Union Bargaining Research Articles

The Impact of a Unionized Labor Market in a Schumpeterian Growth Model

This paper analyzes the relationship between unemployment and growth, applying the seminal growth model of Aghion/Howitt (1992). We distinguish low skilled and high skilled labor and assume that a union bargains over the low skilled labor wage. This causes unemployment, but the growth effect is ambiguous. On the one hand, the higher wage will squeeze the expected profits of the researcher, which is bad for growth. On the other hand, the union affects the marginal product of high skilled labor, and, hence, the wage in the manufacturing sector declines. This causes a migration of high skilled labor from the manufacturing into the research sector. This effect is growth enhancing. We show that the overall effect crucially depends on the elasticity of substitution between high skilled and low skilled labor. Is this elasticity smaller than one the good growth effect dominates the bad and vice versa. In the Cobb Douglas case both effects cancel out.

Collective bargaining in the public sector and the role of budget determination

This paper considers collective bargaining in a public sector institutional setting. The model demonstrates how budget constraints and hierarchical structure affect the bargaining outcome. A trade union bargains over wage and employment either with an output-maximizing bureau or the bureau's sponsoring institution. The slope of the contract curve depends on the bargaining level because the budget constraints differ. Various assumptions are made about the timing of the sponsor's decision concerning the budget of the bureau. Local bargaining and budget determination between the wage and employment bargains can be optimal for the sponsor because it yields a low wage.

Union Bargaining Power: A View from Japan

Union Bargaining Power: A View from Japan

Trade Union Bargaining Horizons in Comparative Perspective: The Effects of Encompassing Organization, Unemployment and the Monetary Regime on Wage-Pushfulness

Before wage-pushfulness can be empirically related to the organizational structure of trade unions, the framework conditions that determine their perceived set of options must be adequately conceptualized. Although rising union density tends to increase wage pressure, the greater `encompassingness' of labour movements has a moderating effect. In addition, unemployment and the policy choices of the political authorities create incentives and constraints which shape union responses. The counteracting forces of density and concentration are presented in an interactive model based on data from 20 OECD countries for 1970-96. The article presents statistical evidence suggesting that wage-pushfulness depends on the specific constellation of density, concentration and the extent to which the political authorities are prepared to accommodate wage pressure.

Endogenous scope of bargaining in a union–oligopoly model: when will firms and unions bargain over employment?

The scope of firm–union bargaining is shown to be endogenously determined in a union–oligopoly model with decentralized negotiations. If the unions' power is sufficiently high, all bargaining units choose to negotiate over wages alone, i.e., universal right-to-manage bargaining emerges in equilibrium. Otherwise, wage/employment bargaining and right-to-manage bargaining coexist in the same industry. In equilibrium, some firm–union pairs will always choose to bargain over employment as well, since the firms become Stackelberg leaders in the market by committing to a particular output during the negotiations. The firms and their unions both benefit from the additional Stackelberg rents, provided that the unions' power is small enough. Our analysis suggests that there is not necessarily a negative relationship between unions' power and sectoral employment rates.

Growth Externalities, Unions, and Long-term Wage Accords,

This paper presents an innovation driven endogenous growth model, where firms and unions bargain over wages. We find that the degree of centralization of the bargaining structure plays a crucial rule for economic performance. Central bargaining, which incorporates the leapfrogging externality incorporated in firm-level bargaining, will yield lower rates of unemployment for a given rate of economic growth. The increase in labor resources will in turn also yield faster growth rates in a corporatist economy. Indeed, when unions focus on issues other than short term wage increases, they may even outperform the non-unionized economy, as they can internalize the knowledge externality through long-term wage moderation accords.

A Numerical Approach to Fiscal Policy, Unemployment and Growth in Europe

Europe is faced with serious problems of slow growth and little employment creation. Are the two problems related at all? Our proposed answer is: yes, they are. Building on Daveri and Tabellini (1997), we developed an infinite-horizon model with endogenous growth due to learning-by-doing and unemployment due to monopoly union bargaining in the labor market. In this framework, high labor and capital taxes and unemployment subsidies may in principle reduce employment and growth. The model is then calibrated using actual data from a variety of countries in Continental Europe, which we identify as the closest to our toy model. We run two types of balanced-budget fiscal policy experiments, focusing on their employment and growth effects. First, we separately change tax rates on capital, labor and subsidies, as well as replacement rates, while assuming that the government budget is kept balanced by appropriate changes in lump-sum transfers. Second, we cut labor taxes and adjust capital taxes in order to keep the GDP share of lump-sum transfers unchanged. Our numerical results suggest that, in the absence of binding revenue constraints, reducing labor taxes and unemployment subsidies is beneficial to both employment and growth, while capital taxes are less useful. If revenue constraints are binding, instead, cutting labor taxes is in general ineffective in boosting employment and growth.

National Employment Systems and Job Autonomy: Why Job Autonomy is High in the Nordic Countries and Low in the United States, Canada, and Australia

We present evidence that, across countries, similar jobs carry very different levels of autonomy. Workers in Nordic countries have greater discretion than workers in the United States, Canada, and Australia, all else being equal. This suggests that students of job autonomy, who emphasize task complexity and human capital, should heed the role of the wider institutional environment. We examine three explanations of the link between national location and autonomy. The Taylorism/de-skilling thesis suggests that work control is a zero-sum game between workers and managers, such that in countries where managers exercise great control, workers will exercise little. The collective bargaining thesis suggests that union bargaining strategy is the key: unionists will have high autonomy in `co-determination' countries and low autonomy in `job control' countries. We argue more broadly that national management, training, bargaining, and unemployment systems operate according to different logics. Where they are oriented to rule-governed work, autonomy will be low. Where they are oriented to skill-governed work, autonomy will be high. Detailed data on job autonomy from over seven thousand jobs in seven countries support our contention that national employment systems shape job autonomy.

The European Union and International Outcomes

Analysts of the European Union (EU) and international bargaining have generally failed to appreciate how the shift within the EU from unanimity to qualified majority voting has affected European bargaining positions and international outcomes. I analyze the international effects of changes in EU decision-making rules with a simple spatial model and assess the utility of the model in two cases of environmental bargaining that span the entry into force of the Maastricht Treaty. The EU can decisively shape international outcomes by concentrating the weight of its fifteen member states on a single substantive position and rendering that position critical to any internationally negotiated agreement. The findings generalize to numerous areas of EU external relations and suggest that analysts should attend specifically to the EU and more generally to domestic and regional institutional factors in explaining international bargaining outcomes.

Efficiency wages, trade unions, and employment

This paper integrates union bargaining into an efficiency model with imperfect monitoring of worker performance. The model is used to examine the effects of an increase in the benefit replacement ratio on wages, employment, and effort. It is shown that, in contrast to both standard shirking and trade union models, these effects are all ambiguous. In particular, if unions have some bargaining strength, a higher replacement ratio may reduce wages and increase employment. Whenever employment is increased the level of effort falls. Copyright 1998 by Royal Economic Society.

The determination of R&D: Empirical evidence on the role of unions

This paper examines the empirical evidence of the role of union bargaining on innovation. We review the existing empirical evidence and emphasis some of the problems with the theoretical assumptions. We outline a simple model of strategic R&D with union bargaining and compare its predictions with econometric results from U.K. enterprise data. Union power (as proxied by density) has at first a positive effect on a firm's relative R&D performance. The effects of union power are only negative when the (a) union density is very high; (b) the union bargains only over wages.

Labour markets, bargaining and innovation

Much of the recent empirical work on the impact of unions on R&D is based on a theoretical model which predicts that (i) unions have a negative impact on R&D; (ii) under some circumstances an increase in union strength can make both firms and unions worse off. We survey a more recent theoretical literature which takes account of the fact that R&D is often undertaken for strategic reasons by firms that are in competition with one another. We show that in this framework the prevailing theoretical paradigm may be overturned. Thus when firms and unions can enter into long-term bargains then an increase in union strength will increase (decrease) R&D spending if successful innovation causes employment to rise (respectively fall). However, when R&D falls then this increase in union strength can cause both firms and unions to be better off. When firms and unions engage in short-term bargaining then an increase in union bargaining strength will cause R&D to fall when bargaining is over wages alone. However, when bargaining takes place over wages and employment, then, if unions care a lot about employment, the relationship between union strength and R&D is inverse U-shaped.

Human Capital, Employment and Bargaining.

This book examines human capital investment, employment and bargaining at the level of the firm. It attempts a summary of results that incorporate both human capital investment and employment decisions within firm union bargaining models, emphasising investment in teams, or groups, of workers. The authors also examine human capital in relation to labour demand as well as the delineation between neoclassical and coalitional firms. Further they investigate connections between, on the one hand, turnover costs and firm-specific human capital and, on the other, unemployment. Labour market policy topics recur throughout the book and include the choice between pure wage and profit sharing remuneration systems, the issue of whether training should be subsidized by governments, and work-sharing versus layoff decisions. This book is aimed mainly at the academic economics profession, but is easily accessible to final-year undergraduate and postgraduate students.

The impact of employment tax cuts on unemployment and wages; The role of unemployment benefits and tax structure

I model and simulate the effects of employment tax cuts on unemployment and wages in four equilibrium models: competitive, union bargaining, search and efficiency wages. I find that if the ratio of unemployment compensation to wages is fixed, the effect of the tax cut is mainly on wages. But if income out of work is fixed in real terms, there are substantial employment effects. When wages are determined by bargaining, revenueneutral reforms that make the tax more progressive also reduce unemployment. Thus, policy towards unemployment compensation and tax structure are key influences on the effect of taxes on unemployment.

The British Docks: A Test of Alternative Models of Wage and Employment Determination

In this paper we compare two well‐known models of union bargaining: labour demand and efficient bargains. We use data on the British docks which belonged to the national Dock Labour Board, abolished in 1989. The docks industry is particularly well‐suited for a test of the competing models: in fact it had a long tradition of union bargaining on manning levels and, at the same time, it experienced a long‐run decline in employment. Also, jobless dockers were granted some form of unemployment compensation.The institutional features of the industry allow to test a strong version of the efficient bargain model, where the union equates the utility of those who work and those who do not. Our evidence supports the strong efficiency hypothesis: employment depends only on the opportunity cost of working. The secular decline in employment in the industry is explained mainly by technological progress, i.e. the introduction of containers.

Non-Union Bargaining: Enterprise Flexibility Agreements

One of the key objectives of the Industrial Relations Reform Act 1993 (Cwlth) is to develop an industrial relations system in Australia based on enterprise bargain ing. To make enterprise bargaining accessible to the non-union sector the legisla tive framework provides for the making of enterprise flexibility agreements. These agreements can be made directly between employer and employees without union involvement where the workforce is not unionized. It has thus been popularly referred to as the 'non-union' bargaining stream. This article examines the extent to which the legislation on enterprise flexibility agreements does provide for non- union workplace bargaining. It does so by examining the way in which the legislation provides for union involvement at the various stages in the process of negotiating and formalizing an enterprise flexibility agreement. The provision in the legislation of a formal system of non-union bargaining has been criticized as posing a threat to the traditional representational role played by unions in Austral ian industrial relations. In this context, the role of the Bargaining Division of the Australian Industrial Relations Commission in facilitating bargaining and its decisions concerning the rights of a union to represent employees in their negotia tions with the employer are also considered. Finally, some conclusions are offered as to why only a relatively small number of enterprise flexibility agreements have been approved.

Voice asymmetries in ERISA litigation

ERISA’s equitable remedies limit employees’ access to the courts. The law fails to protect workers with short tenure and low wages, for example female workers, because trial costs often exceed damages. In single-employer plans, unions improve access, but in multiemployer plans they do not. The reason is that in single-employer plans unions bargain at arm’s length with plan sponsors while in multiemployer plans they do not. Plaintiffs’ win rates are approximately 50 percent in singleemployer union ERISA cases but are significantly below 50 percent in nonunion and multiemployer cases.

Layoffs with Payoffs: A Bargaining Model of Union Wage and Severance Pay Determination

Popular characterizations of union preferences assume that the income of laid-off union members is exogenous. There is evidence, however, of intra-union distribution schemes such as severance payments, unemployment insurance, retraining arrangements and early retirement schemes. This paper develops a model of wage and severance pay determination by a trade union and a firm bargaining in a right-to-manage framework. The important point differentiating the model in this paper from the orthodox union model is that it is efficiency-improving in the sense that it makes full-insurance possible and marginal productivity is equal to the opportunity cost of labour. Moreover, with redundancy pay on the bargaining agenda, both the right-to-manage and the efficient bargaining union models are characterized by the same efficiency conditions. This has implications for empirical research which attempts to distinguish between these two models, since the outcome of both models is the same. Finally, the union-firm bargaining model can also be compared with the outcome of the implicit contract model with redundancy pay. There is an important difference between the two approaches, however. While the result in this paper derives from an imperfectly competitive labour market where unions and firms bargain over wages and redundancy pay, the implicit contract result derives from a perfectly competitive labour market in which competitive forces lead to an efficient outcome.

Are Effort Bargaining Models Consistent with the Facts? An Assessment of the Early 1980s

Recent research has attempted to explain the impact of changes in union bargaining of] the UK productivity miracle of the 1980s. A central part of these explaniations is the concept of 'effort' or 'working conditions' as an observable component of negotiations. After reviewing the evidence, this paper shiows that, in models where effort and wages are jointly negotiated in an environmenit of weakenitig union power, a positive effort-wage association-as observed in the early 1980s in the UK-emerges only unider quite special assumptions. We show that the stylized facts are better explained by a model where effort and wages are bargained over sequentially.

Regulated deregulation - an option for Central and Eastern Europe

This contribution assesses the process of deregulation as it has taken place to date in the most important countries of Central and Eastern Europe (CEECs), with special reference to the social and labour components of the process and to trade union and indutrial relations developments. In the first instance, the authors employ descriptors appropriate for examination bf any system of labour relations, namely, solidarity and social justice; the bargaining culture inherited by the trade unions and their role as intermediary organisations and structures for the balancing of interests within society. Subsequently, in a second stage, an attempt is made to describe certain strategic areas for trade union policy in which appropriate action would best enable a comprehensive modernisation of labour relations, while at the same time maximising the CEECs' opportunities for integration within a future united Europe. The areas described are: the demise of the Fordist approach to labour via a process of systematic rationalisation; an integrated policy of poverty relief and social welfare; the shift towards a workplace-oriented trade union and collective bargaining policy; and the challenge facing the trade unions of organising the recruitment of new highly qualified and, in many cases, strongly individualised groups of workers, the "winners" of transformation, particularly those workers employed in the newly set up "joint ventures" . The name given to the approach thus described is the path of "regulated deregulation".