Nonunion Firms Research Articles

The Union Threat

This paper develops a search theory of labor unions in which the possibility of unionization distorts the behavior of nonunion firms. In the model, unions arise endogenously through a majority election. As unionized workers bargain collectively with the firm, unionization compresses the wage distribution and lowers profits. To prevent their own unionization, nonunion firms distort the skill composition of their workforce by over-hiring high-skill workers, who vote against the union, and under-hiring low-skill workers, who vote in its favor. Because of decreasing returns to labor, this change in hiring lowers output while reducing the dispersion of wages. In the calibrated economy, removing the threat of unionization, by freezing the union status of firms, reduces unemployment and increases output and the variance of wages. Removing, in addition, all unions from the economy leads to a larger increase in wage inequality but does not further affect output and unemployment. These results suggest that the threat that unionization exerts on nonunion firms, more than the fact that some firms are actually unionized, is the main channel through which unions affect output and unemployment in the U.S. economy.

Unemployment and the coverage extension of collective wage agreements

This paper examines how the extension of collective wage bargaining agreements to non-unionized firms affects unemployment. Testing a large number of econometric specifications on data from 15 OECD countries observed between 1965 and 2007, we find a positive, significant and robust interaction between the tax wedge and the degree of coverage extension of collective wage bargaining agreements. More specifically, our results suggest that the tax wedge has a larger positive effect on unemployment than any other labour market policy in countries with wide extension of collective wage agreements’ coverage such as France or Spain. Conversely, in countries where coverage extension is close to zero as in Nordic countries, unemployment is essentially insensitive to changes in the tax wedge.

Considering the Impact of the ‘Right to Bargain’ Legislation in Ireland: A Review

Abstract Ireland is rare among advanced economies in not having statutory trade union recognition legislation for collective bargaining purposes. The matter has been a source of policy contention over the years with attempts to resolve it encapsulated in the so-called ‘Right to Bargain’ legislation, introduced in 2001. This legislation has sought to circumvent statutory recognition in Ireland by putting in place an alternative mechanism for unions to represent members in non-union firms where collective bargaining is not practiced. This review, based on a mixture of empirical and documentary evidence, demonstrates that this legislation was moderately successful for a short period in generating pay rises, improved employment conditions and better access to procedures for union members in non-unionised firms. Indeed, in some respects, it was a superior institutional mechanism to a statutory recognition regime.

Organizational Commitment and Turnover Intention in Union and Non-Union Firms

There are differences in organizational architecture between union and non-union construction firms in early 1990s. The construction industry has traditionally been dominated by strong union firms. However, non-union construction firms began to emerge in the 1990s and this change caused to bring conflicts between union and non-union construction firms. This presents a unique opportunity to study employees’ attitude toward organization. This article investigates workers’ attitudes toward union and non-union construction firms in terms of organizational commitment (OC) and turnover intention. Control variables in OC and turnover intention include personal characteristics, job characteristics, group−leader relations and organizational characteristics. The study found that employees in union firms are more committed to the organization than non-union organization, but they have higher intention to job turnover although the regression coefficients of union variable in commitment and turnover intention are not statistically significant at the conventional level of significance.

Trade Union and Employment: The Korean Experience

Using Workplace Panel Survey of 2005, 2007 and 2009 waves, this study estimates the effects of trade unions on employment and the proportion of irregular workers, short-term and part-time workers, and agent temporary and outsourced workers. While the estimation result shows that the percentage of hired workers increases under union presence, these results seem to be contaminated with bias because the differences between unionized firms before union establishment and non-unionized firms are not completely controlled even after adjusting for observed characteristics. Meanwhile, unionized firms and non-unionized firms with grievance procedures employ higher proportion of irregular workers. The proportion of short-term and part-time workers increases only when they are entitled to join trade unions. These imply that the rise in the percentage of irregular workers due to unions and grievance procedures is attributed to the increase in the percentage of agent temporary and outsourced workers. Also, when short-term and part-time workers are allowed to join the union, the firm replaces agent temporary and outsourced workers with short-term and part-time workers, so that the proportion of irregular workers do not change.

Labor union negotiations: stepping stones or stumbling blocks for a responsible downsizing strategy? Empirical tests in Taiwan

Firms have used organizational downsizing strategies for years. But organizational downsizing not only cannot surely improves firm performance, but also harms thousands of employees and their families. A number of scholars investigating organizational change suggest that ‘a responsible downsizing strategy’ can mitigate or solve this issue. As the major stakeholder in downsizing, labor unions naturally negotiate with firms to protect employee rights and benefits. Their negotiation, therefore, may either enhance or mitigate the effect of responsible downsizing strategy on firm performance. This study used a sample of 154 downsized local firms and multinational corporations in Taiwan to examine the research construct, and invited focus groups to have a further validated explanation. The findings show that labor union negotiation may act as either stepping stones or stumbling blocks. The results indicate that firms employing labor union negotiation experience higher downsizing performance than non-unionized firms do. However, labor union interventions can also become stumbling blocks. Labor union negotiation neutralize the positive effect of employee-caring practices on downsizing performance, leading to a decline in downsizing performance when firms increase employee participation and justice consideration in the downsizing process. The research findings provide implications for further scholarly research and management practices in terms of organization change, stakeholder management and labor–management relationship.

Lobbying for a Common External Tariff from Inside and Out

We consider the interactions between domestic lobbying and two types of cross-border lobbying in a Customs Union (CU). The two types of cross-border lobbying are (i) lobbying from firms in one CU country to the governments of other CU countries, and (ii) that from firms outside the CU. We focus on the determination of the common external tariff (CET) in a two-stage game-theoretic model. When firms within the CU cooperate in lobbying, a sufficient condition for the CET to be higher compared to the noncooperative case is that the CU firms' lobbying is a strategic substitute for the lobbying done by the non-union firms. Furthermore, the same strategic substitutabilty condition is sufficient to ensure that the CET must rise, when stricter regulations are imposed on lobbying from outside the CU.

Where Informality Really Matters: Patterns of Employee Involvement and Participation (EIP) in a Non‐Union Firm

Industrial relations scholars have long been interested in notions of employee involvement, participation, voice, and industrial democracy but the terminology is so elastic that the types of practices covered are extremely broad. In this article, following a brief discussion that categorizes employee involvement and participation (EIP) in terms of degree, level, and scope, we focus on the relatively dilute formal and informal practices which operate at workplace level in non‐union firms. Although researchers now examine direct—as well as representative—forms of EIP, we argue the focus is still onformalsystems. This finding is understandable both from a methodological and a theoretical angle, but it leaves a gap in our awareness of how EIP functions at workplace level, and in particular, the role played by line managers in developing informal communication and consultation in non‐union firms. In this article, we examine formal and informal EIP within a large non‐union firm in the UK hospitality sector; a context characterized by intense product and labor market pressures and limited union presence. Our principal conclusion is that informality takes centre stage in this organization, driven by managerial and worker preferences for informal EIP in the context of close working relations at the customer interface. Moreover, customer pressures and flexible working patterns make it difficult to sustain formal EIP in the context of a capability framework that puts a primacy on managers using informal approaches. However, it is argued that informal EIP needs to be combined with the formal system to operate effectively.

Filling the gaps: Patterns of formal and informal participation

Industrial relations scholarship has traditionally privileged union forms of employee participation. In more recent years there has been a shift to understand the role of participation in non-union firms. This article develops theory on employee participation through analysis of an Australian case study in the hotel sector. The authors find that formal participation mechanisms are useful and essential for both employees and managers, however formal participation leaves behind gaps which are partially filled with informal voice exchanges between employees and their managers.

Recent Longitudinal Evidence of Size and Union Threat Effects Across Genders

Based on data from the National Longitudinal Surveys of Youth covering years 2000 through 2008, it is evident that both male and female workers in medium/larger establishments receive not only higher wages but also have a higher probability of participating in benefit programs than those in smaller establishments. This reinforces the well-documented 'size' effect. Further, the firm size wage effects are much larger for men than women. The union wage effect decreases with establishment size for both genders. This supports the argument that large nonunion firms pay higher wages to discourage the entrance of unions (i.e., the 'threat' effect argument). In addition, the union wage premium is higher for males for small and medium firm sizes relative to females. This implies that unions in the large establishments may have a role to play in achieving a narrowing of the gender union wage gap. In other words, the threat of unionization could reduce union wage premiums for both genders as firm size increases. Given the presence of noticeable gender differences in estimated union effects on the different components of the compensation structure, unions should not treat both genders similarly with respect to wages and benefits.

Resolution Of Complaints By OSHA In Union And Non-Union Manufacturing Organizations

The current study reviewed the OSHA complaint inspection and resolution process in union and nonunion firms to identify potential differences in outcomes. Results revealed that it was possible to distinguish between union and nonunion firms on the basis of seven objective OSHA inspection and complaint resolution factors. Implications of bargaining with OSHA, union effectiveness in the resolution process, and the importance of having a formal grievance system in nonunion firms are discussed.

When Does Reducing Union Bargaining Power Increase Productivity? Evidence from the Workplace Relations Act*

Despite a large empirical literature, the conditions under which unions have different effects on productivity have not been determined. The Australian Workplace Relations Act 1996 (WRA) provides a natural experiment in which union bargaining power was decreased. We estimate productivity growth before and after the WRA. While the WRA did not increase productivity growth in union firms compared with non-union firms, in industries with more extensive unionisation, productivity growth in union firms was greater post-WRA compared with pre-WRA growth for non-union firms. This suggests unionisation tends to have greater effects on productivity in sectors where it is more extensive.

What Do Unions do to Executive Compensation?

In this paper we estimate the relation between union presence within a firm and CEO compensation, using a unique panel of publicly listed companies for the period 1992 to 2001. We find that, on average, union presence: 1) is significantly associated with lower levels of total CEO compensation; 2) affects the mix of CEO compensation by providing higher levels of base pay but much lower stock option values; 3) lowers dispersion across the major components of CEO remuneration and 4) does not significantly reduce the performance sensitivity of CEO compensation as compared to non-union firms. These results are consistent with several models of union influence.

What do Unions do to Executive Compensation?

In this paper we estimate the relation between union presence within a firm and CEO compensation, using a unique panel of publicly listed companies for the period 1992 to 2001. We find that, on average, union presence: 1) is significantly associated with lower levels of total CEO compensation; 2) affects the mix of CEO compensation by providing higher levels of base pay but much lower stock option values; 3) lowers dispersion across the major components of CEO remuneration and 4) does not significantly reduce the performance sensitivity of CEO compensation as compared to non-union firms. These results are consistent with several models of union influence.

Labor unions and productivity: An empirical analysis using Japanese firm-level data

This paper empirically analyzes the relationship between labor union and firm performance in areas such as productivity and profitability by using data on more than 4000 Japanese firms, ranging from listed large firms to unlisted SMEs, in both the manufacturing and non-manufacturing sector. The presence of labor unions has statistically and economically significant positive effects on firm productivity. Unions' effects on wages are also positive, their magnitude being slightly larger than those on productivity. The decrease in the number of employees is greater at unionized firms than at non-unionized firms. The difference in employment growth is mainly attributable to the change in the number of part-time workers. In order to enhance productivity, close cooperation between management and unions is essential.

Survival of the Fittest? Financial and Economic Distress and Restructuring Outcomes in Chapter 11

We use a simple proxy to distinguish between financial and economic distress and show that Chapter 11 outcomes and asset restructurings vary systematically across these firm types. The results from our sample of large bankruptcies from 1991 to 2004 are consistent with the view that the Chapter 11 process preserves the going concern value of financially distressed firms while redeploying the assets of economically distressed firms. These results hold for asset redeployments resulting both from liquidations or acquisitions and those resulting from partial asset liquidations of firms that reorganize in Chapter 11. The empirical findings run counter to concerns that inefficiencies and conflicts of interest severely compromise the Chapter 11 process. Further, we provide the first empirical evidence that the put option inherent in lease contracts is frequently exercised in Chapter 11, that the disposition of lease contracts in bankruptcy constitutes a large portion of asset restructurings, and that the ability to put lease contracts may mitigate the indirect costs of asset fire sales. We also find that unionized firms experience smaller job losses and debt reductions in Chapter 11 than do non-unionized firms.

ESOP Fables: The Impact of Employee Stock Ownership Plans on Labor Disputes

By the early 1990s employee stock ownership plans (ESOPs) had become more prevalent in unionized firms than in nonunionized firms. However, little research has been devoted to examining the implications of ESOPs for collective bargaining. Ben-Ner and Jun (1996) model ESOPs as a buyout option for the union. The ownership share of the typical union ESOP, though, is significantly below 50%. In this paper, we extend the signaling model of Cramton and Tracy (1992) to allow partial ownership stakes by the union. We demonstrate that ESOPs create incentives for unions to become weaker bargainers. As a result, the model predicts that ESOPs will lead to a reduction in the fraction of labor disputes that involve a strike. We examine these predictions using U.S. bargaining data from 1970-1995. The data suggest that ESOPs do increase the efficiency of labor negotiations by reducing dispute rates and shifting the composition of disputes from more costly strikes. Consistent with improved bargaining efficiency, we find that the announcement of a union ESOP leads to a 50% larger stock market reaction as compared to the announcement of a nonunion ESOP.

Compensation, Unionization, and Deregulation in the Motor Carrier Industry

Abstract Previous research on the deregulation of the motor carrier industry has concluded that firms have become more efficient under deregulation and that costs have fallen, largely at the expense of labor. Most studies that examine the effects on labor use Current Population Survey data and find that wage premiums to union labor have fallen as a result of deregulation. This study uses firm data and finds that deregulation had a very small effect on the average compensation paid by surviving union firms. For nonunion firms, the impact of deregulation is much larger. These results suggest that the compensation premium for the labor of surviving union firms has increased, but this increase applies only to surviving union labor. In the paper, we also point to and note a major exodus of union firms with the result that union labor levels have fallen, and fallen dramatically.

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.

Labour Management Practices in Non-Union Firms: Australian Abrasive Industry 1945-70

Australian labour history has traditionally neglected non-union firms as an area of research. However, in recent years, in the context of declining union density, labour management practice in non-union firms has become a topical area of contemporary industrial relations debate. At the heart of much of these debates remains the long-standing assumption that management practice in non-union firms can be categorised within a simple dichotomy of either 'substitution' or 'suppression'. This article seeks to rectify this neglect by examining the labour management practices of two non-union firms during the post-World War II period in Australia. Far from being a simple case of 'substitution' or 'suppression', this article concludes that management action is far more diverse and complex than the simple dichotomy suggests. Furthermore, this article demonstrates that management strategy in non-union firms was contingent on, and shaped by, six factors: the firm's economic fortunes, management's approach to industrial relations, the agency of labour, the labour market, the firm ownership and threat of union organising.