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34Labor Market Institutions and Issues: Unionism, Discrimination, and Immigration
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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
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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
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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
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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
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AFL, American Federation of Labor, formed in 1883
Attempted to organize the skilled craft unions
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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
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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
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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
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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
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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
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What is a Closed Shop?
• An arrangement in which a firm may hire only union labor ( have already joined the union prior to employment)
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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.
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Landrum-Griffin Act, 1959
• Unions must hold elections, keep financial records
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Civil Rights Act, 1964
• Required unions to adopt affirmative action policies in order to hire more women and minorities
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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.
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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
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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.
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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?
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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%
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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%
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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%
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Collective Bargaining• The Work Agreement
–Wage and Hours• Cost of Living Adjustments (COLAs)• Seniority and Job Protection• Grievance Procedures
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Collective Bargaining• The Bargaining Process
–Demands–Bargaining in Good Faith–Strike–Lockout–National Labor Relations Act
(NLRA)–National Labor Relations Board
(NLRB)
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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.
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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…
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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
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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
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Labor Market Discrimination
• Types of Discrimination–Wage Discrimination
–Employment Discrimination
–Occupational Discrimination
–Human Capital Discrimination
• Costs of Discrimination
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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
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Economic Analysis of Discrimination
• Taste-for-Discrimination Model
–Discrimination Coefficient
–Competition and Discrimination
O34.1
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Economic Analysis of Discrimination
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
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Economic Analysis of Discrimination
• Statistical Discrimination–Labor Market Example–Profitable, Undesirable, but
Not Malicious• Occupational Segregation:
The Crowding Model–The Model–Effects of Crowding
Graphically…
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Economic Analysis of Discrimination
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)
Quantity of Labor(Millions)
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
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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
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Immigration (omit)• Legal Immigrants• Unauthorized
Immigrants• Economics of
Immigration–Wage Rates and World
Output–Income Shares
G34.1
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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
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ImmigrationThe Simple Economics of Immigration
Wag
e R
ate
United States Mexico
Quantity of Labor(Millions)
Quantity of Labor(Millions)
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
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Immigration• Complications and
Modifications–Costs of Migration
–Remittances and Backflows
–Full Employment versus Unemployment
–Fiscal Impacts
• Immigration: Two Views
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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
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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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