Unions
- See Benjamin, Gunderson, Lemieux and Riddell:
- Chapter 14: Unions and Collective Bargaining.
- Chapter 15: Measuring effects of unions
Unions:
Collective organizations that negotiate conditions of employment with employers on behalf of their members.
- This objective is met through collective bargaining.
- control of labour supply (strike threat): source of bargaining power
- The outcome is a “collective agreement”.
- specifies wages, non-wage benefits (pensions, vacations,
group insurance, etc.), hiring, promotion, layoffs,
grievance procedures, etc.
- 3 years is currently the most common term for collective agreements in
Ontario, then 2 years (esp. health) and 4 years.
(see Ontario Ministry of Labour “Collective Bargaining
Highlights”
http://www.labour.gov.on.ca/english/lr/pubs/index.php )
- Legislation concerning collective bargaining is primarily provincial.
- Federal jurisdiction industries the exception.
- But: historically, the most important legislative changes were
federal:
Order-in-Council P.C.1003, 1944: encouraged private sector
unionization.
Public Service Staff Relations Act, 1967
- encouraged public sector unionization.
- Provinces tended to follow the federal lead.
- What does the legislation do?
- Employees right to join unions is established.
- Limits are placed on the employer’s power to interfere with worker
rights to bargain collectively.
- Processes for certifying or decertifying unions are specified.
- Rules governing strikes and lockouts are specified.
- Cooling off periods, compulsory conciliation.
- Prohibits strikes and lockouts during the term of an
agreement.
- Requires agreements to specify alternative ways of dealing with problems (grievance procedures).
- May limit actions during a strike/lockout: can replacement workers be hired? Limits on picketing?
- Requires certain provisions in the agreement.
Types of Union organization:
- Craft unions:
- Represent workers in similar occupations.
e.g., firefighters, longshoremen
- Industrial unions:
- Represent workers across many occupations but typically in the same
industry(ies).
e.g., CAW, Steelworkers, CUPE
- more recently: expansion outside traditional industries
- “Unifor”: merger of CAW and CEP (August 2013)
“300,000 workers across roughly 20 sectors of the economy,
primarily in manufacturing, communications and transportation.”
- "Umbrella" organizations:
- Canadian Labour Congress (CLC)
- Ontario Federation of Labour (OFL)
- Canadian Federation of Labour (CFL)
- CNTU in Quebec
- Members are industrial and craft unions.
- Represent the interests of unionized labour to governments and
the public.
Extent of unionization in Canada:
- In 2013: 31.2% of those employed were union members.
- Historically (see Table 14.1 and Figure 14.1), share of labour force
1920 9.4% 1960 23.5% 1995 27.0%
1930 7.9% 1970 27.2% 2005 25.5%
1940 7.9% 1980 29.2% 2010 25.3%
1951 19.7% 1990 28.5%
- Legislative changes were important for the jumps 1941-1951 and in the early 1970s.
- Other Countries (% of employed wage earners), mostly 2009 or 2010:
Canada 30.3% Sweden 68.9% Brazil 28.7%
U.S. 11.4% Germany 18.6% China 78.6%
Japan 18.5% Australia 19.0% Finland 70.0%
U.K. 27.5% France 7.6%
India 41.1% Italy 35.1%
Source: J. Visser, Institutional Characteristics of Trade Unions Database
University of Amsterdam ( http://www.uva-aias.net/208 )
- Shares covered by collective agreements are often higher. Why?
- exempt groups of employees covered by collective agreement.
- extension provisions: agreements applied to (part of) non-union sector.
2006 or 2007 Covered Membership share
Australia 60.0% 19.8%
UK 34.8% 28.7%
Netherlands 82.0% 21.2%
Sweden 92.0% 75.0%
France 95.0% 8.0%
Spain 80.0% 14.6%
Germany 63.0% 20.1%
Japan 16.1% 18.2%
US 13.5% 12.0%
Canada 30.5% 29.4%
Source: J. Visser’s database (see link above).
- see also text: Table 14.2 (1980 vs. 2000)
- In Canada? The share of non-union members covered by collective
agreements is only about 2% of the workforce.
Level of Bargaining
- The Canadian system of collective bargaining is decentralized.
- single employer, single establishment, single union: most prevalent
- single employer, multi-establishment, single union: widespread
- single employer, multi-union: a few examples (railways, newspapers)
- multi-employer, single union: some examples in health care, construction,
forestry, trucking.
- multi-employer / multi-union bargaining: uncommon.
(Source: Chaykowski, 2009 Table 10.1)
- U.S. is similarly decentralized (UK since 1980s as well).
- Multi-employer agreements and even national level wage determination
is found in some countries.
- See handout from Visser’s database: levels of bargaining (LEVEL),
extension of agreements (EXT) and coordination (WCOORD).
- Belgium, Netherlands (early 2000s), UK (1970s), Australia (1983-91)
some examples of high centralization.
- Importance of the level of bargaining?
- Empirical studies suggest it can affect the degree of unemployment.
- Calmfors and Driffil (1988): best known study
- looked at relationship between bargaining coordination and
unemployment.
- results suggest that the relationship is “hump-shaped”.
- decentralized systems: low unemployment
- wages are more flexible to specific market
conditions.
- centralized/highly coordinated systems: low unemployment.
- economy-wide wage setting: may take into account
unemployment consequences of high wages.
- intermediate cases: higher unemployment!
- unions pursue higher wages but don’t take
national unemployment consequences into account.
- Later studies? - Several find the hump-shape.
- Some suggest only coordination gives low
unemployment.
Unionization by Type of Job and Personal Characteristics:
- Industries (Text table 14.3, see also handout from Statistics Canada (2007)
“Unionization” in Perspectives on Labour and Income)
- High unionization: public administration, communications and utilities, education, health and social assistance.
- Low unionization: wholesale and retail trade, finance, insurance and real estate, agriculture, accommodation and food.
- This pattern is similar across countries (Visser)
Unionization by Major Industry, Canada 2009 (ranked high to low)Total employees / 0.314
Public administration / 0.723
Educational services / 0.713
Utilities / 0.661
Health care and social assistance / 0.559
Transportation and warehousing / 0.419
Construction / 0.312
Information, culture and recreation / 0.269
Manufacturing / 0.267
Forestry, fishing, mining, oil and gas / 0.237
Business, building and other support services / 0.160
Trade / 0.148
Other services / 0.102
Finance, insurance, real estate and leasing / 0.097
Accommodation and food services / 0.078
Professional, scientific and technical services / 0.052
Agriculture / 0.052
Source: Labour Force Historical Review
- Visser (2000): 17 industrialized countries
- unionization rates higher in public sector in all countries.
Private Public
Canada 18% 74% (¬ 2009)
US 9% 37%
Japan 22% 68%
UK 19% 60%
Germany 22% 56%
Sweden 77% 93%
Australia 24% 55%
- Public: public administration, public health, education,
public transport.
- Occupations:
- Low unionization: sales occupations, food and beverage prep.
- High: Teaching, nursing, health (technical and support), protective
services.
- Part-time jobs are less likely to be unionized (all countries in Visser).
- Firm size:
- larger firms are more likely to be unionized.
- Middle aged, older workers are more likely to be unionized.
- Regional: 2013 covered by agreement low – Alberta (22.8%), high Quebec
(39.5%). Ontario? 28%
Economics of Unions:
- Some Major questions?
(1) Why are some jobs unionized and others not?
(2) How to model unions and unionized labour markets?
(3) What are the effects of unions on compensation and other
outcomes?
Models of Unionization: Which Jobs are Unionized?
Decision makers involved:
(1) Workers:
- Demand for unions based on a comparison of the costs and
benefits of unionization.
(2) Union organizers:
- Determine the supply of union services.
- Which jobs to target?
(3) Employers:
- can take actions to deter unionization.
(4) Governments:
- Determine the legal framework.
- A substitute for unions?
Some factors affecting unionization:
(1) Tradeoff between extra compensation and jobs.
- Better compensation will often mean fewer jobs: how many fewer? what does the answer depend upon?
(a) Elasticity of labour demand.
- The more elastic (flatter) is labour demand the worse is the tradeoff
between extra compensation and employment.
- Demand for unionization will be low:
potential wage gains are offset by risk of job loss.
Possible considerations:
- Degree of product market competition:
- competitive market: harder to pass on higher wage costs – labour demand more elastic.
- Goldin: US 19th century: national market and decline
of local craft unions.
- Late 20th century: international competition – has it made labour demand more elastic?
- Monopolist vs. a competitive firm.
- Existence of substitutes for organized labour:
- existence of easy to use substitutes makes labour demand
more elastic.
- technology plays a role;
- globalization: can make foreign workers a possible substitute.
- labour laws: can union workers be easily replaced with non- union workers?
- Resource industries, industries with large sunk capital investments:
(mining, utilities, steel) – is labour demand inelastic once the intial investment is made.
- Public sector unionization and elasticity:
are elasticities low in the public sector?
(b) Is the industry/firm growing?
- Unionization may be more attractive in a growing industry.
- raising compensation may mean lower employment
growth rather than layoffs.
(c) Monopsony: does the employer have monopsony power?
- if so unions are like minimum wages under monopsony.
- Raising wages might not decrease employment.
(2) Worker attitudes toward unions
- If unions are viewed positively (aside from any monetary benefits
they may bring) the prospects for unionization will be better.
e.g., Canada vs. United States (but: Lipset and Meltz, 2004 say
views are similar)
Alberta vs. BC
Northern U.S. vs. Southern U.S.
Europe vs. North America.
- Are there spillovers here?
- are attitudes contagious? (Holmes, 2006)
- union friendly or unfriendly legislation and public attitudes.
(3) Worker's anticipated labour force attachment
- Short tenure: is unionization is less likely?
- unionization as an investment: less time to accrue benefits
- costs now in terms of union dues, lost income if
there is a strike, etc.
- less time to reap benefits of unionization.
- high cost of organizing high turnover groups.
Possible examples of groups with low unionization and low attachment:
- young workers, fast food industry workers.
(4) Non-union pay and working conditions:
- These can affect the expected benefits and demand for unionization.
- Employers may night adopt high-wage policies to discourage
unionization e.g., Michelin Tire.
- Have improvements in personnel management contributed to falling U.S.
unionization?
- Minimum employment standards set by government may affect
the size of expected benefits.
- government protection: a substitute for unions?
- welfare state as an explanation of the decline of unionization?
- Extension of collective agreements to non-union workers reduces incentives to join unions: Australia, France, Netherlands,
etc.
(5) Expected Degree of Employer resistance.
- Will the employer fight unionization?
- If a long strike is expected the cost of unionization to the
worker may be high.
- Employer information campaigns, actions against union
members, wage and working conditions can
affect the costliness / success of a unionization drive.
e.g. anti-union firms: McDonald’s, Walmart.
- do they invest in an anti-union reputation?
(6) Legal framework:
- Can affect the relative power of employers vs. unions and so
the size of anticipated rise in compensation.
- Can affect the time and resource costs of forming a union.
- United States: prevalence of "right-to-work" laws
- can't require that workers be union members.
- Less "union-friendly" legislation in the U.S. is often argued to
be a major factor behind low U.S. unionization rates.
- Growth of unions in Canada and the US: pattern suggests
legislation was important. e.g. PC1003, public sector union laws.
- Martinello (2000) Canadian Public Policy (see text p. 424)
- Ontario certification and decertification activity in 1990s.
- Signficant effects of NDP and PC governments and their
legislation on success rates.
- Recent Canadian studies of changes in unionization rates:
- Riddell and Riddell (2004):
- Declines in Canadian and US unionization rates 1984-98.
- It is not due to decline of industry/occupations where unionization
rates are high or a change in workforce characteristics.
- Probability of being unionized has fallen generally.
- Why? Perhaps: - increased management opposition
- legislative change
- better substitutes for union services.
Unions in Economic Models
- What is the objective(s) of a union?
- unions are collective organizations
- individual members may have quite different preferences
e.g., old vs. young and seniority rules
- the leadership may have its own objectives
- no single model of how unions behave.
Monopoly union model:
- Think of a union as a monopolist selling labour to the firm.
- controls the labour supply
- faces the firm’s labour demand curve: this curve represents the
actions of the firm, i.e. shows employer choice of
employment at each wage.
- the value of the wage rate chosen implies an employment
level (from the labour demand curve)
- Union sets the wage to maximize its “welfare” or “well-being”
- welfare of a union?
Union Preferences:
- Assume unions view both compensation (W) and employment (E) as good.
- represent union preferences over compensation and
employment with a set of indifference curves.
(see text Figure 14.3 for some possibilities).
- shape represents valuation of extra employment vs. extra
wages:
- steep: values extra employment highly (extra wages lowly)
- flat: values extra wages highly (extra employment lowly)
- where do these come from?
- union consists of many workers with different preferences
(leaders preferences? voting models?)
Constraints Faced by unions:
- Wage obtained in alternative employment and/or the cost to workers of
supplying labour
- union must do as well as workers can do in employment
elsewhere.
- this could be represented by the labour supply curve (text draws it
as flat – I will too a wNU)
- Labour demand curve:
- reflects behavior of the profit maximizing firm (given the wage)
i.e., given the negotiated wage the firm chooses employment
along the labour demand curve.
Union’s Best Choice:
- Facing these two constraints:
- union picks the wage that will put it on the indifference
curve just tangent to the labour demand curve.
(provided that this wage is higher than the alternative wage)