Some economic effects of the California agricultural labor relations act

The California Agricultural Labor Relations Act (CALRA) evolved in the 1970s because the National Labor Relations Act (NLRA) excluded agricultural workers. CALRA effectively placed the United Farm Workers Union in a stronger bargaining position vis-a-vis farmers than the NLRA had done for industrial unions vis-a-vis nonfarm business firms. Society has suffered a net economic loss from CALRA and the events preceding its enactment. Since passage of the act, at least three effects have been verified: Relative to conditions that would otherwise have been expected to exist, consumers are facing higher prices; agricultural workers are earning lower wages; and landowners have suffered losses in land values.     

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.     

Public employee unions: A study in the economics of power

This paper examines how public employee unions influence the allocation of public sector jobs. The empirical results indicate that vote maximizing public officials’ employment decisions are influenced by the political clout of highly-unionized employees. The political clout of public-sector unions influences the functional distribution of public-sector jobs by increasing demand for the relatively more organized functions. These results suggest that consideration should be given to the growth of public sector collective bargaining in the allocation of public sector resources. The author wishes to acknowledge the helpful suggestions of Bernard Lentz.     

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.     

Labor’s inequality of bargaining power: Changes over time and implications for public policy

A major justification for enacting the Wagner Act and encouraging collective bargaining was that in the wage-determination process individual workers suffer from an inequality of bargaining power vis-á-vis employers. This critical review of this justification examines the analytical meaning of the concept of an inequality of bargaining power, the factors responsible for this inequality, the change that has taken place in labor’s disadvantage since the 1930s, and the implications for national labor policy. It is concluded that some employers continue to have significant market power over wages but that the extent and degree of labor’s disadvantage in bargaining has diminished substantially since World War II. The implication is that the Wagner Act’s protection of the right to organize remains in the social interest but that the bargaining power of labor unions should be further circumscribed to preserve a balance of power in wage determination. The author thanks Paul Swiercz for helpful comments.     

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.     

Agency costs,property rights,and the evolution of labor unions

Collective bargaining requires that an agent represent workers. This paper examines the implications for the trade union movement of the resulting agency costs. Without transferable rights in the union, union members lack the means and incentive to bring forth the innovative agent controls common to the modern corporation. Considerations of the bargaining strengths of employers and employees, each represented by an agent, provide an explanation of the simultaneous decline of private sector union membership (corporate share holders have been more successful at lowering agency costs) and growth of public sector union representation (where the union official, a “double agent,” serves the interest of both employee and bureaucratic employer). The authors acknowledge the helpful remarks Donald L. Martin whose earlier research on property rights in unions inspired this effort. Don Bellante’s work was supported by a grant from the Research Committee of the College of Business Administration, University of South Florida.     

The market’s reaction to two supreme court rulings on American labor law

The Supreme Court has gradually narrowed the number of persons who are protected by the National Labor Relations Act should they seek to form or join a union, in part by ruling that professionals who also serve as supervisors of less skilled employees are not covered by the Act. The market’s reaction to the two latest rulings, Health Care & Retirement Corp. and Kentucky River is researched herein. Shareholder wealth rose for health care firms in response to each ruling. The market response was greater for the latter decision, signaling investor beliefs regarding the benefit to employers and the likely future direction of court decisions.     

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.     

Labor union coercion of employees: The use of fringe benefits

In bargaining on fringe benefits, labor unions violate Section 8(b)(1)(A) of the National Labor Relations Act if they restrict benefits to members only. Even if fringe benefits are provided for nonunion members, a violation of the Act occurs if more stringent eligibility rules are required for nonmembers than for members. Sometimes unions deny fringe benefits to union members if fines or dues are not paid, but National Labor Relations Board has ruled that workers are restrained in violation of Section 8(b)(1)(A) if fringe benefits are withheld due to nonpayment of fines or dues.     

Union decertification election outcomes: Bargaining unit characteristics and union resources

Previous analysis using aggregate data has concluded that union decertification activity is “exclusively a product of market conditions.” We employ data disaggregated by local (county) labor market which permits a preliminary investigation of the importance of potential nonmarket influences that are not measurable using aggregate data, namely, the type of bargaining unit, the type of union, the type of employer, and proxies for union resources. It also allows a more precise specification of the labor market characteristics previously found to influence decertification. Our results confirm the importance of market conditions in decertification activity and outcomes, but they also suggest that the likelihood of decertification is much greater in independent unions and in industry-county combinations in which the typical employee works part-time and has limited alternative income opportunities. Institutional characteristics of the union and employer, individual characteristics of bargaining unit members, and local economic conditions are important determinants of decertification.     

How new lawyers use E-voice to drive firm compensation: The “greedy associates” phenomenon

Discussions and Conclusions How can we distinguish the GA phenomenon from unions? Unions’ raison d’etre is employee representation through collective bargaining, supported by a permanent institutional structure of professional officers and business agents and a revenue base from dues. The GA sites are idiosyncratic, based on the voluntarism and self-interest of secret founders, and lack any sort of disciplined approach to negotiation. Both unions and the GAs have adversarial relationships with management. Rather than bargaining, however, the GAs engage in concerted and surreptitious sniping. Both gather and share information, but unions use it to advance the interests of the collective whereas the GAs are left to their own individual devices when dealing with their employers. The GA sites suffer from problems of possible disinformation being posted by partners and others in the firms, and there have at times been false postings. The sock-puppet issue not only masks identities but also distorts the communication flow such that it is difficult to distinguish real conversations from ersatz relationships.     

Union salting: Reactions and rulings since <Emphasis Type="Italic">Town and Country</Emphasis>

In a difficult organizing environment, unions have adopted growth strategies including organizing for recognition and bypassing the NLRB election process-a top-down approach. Union salting has become a popular tool toward achieving that goal particularly among the building trades unions. I examine labor’s thrust at the top-down approach toward organizing the workplace using the “salting” strategy, employer reactions to salting, and the pattern of rulings coming from the National Labor Relations Board since the seminal Supreme Court case on salting, NLRB v. Town & Country Electric (1995).     

How attorney representation and adjudication affect Canadian arbitration and labor relations board decisions

Few studies have investigated the effects of either attorney representation or attorney adjudication on arbitration board decisions, and none has investigated these effects on labor relations board decisions. I examine the effects of lawyers, as both representatives and adjudicators, on arbitration and labor relations board decisions in an analysis of 272 Canadian discipline cases involving the right to refuse unsafe work. My results show that the employee is more likely to have management’s discipline overturned if she uses a lawyer when the employer does not. However, the employer gains no comparable advantage by hiring a lawyer when the employee does not. In addition, neither side benefits by hiring a lawyer when both do so. Attorneys are also no more or less likely than non-attorneys to overturn or reduce management’s discipline.     

Exclusive representation and american industrial democracy: An historical reappraisal

Exclusive representation in the public sector has been defended on the basis of private sector experience, which purportedly demonstrates that stable, orderly, peaceful collective bargaining is otherwise impossible or impracticable. Nevertheless, nonexclusive collective bargaining was the norm in most industrial nations when the Wagner Act was passed in the 1930s, and it still is the rule outside the U.S. Historical evidence is presented for the thesis that exclusivity was adopted in the private sector primarily in order to pave the way for a corporative state. Peaceful, orderly collective bargaining by “responsible” unions in a competitive economy was a minor, secondary consideration. Editor’s Note: This Symposium was jointly sponsored by theJournal of Labor Research and the National Institute for Labor Relations Research and was held February 10, 1984 at the Westpark Hotel, Rosslyn, Virginia.     

Labor’s inequality of bargaining power: myth or reality?

This article responds to Morgan O. Reynolds’ paper which questions the inequality of labor’s bargaining power by addressing four issues: (1) the economic case for collective bargaining, (2) the concept of an inequality of bargaining power, (3) the extent of employer market power, and (4) the role of public policy. The author thanks Jack Blicksilver for helpful comments.     

Unionization and the cost of producing hospital services

Since the inclusion of nonprofit hospitals under the provisions of the NLRA in 1974, the extent of unionization among hospital workers has increased sharply. The implications of this trend for hospital costs are examined here by analyzing data from 617 short-term hospitals in the Northeast. It is estimated that unionization on average increases production costs by 5 to 9 percent, with the bulk of this increase resulting from factors other than wage increases. Cost impacts are also found to be greater for national unions and where cost-based payment is more prevalent, and smaller for RN’s and service employees. This research was supported by Grant HS 03016 from the National Center for Health Services Research.     

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.     

Outsourcing and union power

The outsourcing of union work and jobs either diffuses or diminishes union membership, depending on perspective and situation. The correlation of trends in union membership to trends in union power, while less than perfect, has until recently been relatively strong over the past sixteen years. The fact that as diverse a sample of unions as AFSCME, SEIU, and UAW have chosen to make outsourcing a prominent labor/public relations issue suggests that the correlation continues to be perceived by the union movement to be significant, notwithstanding the efforts of the “new” leadership of the AFL-CIO to break that link with respect to union political power by “taxing” member unions and their members to contribute both money and militancy to the 1996 election cycle. Although outsourcing may lead only to the diffusion of union membership either within or between unions, as opposed to the diminution of union membership, this fact has not received a great deal of attention. The net effect on total union membership of outsourcing from one union employer to another union employer is unclear, although the effect on the membership of the union at the outsourcing employer is not. The redistribution of membership within a union as a result of outsourcing is likely to have little immediate impact on union power. However, as even the best case scenario presented above suggests, it may have significant long-run deleterious effects on union bargaining power by taking labor out of a sheltered market and putting it into potentially competitive market. This is particularly likely to be the case when outsourcing (1) places the outsourced work into a different industry or wage contour and (2) creates the possibility of moving from sole-source to multiplesource supplier arrangements. The redistribution of membership between unions as a result of outsourcing is unlikely to have a major impact on union power broadly defined. It can have, however, serious deleterious effects in terms of the power of an individual union, as suggested in my “competitive case” scenario. The fact that one union’s losses due to outsourcing may be another union’s gain is of little consolation to the losing union. That act, in and of itself, may make the threat of outsourcing a potential union “Achilles heel” at the bargaining table by placing it into competition with some other, perhaps unknown, union as well as possibly nonunion competition. The most obvious threat to union power comes from outsourcing that diminishes union membership overall by transferring jobs from union to nonunion employers. The willingness and ability of employers to move work/jobs entirely out of the orbit of union control constitutes, in terms of power and particularly union bargaining power, a revisitation of the phenomenon of the “runaway shop.” It may also be viewed as a proactive form of hiring permanent replacements for (potentially) striking workers. The union options in dealing with such a challenge are to endeavor to preclude outsourcing through legislation or collective bargaining or to chase the work by organizing the unorganized, hopefully with the help of the unionized outsourcing employer. Neither option may be easy, but as the 1996 auto industry negotiations suggest, the former may be less difficult than the latter. The possibility that outsourcing from union to nonunion employer may provide unions with the power to organize from the top (outsourcer) down (outsourcee) cannot be entirely ignored as the issue of supplier “neutrality” reportedly was raised in the 1996 auto negotiations. The adverse effects of outsourcing on union political and financial power, by virtue of its impact on the level or distribution of union membership, can and may well be offset by an increase in union activism—as measured by dues levels, merger activity, organizing commitment, and political action. The adverse effects of outsourcing on union bargaining power are more problematical from the union standpoint. The effect of outsourcing, whatever its rationale or scenario, appears to be to put union labor back into competition. Thus, outsourcing constitutes yet another challenge to the labor movement in its ongoing and seemingly increasingly unsuccessful battle to take and keep U.S. union labor out of competition by proving itself able and willing to organize to the extent of the market and standardizing wages in that market.