copyright 2008 the mcgraw-hill companies 34-1 34 labor market institutions and issues: unionism,...

Copyright 2008 The McGraw-Hill Companies34-1

34Labor Market Institutions and Issues: Unionism, Discrimination, and Immigration


Chapter Objectives• Who Belongs to U.S. Unions;

the Basics of Collective Bargaining; Why Unions are in Decline; and the Effects of Unions on Wages, Efficiency and Productivity

• The Types and Costs of Discrimination, Economic Theories of Discrimination, and Current Antidiscrimination Issues

• The Extent and Effects of U.S. Immigration


What is a Labor Union?

• An association of workers, each of whom transfers the right to negotiate wage rates, work hours, and working conditions to the association


Types of Unions

Craft or trade union--members practice the same craft--plumbers, etc.

Industrial union, workers in the same industry--auto, steel

Public employees union, members are government employees--teachers, police, etc.

Employee Associations: American medical association, etc--not really unions but similar in many ways


Brief History of Unions

• Early unions, groups of craft workers • Knights of Labor, early attempt at a national

union of all workers• Problems faced by the Knights, skilled-unskilled

debate• In early days, courts very anti-union


AFL, American Federation of Labor, formed in 1883

Attempted to organize the skilled craft unions


Congress of Industrial Organizations (CIO)

• Formed in 1938, attempt to organize the industrial workers

• Auto and Steel industries among their first successes• AFL-CIO merged in the 1950’s• Some unions are affiliated with the AFL-CIO, others are

independent


What are the major laws affecting unions?

• Norris-La Guardia Act of 1932• Wagner Act of 1935• Taft-Hartley Act of 1947• Labor Management Reporting & Landrum-Griffin

Act 1959• Civil Rights Act of 1964


Norris-LaGuardia Act, 1932

• Outlawed yellow-dog contracts in which workers agreed to not join unions in order to get a job

• Restricted injunctions against unions


Wagner Act, 1935 (national labor relations act)

• Gave workers the right to join unions if majority of workers vote to

• Required management to engage in good faith bargaining

• Created national labor relations board


Taft-Hartley Act, 1947

• Closed shops illegal, union shops illegal if state passes right to work law

• Certain strikes illegal• Cooling off period can be ordered in national emergency

cases


What is a Closed Shop?

• An arrangement in which a firm may hire only union labor ( have already joined the union prior to employment)


What is a Union Shop?

• An arrangement in which a firm may hire nonunion labor, but every worker hired must join the union by a certain date.

• Agency shop: nonunion workers either pay dues or donate equivalent amount to charity.


Landrum-Griffin Act, 1959

• Unions must hold elections, keep financial records


Civil Rights Act, 1964

• Required unions to adopt affirmative action policies in order to hire more women and minorities


Unionism In America• Business Unionism: concern with

pay, working conditions, benefits, and not with overthrowing capitalism. Also, in US, as opposed to other countries, our unions are not a distinct political party.


Decline of Unionism in the US

• Union Membership: only 12.5 percent of wage and salary workers in US now in unions, down from about 25 percent some decades ago.

• The Decline of Unionism: causes?

–Structural-Change Hypothesis

–Managerial-Opposition Hypothesis


Structural-Change Hypothesis• Employment has shifted away from

traditional union strongholds: decline of manufacturing, rise of service industries, more foreign competition

• Greater numbers of women and part time workers in labor force

• Movement to the Southern states, the sun-belt, right to work states

• Very success of unions in raising wages may have led to substitution of machinery and nonunion workers, etc.


Managerial-Opposition Hypothesis

• Argues that managerial opposition to unions has intensified, reducing union growth.

• Early 1980’s, air traffic controllers fired

• Wal-Mart anti union tactics?


Unionism In AmericaUnion Membership as a Percentage of the Employed Labor Force, Selected Nations

DenmarkSweden

ItalyAustraliaGermany

United KingdomHungary

United StatesSouth Korea

France

0 20 40 60 80 100

Source: Statistical Agencies in Individual Countries, Latest Data

12.5%


Unionism In AmericaPercentage Unionized by Industry in 2005

GovernmentTransportation

TelecommunicationsConstruction

ManufacturingMining

Retail TradeAgriculture

FinanceTotal U.S. Workers

0 20 40 60 80 100

Source: Bureau of Labor Statistics

2.7%1.6%

5.2%

8.0%13.0%13.1%

21.4%

23.4%36.5%

12.5%


Unionism In AmericaPercentage Unionized by Occupation in 2005

TeachersProtective Services

Transportation WorkersProduction Workers

Social WorkersLegal Workers

ManagersFood WorkersSales Workers

Total U.S. Workers

0 20 40 60 80

Source: Bureau of Labor Statistics

4.3%3.3%

4.4%

5.6%16.5%17.1%

19.0%

37.0%38.5%

12.5%


Collective Bargaining• The Work Agreement

–Wage and Hours• Cost of Living Adjustments (COLAs)• Seniority and Job Protection• Grievance Procedures


Collective Bargaining• The Bargaining Process

–Demands–Bargaining in Good Faith–Strike–Lockout–National Labor Relations Act

(NLRA)–National Labor Relations Board

(NLRB)


Economic Effects of Unions• The Union Wage Advantage: recall in ch.

26 the 3 ways that unions can try to raise wages: but have they done so?

• Research finds an average 15% union wage advantage over nonunion workers in the same industry.

• However, appears to be little affect on the overall average level of wages received by labor.


Economic Effects of Unions

• Efficiency and Productivity: how do unions affect worker productivity?–Negative View

• Losses via Featherbedding and Work Rules

• Losses via Strikes• Losses via Labor Misallocation

Graphically…


Economic Effects of UnionsEffects of the Union Wage Advantageon the Allocation of Labor

Sector 1Union

Sector 2Nonunion

Employment Employment

Wag

e R

ate

Du = MRP Dn = MRP

Wu

Wn Wn

WsWag

e R

ate

N1N2 N1 N30 0

A

B

C

D

E

Area B Represents Misallocation of Labor and Decline IN Economic Efficiency


Economic Effects of Unions• Efficiency and Productivity

–Positive View• Longer-Run Positive Impacts: The Shock-Effect

• Reduced Worker Turnover–Exit Mechanism–Voice Mechanism

• Increased Informal Training

• Mixed Research Findings


Labor Market Discrimination

• Types of Discrimination–Wage Discrimination

–Employment Discrimination

–Occupational Discrimination

–Human Capital Discrimination

• Costs of Discrimination


Labor Market DiscriminationDiscrimination and Production Possibilities

Cap

ital

Go

od

s

Consumer Goods

0

Kd

Cd

X

Y

Z

DiscriminationCauses a Failure toAchieve ProductiveEfficiency

EfficientCombinations

D


Economic Analysis of Discrimination

• Taste-for-Discrimination Model

–Discrimination Coefficient

–Competition and Discrimination

O34.1



Taste for Discrimination Model

Afr

ican

-Am

eric

an W

age

Rat

e(D

oll

ars)

African-American Employment (Millions)

0

D3

D2

D1

S

12 16 18

6

$9

8

MoreDiscrimination

LessDiscrimination



• Statistical Discrimination–Labor Market Example–Profitable, Undesirable, but

Not Malicious• Occupational Segregation:

The Crowding Model–The Model–Effects of Crowding

Graphically…



Wag

e R

ate

Wag

e R

ate

Wag

e R

ate

B BBM M

W

3 4 3 4 64

Dx Dy Dz

Occupation X Occupation Y Occupation Z

Economics of Occupational Segregation

Quantity of Labor(Millions)



By Crowding Women Into One Occupation (Z)…

Men Enjoy Higher Wages in the Other Occupations (X and Y)

000

Eliminating Occupational Segregation


Antidiscrimination Policies and Issues

• Equal Pay Act 1963• Title VII of the Civil Rights

Act of 1964• Affirmative Action

Requirement–Supportive View–Opposing View

• Reverse Discrimination

• Recent Developments


Immigration (omit)• Legal Immigrants• Unauthorized

Immigrants• Economics of

Immigration–Wage Rates and World

Output–Income Shares

G34.1


GLOBAL PERSPECTIVE

ImmigrationU.S. Immigrants by Country of Origin, 2004

Mexico

India

Philippines

China

Russia

Vietnam

Dominican Republic

El Salvador

Canada

South Korea

0 30 60 90 120 150 180 210

65,472

54,632

45,942

36,646

30,064

30,049

29,285

23,437

19,441

176,664

Source: U.S. Citizenship and Immigration Services


ImmigrationThe Simple Economics of Immigration

Wag

e R

ate

United States Mexico



DuDm

a

A

bd D

B

We

Wag

e R

ate

We

c f F C

Wu

0 0

Wm

Immigration to the United States Impacts Jobs and Wage Rates


Immigration• Complications and

Modifications–Costs of Migration

–Remittances and Backflows

–Full Employment versus Unemployment

–Fiscal Impacts

• Immigration: Two Views


Allegations of Discrimination in Hiring of Women in Major Symphony Orchestras

Orchestrating Impartiality

• “Blind” Auditions by Hiding Candidates behind Screens

• 1970 Only 5% Were Women• Screened Auditions Increased

Probability of a Woman Hiring by 50%

• Without Screens Was Only 10% But With the Screens 35%

• Today About 25% of Top Orchestra Members Are Women

• Directors Demonstrated a Clear Bias Toward Men in Hiring

Last

Word


Key Terms• American Federation of Lab

or and Congress of Industrial Organizations (AFL-CIO)

• independent unions• business unionism• structural-change hypothesi

s• managerial-opposition hypo

thesis• collective bargaining• closed shop• union shop• agency shop• right-to-work laws• open shop• cost-of-living adjustments (

COLA)• strike• lockout• National Labor Relations Ac

t (NLRA)

• National Labor Relations Board (NLRB)

• exit mechanism• voice mechanism• labor market discrimination• wage discrimination• employment discrimination• occupational discrimination• human capital discriminatio

n• taste-for-discrimination mod

el• discrimination coefficient• statistical discrimination• occupational segregation• affirmative action• reverse discrimination• legal immigrants• unauthorized immigrants


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