Bài giảng Labour Market Economics - Chapter 16 Union Impact on Wage and Nonwage Outcomes

Chapter SixteenUnion Impact on Wage and Nonwage Outcomes Created by: Erica Morrill, M.Ed Fanshawe College1© 2002 McGraw-Hill Ryerson Ltd.Chapter FocusImpact unions have on wagesEffect on nonunion wagesIncrease or decrease level of income inequalityEconomic inefficiencyEffects on labour productivityEffect on profits of firm2© 2002 McGraw-Hill Ryerson Ltd.Union Wage ImpactTwo sector model higher wages associated with unionization workers move to the unorganized sector depressing wagesthe magnitude of the union-nonunion wage differential depends on:elasticity of labour demand in each sectorthe ability of union to raise wagesthe elasticity of labour supply3© 2002 McGraw-Hill Ryerson Ltd.Figure 16.1 a Two-Sector Model of General EquilibriumWEWESector ASector BDADBSASBW0EA1WuEA0abEB0S’BWNEB1aW04© 2002 McGraw-Hill Ryerson Ltd.Figure 16.1 b Union Wage Impact with a Threat EffectWESector B (Threatened nonunion)SBEB0S’BaW0DBWESector C (Unthreatened nonunion)SCEC0S’CaW0DBbWCNEC1S’’CbWBNEB15© 2002 McGraw-Hill Ryerson Ltd.Figure 16.1 c Union Wage Impact With a Vertical Contract CurveWEWESector A (Union)Sector B (Nonunion)DADBSASBW0WuEA0EB1WN=W0Cd6© 2002 McGraw-Hill Ryerson Ltd.Figure 16.1 d Union Wage Impact with a Wait UnemploymentWESector A (Union)S’AEA0SAcW0DBWESector B(Nonunion)SBEB0S’’BbW0DBcWNEB1S’BWuEA17© 2002 McGraw-Hill Ryerson Ltd.Contrary PerspectiveNonunion firms raise wages to compete with the unionized firmsEmployers raise wages to reduce the threat of unionIgnores the supply influx of workers who cannot get jobs in unionized sectorenables employers to offer lower wagesreduces the necessity to compete for labour8© 2002 McGraw-Hill Ryerson Ltd.Problems in Measuring the Union Wage ImpactControl for skill differenceslabour qualitycharacteristics of workersjob assignmentsDifficult to fully control for differences in productivity-related factors9© 2002 McGraw-Hill Ryerson Ltd.Empirical Evidence on Union Wage ImpactEarly studiesvariation thought to be due to methodological differencesSimultaneity issues of status and impacthigher wages made unionization more likelyimpact is smaller when causality is taken into accountLongitudinal StudiesDifferential smaller than cross-sectional data10© 2002 McGraw-Hill Ryerson Ltd.Variations in the Union Wage ImpactDifferential between unions and nonunions vary acrossfirmsindustriesworkersDifferential is larger when the jurisdiction is organized11© 2002 McGraw-Hill Ryerson Ltd.Union Power Elasticity of demandsubstitution reduces the elasticity of demandThreat Effectraise wages to discourage unionization12© 2002 McGraw-Hill Ryerson Ltd.Union Wage ImpactEvidence of a wage differential15% in CanadaImpact of higher wages in union on nonunion sector is inconclusiveWage differences for productivity related characteristics are smaller than in nonunionDifferential higher in private sectorsmaller firmsunionized jurisdictionsrecessions13© 2002 McGraw-Hill Ryerson Ltd.Unions, Wage Dispersion and Distribution of IncomeLess wage dispersion among unions than nonunionsUnionsreduce differentials among workersstandardize wages of similar workersraise wages of those at lower end of pay scale14© 2002 McGraw-Hill Ryerson Ltd.Figure 16.4 The Union Wage Impact and Allocative InefficiencyWEWEUnion sectorNonunion sectorWUW000EN0EN1EU0EU1cabWNW0dgfe15© 2002 McGraw-Hill Ryerson Ltd.Union Impact on Resource Allocation and Economic WelfareAltering wages and employment affect the allocation of resources Deadweight loss - reduction in the total outputMisallocation of labourAffects other resource allocations16© 2002 McGraw-Hill Ryerson Ltd.Real Output LossUnion sector consumers pay for the output above what workers are required to produce Nonunion sectoroutput increase is valued less in the nonunion sector than in the union sector 17© 2002 McGraw-Hill Ryerson Ltd.Union Impact on Nonwage OutcomesUnions tend to have a greater impact on fringe benefitsReasons all parties prefer fringe benefits as a form of compensationworkers-not taxed or deferred taxes,economies of scale and administrative simplicityemployers-facilitate planning/operation,work incentives, reduce turnovergovernment-reduce pressure for government spending18© 2002 McGraw-Hill Ryerson Ltd.Union ImpactWorking conditionsTurnover and mobilityProductivity and profitability and investment19© 2002 McGraw-Hill Ryerson Ltd.End of Chapter Sixteen20© 2002 McGraw-Hill Ryerson Ltd.