Since the 1930s, these studies have usually been based on prosecutorial initiatives of federal or state agencies seeking to rein in Mafia, Cosa Nostra, or Outfit crime families for whom control of unions has been a major income source, not the unions, themselves. I use two new, recently available data sources that allow an overview of the whole spectrum of union corruption, that quantify it, and that differentiate certain aspects of it from the corruption found in other societal organizations. My analysis reveals that union corruption is both broadly practiced and multifaceted, with some forms having brutal ancient antecedents not yet completely lost while others are new and not yet completely developed. Only a few are broadly shared with businesses or other societal organizations. Overall, I identify 25 separate categories of significant union corruption and find that among these embezzlement remains the most common, but kickbacks and malfeasance with respect to pension plan management are of much greater financial concern. Peculation associated with gaining and maintaining high union office together with the bloated perks and emoluments that obtain thereto fuel internal corruption without diminishing the practice of extortion, bribery, conspiracy, selling labor peace, licensing loose contracts, selling job access, and other traditional external corrupt practices. All are a blight on organized labor.     

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.     

Unions and environmental regulation

Several logical reasons for union support of environmental regulation suggest union memberships will be larger where expenditures on environmental control are larger. If the relative cost of labor is reduced when additional capital is required to produce a unit of output and if the larger interests of union members and some of the interests of firms can be satisfied by environmental regulation, empirical evidence of those effects should be available. Two statistical tests reported in this paper support the hypothesis that unions will demand certain amounts and forms of environmental regulation. The author expresses appreciation to Fred Amobi for assistance in data collection and to John Warner for helpful comments and criticisms.     

Union decline: A view from Canada

Important changes are occurring in the Canadian unions’ political and economic environments. This paper argues that such changes may be detrimental to Canadian trade unions, given their structural and institutional situation. To support this argument, private-sector union and nonunion firms in Alberta are compared. This comparison uncovers some structural (union members’ employment patterns and union firm characteristics) and institutional (union services) attributes of unions. Combined with the politico-economic environments that Alberta unions have faced since the early 1980s, these attributes have led to a decline in union membership. Because these attributes are shared by many other Canadian unions, those unions may increasingly confront some of the same hardships currently plaguing their Alberta counterparts. I am indebted to Brian Bemmels, Alan Murray, and John G. Fricke for helpful comments on an earlier version of this paper, and to Mike Jones for his research assistance.     

Irish Credit Unions: Exploring the Gender Mix

Credit unions are voluntary cooperative financial institutions. At present there are 621 credit unions in Ireland serving two million members. Credit unions espouse the principle of gender inclusiveness, which is viewed as a fundamental cooperative concept. Based on a survey of 500 Irish credit unions, this study explores the role of women in credit unions. Judged against participation rates for women in the labor market and in specific organizations such as trade unions, the study suggests that gender balance in credit unions is superior to that elsewhere in Irish society. There is, however, some evidence of gender imbalance in the composition of credit union boards with this being most visible for key decision-making positions such as Chair and Vice-Chair. It also emerges that gender imbalance becomes more pronounced for larger credit unions supporting the contention that women are found in greater numbers on small and less well-connected not-for-profit boards.     

Judging unions’ future using a historical perspective: the public policy choice between competition and unionization

VII. Conclusion In discussing the future of private sector union membership one needs to evaluate the early period of union ascendancy (1930s through the early 1950s) as well as the past few decades when unions have been in decline. We know trends currently in place are unfavorable to unions. What conditions would be favorable? When the earlier period of union growth us studied, two factors become prominent — the competitiveness of the labor market and the ability of unions to fullfill their major goal of either extracting economic rents or remedying market failures that result in exploitive employment relationship.     

Union organizing expenditures: Determinants and their implications for union growth

This paper explores some implications of the economics of union organizing. Following the literature, it is argued that the economic costs and benefits of organizing are systematically related to the proportion of the union’s jurisdiction already organized. Evidence is presented that unions do allocate a smaller proportion of their budgets to organizing when a greater proportion of their jurisdiction is already organized. Total union organizing expenditures, however, are found to increase over a broad range as the percentage organized increases. The supply of union-organizing services to unorganized workers apparently only declines at relatively high levels of union penetration. These critical levels of unionization have been attained only by a few U.S. labor organizations.     

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.