Power Of Labor Unions Research Articles

Personal bankruptcy costs, union bargaining power, and capital structure

We document that employee bankruptcy costs affect corporate capital structure decisions via their impact on the bargaining power of labor unions. We employ difference-in-differences and triple-difference research designs surrounding a major bankruptcy reform that increased personal bankruptcy costs. Our results suggest that, on average, this reform reduced unions’ bargaining power, resulting in a decrease in the financial leverage of unionized firms relative to nonunionized firms. Our results provide new evidence for a relatively unexplored determinant of capital structure—personal bankruptcy costs.

The employment effects of corporate income tax and the bargaining power of labor unions

This study analyzes how the relationship between corporate income tax and employment varies according to the bargaining power of labor unions. To this end, we use a dynamic general equilibrium model to examine corporate income tax and the bargaining power of labor unions based on a span-of-control model. Previous studies on the relationship between corporate income tax and employment are inconclusive and do not examine the role of the bargaining power of labor unions in this relationship. Calibrated results obtained using data from Korea show that a reduction in only the corporate income tax rate slightly decreases total employment, but a reduction in the corporate income tax rate accompanied by a decline in the bargaining power of labor unions significantly increases total employment.

기업 내 노동조합의 특성과 원가하방경직성

[Purpose] This study investigates the effect of a labor union and its characteristics on a firm’s cost behavior, with a particular focus on both listed and non－listed firms.
 [Methodology] We employ labor union data obtained from the Human Capital Corporate Panel (HCCP) provided by the Korea Research Institute for Vocational Education and Training. We examine how the labor union affects cost stickiness (selling, general, and administration costs) using the model developed by Anderson et al. (2003).
 [Findings] First, we find that firms exhibit cost stickiness in their cost behavior and the presence of labor unions mitigates this cost stickiness. These results suggest that labor unions serve as monitoring mechanisms, thus mitigating cost stickiness arising from agency problems. Second, the bargaining power of labor unions has no incremental impact on cost stickiness. However, we find that cost stickiness is alleviated only when labor unions and firms maintain a cooperative relationship. In other words, labor unions play the role of corporate governance structures as stakeholders of the firm only when labor－management relations are cooperative.
 [Implications] This study examines the impact of labor unions as one of the stakeholders in a firm’s economic decision－making process and their role in corporate governance in alleviating cost stickiness. It underscores the importance of a cooperative labor－management relationship, as labor unions effectively serve their monitoring role in the corporate governance structure only under such conditions. Furthermore, even in a sample primarily comprised of non－listed firms, labor unions can influence cost stickiness.

Labor Union Power and Long-term Hiring Management

Labor Union Power and Long-term Hiring Management

The first Kennedy-Nixon debate: the McKeesport Junto of 1947

The first Kennedy-Nixon debate did not occur in the Fall of 1960, but rather in the Spring of 1947 when the Junto, a community group in McKeesport, Pennsylvania, hosted a forum on the Hartley bill, controversial legislation pending in Congress that substantively curtailed the power of labor unions. The freshman legislators selected to headline the event, Representatives John F. Kennedy of Massachusetts and Richard M. Nixon of California, would later become the 35th and the 37th presidents of the United States. The newspaper account of the McKeesport Junto, published the next day in the McKeesport Daily News, employed a content frame that focused on the substance of the debate. Later accounts of the Junto, published after the advent of television, shifted to a mediated frame that emphasized physical appearance and argumentative style. By highlighting the difference between the two analytical frames, this analysis explores the impact television had on the format for political debates, the history of the McKeesport Junto, and the famous presidential debates of 1960.

Beyond the New Deal Order: US Politics from the Great Depression to the Great Recession

Beyond the New Deal Order: US Politics from the Great Depression to the Great Recession

Markups and income inequality: Causal links, 1975-2011

Using data for 20 countries during 1975–2011, this study provides new evidence on the association between the lack of competition, measured by an increase in markups, and income inequality. We find that an increase in markups is positively associated with rising income inequality. More interestingly, not only do extra profits from higher markups accrue to the top-income group, but also, within the top-income group (top 10%), the higher top-income earners (top 1%) tend to benefit disproportionately more than the lower top-income earners (top 5% or 10%). Finally, we highlight the role of labor market policies; the positive relationship between markups and income inequality is less pronounced in countries with better labor protection such as the statutory protection and power of labor unions, generous unemployment benefits, and mandatory minimum wages.

Labor power, investor protection, and price synchronicity

ABSTRACT In this study, we examine the impact of labor union power on stock price synchronicity. We proxy labor union power by the collective relation law index and measure stock price synchronicity by the level of co-movement between a firm’s stock price and market index. Using a sample of 37 countries between 1995 and 2016, we find that labor union power is positively associated with stock price synchronicity, indicating that firms in countries where labor union power is relatively stronger tend to disclose less firm-specific information. Our evidence also shows that this phenomenon is more pronounced in countries where investors are better protected, and is less pronounced or even reversed in countries where investors are less protected.

After Citizens United: How outside spending shapes American democracy

We study the political consequences of lifting restrictions on the funding of groups engaging in outside spending (e.g., independent political advertising) in elections. Theoretically, we assume that outside spending changes the salience of candidate-specific attributes relative to their party labels. Empirically, we employ a difference-in-differences design that exploits the removal of state-level restrictions on the funding of outside spending mandated by the federal-level rulings in both Citizens United and SpeechNow.org v. FEC. We find strong evidence that these regulatory changes increase the electoral success of Republican candidates, thereby leading to more ideologically conservative legislatures. We find no effect on polarization. Consistent with our theory, the size of our estimated effects depends on the power of labor unions and the alignment of business interests with the Republican party.

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.

Risk Sharing Within the Firm: A Primer

Labor income risk is key to the welfare of most people. This risk is mainly insured the firm and by public institutions, rather than by financial markets. This paper starts by asking why such insurance is provided within the firm, and what determines its boundaries. It identifies four main constraining factors: availability of a public safety net, moral hazard on the employees' side, moral hazard on the firms' side, and workers' wage bargaining power. These factors explain three empirical regularities: (i) family firms provide more employment insurance than nonfamily firms; (ii) the former pay lower real wages, and (iii) firms provide less employment insurance where public unemployment benefits are more generous. The paper also explores the connection between risk sharing and firms' capital structure: greater leverage calls for high wages to compensate employees for greater job risk; nevertheless, firms may want to lever up strategically in order to offset the bargaining power of labor unions. Hence, the distributional conflict between shareholders and workers may limit risk sharing within the firm. By contrast, bondholders and workers are not necessarily in conflict, as both are harmed by firms' risk-taking. In principle, firms may also insure employees against uncertainty about their own talent, but their capacity to do so is constrained by workers' inability to commit to their employer: in the presence of labor market competition, high-talent employees will leave unless paid in line with their high productivity, making uncertainty about talent uninsurable. The paper concludes by showing that risk sharing within firms has declined steadily in the last three decades, and by discussing the financial, competitive, technological and institutional developments that may have conjured this outcome.

Employee treatment and corporate fraud

This paper examines the association between a firm’s relations with its employees and its likelihood of committing fraud. We find that firms treating their employees fairly (as measured by employee treatment index) have a lower likelihood of committing fraud since labor-friendly firms have incentives to signal their willingness to fulfill implicit contracts and maintain long-term relationships with employees. Further analysis shows that employee involvement and cash profit-sharing are the most important components in employee treatment to determine our results. Moreover, we show that the negative association between employee treatment and fraud propensity is more prominent when a firm is in a high-tech industry, when a firm in a less competitive industry, and when employees have less outside employment opportunities. Finally, we show that our results are not driven by the employee’s moral sensitivity or other labor related factors (i.e. labor wage, pension benefits, and labor union power).

Right-to-Work Laws: Ideology and Impact

The debates about right-to-work (RTW) laws have raged for decades. Conservatives have long argued that a freedom principle prohibits employees from being required to pay dues even when a union represents them. Unions and their allies counter that RTW laws are actually intended to minimize the bargaining and political power of labor unions. This article outlines the ideology and impact of RTW laws in the United States. As constitutional challenges to fair share fees continue and state legislatures gradually pass RTW laws, there are many studies on the impact of RTW laws on wages and unionization, but the impact on politics is more mixed. This article analyzes the data nationally but also points to some conditions in which RTW laws may not have the impact that either their proponents or detractors predict. Literature on the topic has considered the following questions: ( a) whether wages and working conditions in RTW states are lower than in non-RTW states, ( b) whether such laws have the intent and effect of weakening worker-friendly candidates politically, and ( c) whether legal interpretations of agency fees or fair share fees are correct. Drawing on the literature in each of these areas, I explore areas of future research and offer conclusions about the state of the literature, as well as the public perceptions of RTW.

The Role of Labor Unions in Corporate Transparency: Focusing on the Role of Governance in Auditor Change Process

This study investigates how the presence and power of labor unions are associated with auditor replacement, more specifically, external auditor tenure and the direction of auditor change. External auditor tenure and direction have been of great interest to stakeholders, as they are very likely associated with the financial reporting quality and corporate transparency, crucial factors for sustainable business. We are focusing on the role of the labor union, one of the key stakeholders involved in corporate governance and transparent operations, in external auditor selection processes. During the annual wage bargaining process, labor unions that rely on financial information face information asymmetry because financial statements are provided by the management. Therefore, labor unions have a high demand for independent and capable external auditors. This demand is likely to shorten auditor tenure and/or prompt changes to higher-quality auditors. Using a sample of 4568 firm-years listed in the Korean stock markets for the period of 2005 to 2008, we find evidence that the presence and power of labor unions significantly decrease external auditor tenure. We also find that the direction of auditor changes with the presence and power of labor unions is likely from non-industry specialist auditors to industry specialist auditors. This study contributes to the extant literature by extending the previous research on auditor selection and the governance role of labor unions.

Local Union Organization and Law Making in the US Congress

The political power of labor unions is a contentious issue in the social sciences. Departing from the dominant focus on membership size, we argue that unions’ influence on national law making is ba...

Trade Unionism and Spain-Us Political Relations, 1945-1953

The lack of greater involvement of Western democracies in defense of the Second Republic during the Spanish Civil War generated a sort of remorse in many sectors of the European and American public opinion. After the end of World War II, the American Federation of Labor (Afl) and United Automobile Workers (Uaw) deployed numerous campaigns in favor of their anti-Franco colleagues. However, such trans-Atlantic solidarity took place in an atmosphere of adversity, due to the increasingly polarizing atmosphere of the Cold War, a period in which the Us Congress drastically reduced labor union power. Democratic labor leaders constantly aired the Spanish dictatorship’s previous connection with Hitler and Mussolini. Although this pressure failed in pushing the Spanish dictator to relinquish power, it provided oxygen for anti-Franco labor unions to continue their actions. Ultimately, this contributed to moderating the highly repressive treatment that those unions were suffering.

Relationship between leverage and the bargaining power of labor unions: evidence from theoretical and empirical perspectives

This study examines whether a firm’s leverage can be used strategically to improve its bargaining position with an organized labor union using samples of non-financial firms listed on the Korean Stock Exchange (KSE) from 1999 to 2013. Through empirical testing, we find that the portfolio with the lowest union labor coverage has the lowest leverage, while the portfolio with the highest union labor coverage has the highest leverage. We also find that collective bargaining power positively affects leverage through the regression of leverage on the bargaining power of the labor union, regardless of the analysis methods, such as static and dynamic models. With a robustness test model that used the industry adjusted labor union concentration index (IUCI), we obtain evidence that collective bargaining power positively influences leverage, which corresponds with the regression results. In conclusion, we suggest the existence of evidence demonstrating that variables related to labor unions affect leverage levels, as suggested in previous studies.

Corporate Taxation of Heterogeneous Firms and the Welfare Effects of Labour Unions

AbstractThis paper examines the welfare effects of powerful labour unions when the government levies a uniform tax rate – as is currently the case in most OECD countries – and firms are heterogeneous with respect to productivity. I show that an increase in the bargaining power of labour unions can decrease the welfare loss generated by restriction of the tax policy and provide conditions under which powerful labour unions decrease the likelihood that firms will move abroad. I also reproduce the well‐known effect whereby powerful labour unions decrease corporate tax rates if firms are mobile.

The relationship between labour unions’ bargaining power and firms’ operating flexibility: New evidence from emerging markets

This study analyses the relevance between the bargaining power of labour unions and the operating flexibility on firms’ capital costs by using non-financial firms listed on the Korean stock exchange from 1999 to 2013. Under the assumption that constraints in business activities attributed to the collective bargaining power of labour unions lead to reduced operating flexibility and increased capital costs, we test this notion empirically; the main test results are as follows: First, we find from portfolio analysis that the cost of capital is higher for firms in more unionized industries. Second, we find that union coverage positively affects the cost of capital at a significant level. Third, we confirm through robustness tests that the industry adjusted union coverage (IAUC) also has a positive effect on the cost of capital at a significant level. As a result, the effect holds after controlling for a host of industry- and firm-level characteristics, and is stronger when unions have more favourable bargaining power. Thus, our findings are consistent with the hypothesis that the increase of labour unions’ bargaining power leads to raise firms’ capital costs by decreasing operating flexibility in the Korean firms.

Why is Income Inequality Increasing in the Developed World?

We address empirically the factors affecting the dynamics of income inequality among industrialized economies. Using a panel for 32 developed countries spanning the last four decades, our results indicate that the predictions of the Stolper–Samuelson theorem concerning the effects of international trade on income inequality find support in the data if we concentrate on imports from developing countries as a trade measure, as theory would imply. We find that democratization, the interaction of technology and education, and changes in the relative power of labor unions affect inequality dynamics robustly.