Chapter 15
Pay and benefits of U.S unions
+ Good news is unions' members earn about 20% more than non-union workers, even after adjusting for factors such as years of work experience and educational level +Bad news is the share of the United States workers who belong to unions has been steadily declined for 50 years Fewer people join unions today (About one-quarter of all U.S. workers belonged to a union in the mid-1950s, but only 11.1% of U.S. workers are union members today). Union workers might have higher productivity than non-union workers for a number of reasons: + higher wages may elicit higher productivity + union workers tend to stay longer at a given job, a trend that reduces the employer's costs for training and hiring and results in workers with more years of experience Union workers may be more willing to accept new technology than non-union workers because the union workers believe that the union will negotiate to protect their jobs and wages, whereas non-union workers may be more concerned that the new technology will replace their jobs In addition, union workers, who typically have higher job market experience and training, are likely to suffer less and benefit more than non-union workers from the introduction of new technology
A decline in Union Membership
+ The shift from manufacturing to service industries + The force of globalization and increased competition from foreign producers + A reduced desire for unions because of the workplace protection laws now in place + U.S. legal environment that makes it relatively more difficult for unions to organize workers and expand their membership
public policies to reduce discrimination
+ make discrimination in the labor market illegal + to reduce the gap in educational achievement
Affirmative Action
A policy designed to redress past discrimination against women and minority groups through measures to improve their economic and educational opportunities In its more aggressive and controversial form, affirmative action required government and companies to hire a specific number of percentage of minority groups the U.S Supreme Court ruled against these laws. Today, the government applies affirmative action only to federal contractors who have lost a discrimination lawsuit. The federal Equal Employment Opportunity Commission (EEOC) enforces this type of redress
Taft-Hartley Act
Act that provides a balance of power between union and management by designating certain union activities as unfair labor practices; also known as Labor-Management Relations Act (LMRA)
Gender-based earnings gap
Gains in education and experience have reduced the female/male wage gap over time Factors that can lower women's average wages: women are likely to bear a disproportionately large share of household responsibilities ( a mother might drop out of the labor force) -> women in their 30s to 40s are likely to have less job experience than men In addition, women with families and children are typically paid about 7% to 14% less than other women of similar education and work experience, meanwhile, married men earn about 10-15% more than single men given comparable education and work experience
Competitive markets and discrimination
Gary Becker pointed out that while competitive markets can allow some employers to practice discrimination, it can also provide profit-seeking firms with incentives not to discriminate If a business is located in an area with a large minority population and refuses to sell to minorities, it will cut into its own profits. If some businesses run by bigoted employers refuse to pay women and/or minorities a wage based on their productivity, then other profit-seeking employers can hire these workers In a competitive market, if the business owners care more about the color of money than about the color of skin, they will have an incentive to make buying, selling, hiring, and promotion decisions strictly based on economic factors.
"see the graph Union Wage Negotiations in notes"
If no labor union existed in this market, then equilibrium (E) in the labor market would occur at the intersection of the demand for labor (D) and the supply of labor (S) However, if the union is able to use its bargaining power to raise the wage to Wu. The result is an excess supply of labor for union jobs. That is, a quantity of labor supplied, Qs is greater than firms' quantity demanded for labor, Qd. A sensible union must recognize that when pushes up the wage, it also reduces the firms' incentive to hire Likewise, at Qd, another situation could be that a firm decides to purchase inputs from non-union producers, rather than producing them with its own highly paid unionized workers, or perhaps the firm moves or opens a new facility in a state or country where unions are less powerful the question for employers is whether increase in wages for union workers = an increase in productivity. If yes, this would cause the demand curve to shift to the right and yield more profits
collective bargaining
Process by which a union representing a group of workers negotiates with management for a contract Facts: 10.7% all U.S workers belong to unions. Occupations in which relatively high percentages of workers belong to unions are the federal government (27.4%) and the opposite goes to agricultural workers (1.3%)
Cause #2: The force of globalization and increased competition from foreign producers
Starting in the 1960s, U.S. carmakers, and steelmakers faced increasing competition from Japanese and European manufacturers. As sales of imported cars and steel rose, the number of jobs in U.S. auto manufacturing fell. This industry is heavily unionized. Not surprisingly, membership in the United Auto Workers, which was 975,000 in 1985, had fallen to roughly 390,000 by 2015. import competition not only decreases the employment in sectors where unions were once strong but also decreases the bargaining power of unions in those cities
Earning Gaps by Race and Gender
a possible signal of labor market discrimination is when an employer pays one group less than another the ratio of wages for black workers - white workers have not changed much since then while the ratio of wages for female - male workers changed little through the 1970s, but has risen substantially since the 1980s
labour union
an organization of workers that negotiate with employers over wages and working conditions. a labour union seeks to change the balance of power between employers and workers by requiring employers to deal with workers collectively, rather than as individuals Supporters of labour unions view them as the workers' primary line of defense against efforts by profit-seeking firms to hold down wages and benefits. While critics of labour unions view them as having a tendency to grab as much as they can in the short term, even if it means injuring workers in the long run by driving firms into bankruptcy or by blocking the new technologies and production methods that lead to economic growth
How does a union affect wages and employment?
because a union is the sole supplier of labour, it can act like a monopoly and ask for whatever wage rate it can obtain for its workers. If employers need workers, they have to meet the union's wage demand.
Cause #3: A reduced desire for unions because of the workplace protection laws now in place
citizens often call on their elected representatives to pass laws concerning work condition, overtime, parental leave, regulation of pensions, and other issues. Unions offer strong political support for these laws aimed at protecting workers, but, IN AN IRONIC TWIST, the passage of those laws then made many workers feel less need for unions
Immigrant
immigrants from Europe were more than 90% of the total in the first decade of the twentieth century, but less than 20% of the total by the end of the century. By the 2000s, about half of U.S immigration came from the rest of the Americas, especially Mexico, and about a quarter came from various countries in Asia In reality, about one-third of immigrants over the age of 25 lack a high school diploma, which puts them in jobs like restaurant and hotel work, janitorial work, etc. This kind of immigration represents a shift to the right in the supply of unskilled labor for a number of jobs, which will lead to lower wages for these jobs. The middle- and upper-income households that purchase the services of these unskilled workers will benefit from these lower wages. However, low-skilled U.S workers who must compete with low-skilled immigrants for jobs will tend to suffer from immigration The disruptive effect is that immigration weighted toward low-skilled workers tends to reduce wages for domestic low-skilled workers the effects on wages of low-skilled workers are kept low because of the legal floor of federal and state minimum wage laws. Another potential disruptive effect is the impact on state and local government budgets. Many of the costs imposed by immigrants are costs that arise in state-run programs, like the cost of public schooling and of welfare benefits. However, many of the taxes that immigrants pay are federal taxes like income taxes and Social Security taxes. Many immigrants do not own property (homes and cars), so they do not pay property taxes, which are one of the main sources of state and local tax revenue. However, they do pay sales taxes, which are state and local, and the landlord of property they rent pay property taxes. According to the nonprofit Rand Corporation, the effects of immigration on taxes are generally positive at the federal level, but they are negative at the state and local levels in places where there are many low-skilled immigrants
DREAM Act
legislation that offers a path to citizenship for illegal immigrants brought to the United States before the age of 16 It failed to be recognized at the federal level
Cause #1: The shift from manufacturing to service industries
manufacturing jobs rose to 19 million by the late 1970s and then declined to 17 million in 2013 Over time, unions were stronger in manufacturing than in service industries, the growth in jobs was not happening where the unions were.
Cause #4: U.S. legal environment that makes it relatively more difficult for unions to organize workers and expand their membership
the United States government strongly encouraged forming unions during the early 1940s in the belief that unions would help to coordinate the all-out production efforts needed during WWII. However, after WWII came the passage of the Taft-Hartley Act of 1947, which gave states the power to allow workers to opt out of the union in their workplace if they so desired. This law made the legal climate less encouraging to those seeking to form unions =, and union membership levels soon started declining
Race-based earnings gap
the remaining racial gap seems to have anything to do with continuing differences in education levels and to the presence of discrimination
