Impact Of Labor Unions Research Articles

Do Labor Unions Affect Income Smoothing Through R&D Management?

ABSTRACT Using the firm-level labor union data unique to Korea, this study examines the influence of labor unions on firms’ income smoothing activities through R&D expense adjustment. We show that unionized firms have greater extent of income smoothing through R&D adjustment, suggesting that labor unions impose pressure on management to smooth out fluctuation in earnings path. Also, we find evidence that the positive association between labor union and income smoothing via R&D expense is significant only for non-chaebol firms. These findings add to the existing literature on the impact of labor unions, one of important stakeholders, on firms’ accounting choices and financial reporting behavior.

Reducing Unequal Representation: The Impact of Labor Unions on Legislative Responsiveness in the U.S. Congress

It has long been recognized that economic inequality may undermine the principle of equal responsiveness that lies at the core of democratic governance. A recent wave of scholarship has highlighted an acute degree of political inequality in contemporary democracies in North America and Europe. In contrast to the view that unequal responsiveness in favor of the affluent is nearly inevitable when income inequality is high, we argue that organized labor can be an effective source of political equality. Focusing on the paradigmatic case of the U.S. House of Representatives, our novel dataset combines income-specific estimates of constituency preferences based on 223,000 survey respondents matched to roll-call votes with a measure of district-level union strength drawn from administrative records. We find that local unions significantly dampen unequal responsiveness to high incomes: a standard deviation increase in union membership increases legislative responsiveness towards the poor by about six to eight percentage points. As a result, in districts with relatively strong unions legislators are about equally responsive to rich and poor Americans. We rule out alternative explanations using flexible controls for policies, institutions, and economic structure, as well as a novel instrumental variable for unionization based on history and geography. We also show that the impact of unions operates via campaign contributions and partisan selection.

The impact of labor unions on corporate tax avoidance: evidence from Korea

This study examines the effect of labor unions on corporate tax avoidance activities. Labor union is an important stakeholder in terms of corporate governance; thus, managers may engage in certain accounting choices that reflect union members’ position to improve the relation with labor union. This paper empirically investigates whether managers engage in tax avoidance activities to secure financial resources for workers’ pay when the negotiation power of labor unions is higher. The empirical analysis is based on a sample of firms listed in the Korean stock market from 2001 to 2008. The authors find that companies, where labor unions are organized, have a significantly higher level of tax avoidance activities. Also, the authors attempt to examine the effect of labor unions’ bargaining power on tax avoidance. While the union membership ratio is not significantly related to tax avoidance, labor unions that belong to upper-level labor organizations significantly affect the increasing tax avoidance activity, on average. Moreover, companies that join an aggressive labor organization (‘Minju’ Federation) show a significantly higher level of tax avoidance activity, compared to those joining a moderate labor organization (‘Hanguk’ Federation). Furthermore, the authors show that such an effect of labor unions on tax avoidance is significant for companies, which are not affiliated with large business groups (‘chaebols’). This result suggests that chaebol group management is not under pressure to negotiate with union members due to higher reputation costs. The findings of this paper offer academic and practical implications that capital market participants need to understand labor unions’ effect on management’s accounting choices.

The impact of labor unions on investment-cash flow sensitivity

This paper empirically examines how labor unions affect investment-cash flow sensitivity using samples from the US covering the period of 1984–2009. We find a significant positive union effect using a q model of investment. The capital expenditures of firms are 1.71 times more sensitive to internal cash flows when unionization rates increase one standard deviation from the mean. This effect holds when we control for other proxies of financial constraints. In addition, unionized firms are associated with lower cash–cash flow sensitivity, which suggests that the higher investment-cash flow sensitivity in unionized firms is primarily driven by the incentive of these firms to reduce liquidity and enhance bargaining power against the union. We also show that the above union effects become more pronounced during labor contract negotiation years.

Labor Unions and the Cost of Debt

We examine the impact of labor unions on the cost of corporate debt. Using a dataset of union certification elections, we find that unionization is associated with a 30 basis point increase in yield spreads on corporate bonds. The positive effect of unionization on bond spreads is more pronounced for small firms, firms with high leverage, firms with high operating risk, and firms with greater credit risk. We also find that the effect of unionization on bond spreads is stronger for firms located in states without right-to-work laws, firms in non-manufacturing industries, firms in industries with low unionization rates, and firms with weak shareholder rights. Overall, our evidence suggests that unionization increases a firm’s cost of debt, especially for high credit risk firms and firms in which unions are expected to have high bargaining power. Our findings suggest that policies designed to enhance union strength, such as the recently-proposed Employee Free Choice Act, would have negative repercussions for bondholder wealth and the cost of debt. We estimate that repealing right-to-work laws would raise the cost of debt by 20 basis points for unionized firms.

The impact of labor unions on corporate perks in Korea: human resource management perspective

In this study, we analyzed census samples linking the finance–labor information of unionized companies in Korean manufacturing industries from 2002 to 2006 in an effort to assess the effects of labor unions on corporate perk expenditures. The majority of previous studies conducted into CEO perks have paid less attention to the determinants of corporate perk expenditures. This paper focuses on analyzing the impact of unions on corporate perks. The results of our empirical study show that unions reduce corporate expenditures on perks and also decrease the probability that the perk expenditure will exceed the tax exemption limit. In analyses of separate samples of unions in which very different climates of industrial relations prevailed, our findings also indicate that the negative influence of unions on corporate perks increases with the union organization rate and the inclination to strike. This paper probes several theoretical reasons underlying the negative influence of unions on corporate perks.

The impact of organized labor on public employment: A comparative analysis

This paper examines the political economy of public employment, specifically the impact of labor unions on public employment across 20 OECD nations during the 1965–1983 period. A theoretical paradigm based on exchange theory is used to explain the rationale for organized labor’s role in public employment. A model is then presented and tested to explain variation in public employment levels across the 20 nations. The results of the analyses support the central hypothesis that labor union power is positively correlated with public employment. Following the data analysis, the conclusions and implications of the findings are discussed as they pertain to the political economy in advanced industrial democracies.

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.

Unionism and Wage Rates: A Simultaneous Equations Model with Qualitative and Limited Dependent Variables

A large number of studies have been made on the impact of labor unions on wage rates of workers. These studies generally have found positive and significant effects of unionism on wage rates. More recently, a few authors have studied the simultaneous effects between unionism and wages. Ashenfelter and Johnson [1972] used aggregated U.S. Manufacturing Industries Data and found that unionism had no significant impact on wage rates, but that the wage rate had a significant effect on the extent of unionism. Since the data they used were quite limited, they could only conclude that the magnitude of the effects of unionism on wage rates was uncertain. Schmidt and Strauss [1976] reached similar conclusions using macroeconomic data. Their mixed logit approach, however, is not based on choice behavior and does not fit into a traditional econometric framework. This study extends recent investigations of the joint determination of the extent of unionism and the effects of unions on wage rates, using macroeconomic data from the Survey of Economic Opportunity Sample of 1967. Economic considerations suggest that the propensity to join a union depends on the net wage gains that might result from trade union membership. The explicit inclusion of this interdependence between the wage gain equation and the union membership equation in the model represents our point of departure from the previous work of Ashenfelter and Johnson and Schmidt and Strauss. The model is a variant of a traditional simultaneous equations model with a binary qualitative variable (union membership) and limited dependent variables. In Section 2, the conceptual framework of the model is discussed. Properties of the data are presented in Section 3. Section 4 briefly discusses estimation methods, and empirical estimates are presented in Section 5. Finally, in Section 6, conclusions are drawn.