Labor Economics
Labor Unions - Part One
Sources: Morgan O. Reynolds (history, etc.), common knowledge, text books)
The first part of this lecture is mostly from “American Labor Unions” by Morgan O. Reynolds
Interesting to note that economists who view cartels and other business combinations as terrible – uncompetitive or monopolistic do not view the same type of behavior in labor unions as detrimental.
Stems from a redistribution theory – goes way back – that it is OK for the laborers to have “power” but never OK for a business owner to have “power.”
Unions claim to improve the “plight” of the masses.
Have unions been the catalyst behind:
Some say yes, some say no – and others say 2-4 are not good anyway.
Let’s first distinguish between:
“Competitive Unions”-
A competitive union, like any successful cartel in a free market, must meet certain criteria – which is why we don’t see many:
1.
2.
And also there is always an incentive to cheat. Usually the Nash Equilibrium or prisoner’s dilemma is used here.
And then there are:
“Monopoly Unions” –
Historical Background:
The difficulties of organized labor in the marketplace have gone along with an erosion of organized labor’s influence in the political arena.
The U.S. economy has always been predominantly nonunion.
Pre-1850: Unions largely failures.
Unions originated among the educated, urban workers in such high-income crafts as printing and other skilled trades.
This is consistent with economic theory. Unions were mostly groups of craftsmen because they met the conditions for a cartel to organize –
In the modern era unions are still found in crafts and industries where the labor market is concentrated or regulated by government rather than in decentralized industries such as wholesale and retail trade, services and agriculture.
1850-89: “Unions and unionists were a diverse lot.”
Secret societies, etc.
Knights of St. Crispin
Molly Maguires
Knights of Labor – most famous – but very diverse. Secret initiations did not keep factions together.
Collective protest – high pitched emotion. Union violence. Public image of unions and organized labor was not good.
Individualism and liberty – not collectivism – were the ethic of the day.
1890-1917: One form of unionism emerges as a survivor in this unfavorable environment.
Business unionism:
Accept capitalism and achieve gains within the system.
Unions in a single craft could survive in a private property market order by banding similar workers together and bargaining for their services as an undifferentiated lump (collective bargaining).
The tradition of 20th century American unionism was largely the work of the American Federation of Labor (AFL) and especially its leader – Samuel Gompers.
Founded in 1881 as a federation of national trade unions – each composed of a particular craft – each very autonomous.
These competed with the more socialist unions – Industrial Workers of the World (IWW) and the Socialist Labor Party. The IWW (Wobblies) organized in 1905 – general workers union – also known as radical, syndicalists – “One Big Union” – basically gone by the end of WWI.
1917 – 1933: By 1920s craft unions became out-of-date due to mass production technology, etc.
WWI seemed to be pivotal for government policy toward unions. Doubled union membership to 5 million (12% of labor force) by 1920.
The greatest union growth occurred in industries directly managed by government, such as the railroad and shipbuilding industries.
Some of the federally ordered employee organizations later became company unions.
After war time orders were filled – end to the federal government forcing companies to recognize unions as exclusive agents of employees – labor market was deregulated.
Although unions gained membership during WWI and aftermath - Membership decreased by 1.5 million by 1923. By 1925 – 7% of labor force.
Union losses concentrated in the government run war industries – thereby suggesting how dependent unions were on intervention for membership.
By 1933, the Great Depression had reduced membership to 2.8 million and unions were declining.
Since 1933: Industrial union (organization on an industry-wide basis).
Congress of Industrial Organizations, or CIO, was a federation of unions that organized workers in industrial unions in the U.S. and Canada from 1935 to 1955.
The New Deal legislation of the 1930s reversed the decline and created the framework that persists today. “monopoly unions”
The first legal help for unions was the:
Railway Labor Act of 1926 (Watson-Parker Act) – mandated collective bargaining on all interstate railroads and set up machinery for government intervention in labor disputes.
Declared constitutional in 1930.
Six other pieces of labor legislation passed during the Great Depression:
1.) Davis-Bacon Act – prevailing wage.
2.) Public Contract Act (Walsh-Healey Act)
3.) Fair Labor Standards Act
[“Authorized direct federal fixing of minimum wage rates, maximum working hours and other working conditions.]
4.) Norris-La Guardia Anti-Injunction Act – 1932 – (restricted the power of federal courts to grant injunctions against unions engaged in peaceful strikes) – see below.
5.) National Industrial Recovery Act – (1933) – Section 7 “right to organize and bargain collectively through representations of their own choosing.”
Eventually declared unconstitutional by the supreme court, etc.
But taking on the same language – was the --
6.) National Labor Relations Act of 1935 (Wagner Act) – Granted labor the statutory right to organize and strike. Upheld by Supreme Court in 1937. Recorded as legal entities. (Defined unfair labor practices)
[Empowered labor unions to fix terms of employment]
Provisions:
1.) Require employers to recognize a union and negotiate with it after an election under provision of Wagner Act.
2.) National Labor Relations Board (Est.) had the right to conduct representational elections among employees in a bargaining unit to determine the exclusive bargaining representation for those employees.
Basically gave labor privileges and immunities under the law -- inequality under the law.
Take for example the Norris-La Guardia Anti-Injunction Act – signed by Hoover on March 23, 1932:
Three-fold purpose of the act to:
1.) declare non-union agreements (so-called yellow-dog contracts) – contracts which potential employees had to agree not to join a union for employment; unenforceable in U.S. Courts.
2.) relieve labor organizations from liability for wrongful acts under anti-trust law,
3.) give unions immunity from private damage suits
In other words – to allow unions to be freer of the constraints that bind businesses.
Result – number of strikes doubled between 1932 and 1933 to 1,695 and then continued climbing to 1930s peak of 4,740 in 1937.
**Note – this was during a period of deep depression and massive unemployment conditions that normally diminish strike activity.
.
AFL-CIO merged in 1955
Immunity under the law for labor unions has not stopped since the 1930s.
For example – the Landrum Griffin Act or Labor Market Reporting and Disclosure Act in 1959 (to modify the Wagner Act which created the National Labor Relations Board): Sec. 602a
“It shall be unlawful to carry on picketing on or about the premises of any employer for the purposes of, or as part of any conspiracy or in furtherance of any plan or purpose for, the personal profit or enrichment of any individual (except a bona fide increase in wages or other employee benefits) by taking or obtaining any money or other thing of value from such employer against his will or without his consent.”
Legislation Against Union Power: The Taft-Hartley Act (1947):
Gave states the right to pass “right-to-work” laws - the right of employees to decide for themselves whether or not to join or financially support a union.
More basic types of union laws:
Right-to-Work laws prohibit union shops (make union membership compulsory in a particular plant once a new worker has held the job longer than at most a few months). Legal under Taft-Hartley but state laws take precedence.
Agency shop – worker who declines is obliged to pay the union a fee in return for what the union does. Also called fee-for-service agreement (idea – union is the worker’s agent). A limited exemption to the Agency Shop requirement exists for employees with bona-fide religious objections to joining or financially supporting any public employee organization.
Also similar are now called - Dues Shop - employees pay dues or their equivalent to the union, but may not be fired if he or she fails to join or maintain membership in good standing in the union for any reason other than failure to pay such dues.
Closed shop – a shop in which only union workers are employed and in which only union members are accepted for employment. Outlawed with Taft Hartley in 1947.
Open shop – a shop in which employment is offered without references to membership or non-membership in a labor union.
*Some states have had union shop banned – but there is often a “maintenance of membership agreement” – when contract formed all union members must remain in union until end of contract.
Total union membership rose to 7.2 million by 1940 – then to 13.2 million by 1945. By the early 1950s – union membership peaked at 25% of the civilian labor force.
Union Membership – Now and Then
1956 – 25%
1960 – 23.6%
1965 – 22.2%
1970 – 22.6%
1975 – 21.8%
1980 – 20.9%
1985 – 18.0%
1990 – 16%
1995 – 14.9%
2000 – 13.5%
2005 – 12.5%
2006 – 12%
2007 – 12.1%
2008 – 12.4%
(source: BLS)
Unions were on the decline – increasing slightly lately. Why?
Reynolds – answer “lies in the realm of ideas.”
Collectivist ideas were the wave in 1930s through 1950s. Ideas rested upon the belief that pro-union rules rectify a labor market imbalance so as to create a level playing field on which labor and capital can fight it out more “fairly.”
Maybe the slight increase now is also due to ideas? Or to Union recruitment efforts?
SEE BELOW FOR STATS
FROM THE BLS: Some highlights from the 2008 data are:
--Government workers were nearly five times more likely to belong
to a union than were private sector employees.
--Workers in education, training, and library occupations had the
highest unionization rate at 38.7 percent.
--Black workers were more likely to be union members than were
white, Asian, or Hispanic workers.
--Among states, New York had the highest union membership rate
(24.9 percent) and North Carolina had the lowest rate (3.5 percent).
Membership by Industry and Occupation
The union membership rate for public sector workers (36.8 percent)
was substantially higher than the rate for private industry workers
(7.6 percent). Within the public sector, local government workers had
the highest union membership rate, 42.2 percent. This group includes
many workers in several heavily unionized occupations, such as teachers,
police officers, and fire fighters. Private sector industries with
high unionization rates include transportation and utilities (22.2 per-
cent), telecommunications (19.3 percent), and construction (15.6 per-
cent). In 2008, unionization rates were relatively low in financial
activities (1.8 percent) and professional and business services (2.1
percent). (See table 3.) http://www.bls.gov/news.release/union2.t03.htm
Among occupational groups, education, training, and library occupa-
tions (38.7 percent) and protective service occupations (35.4 percent)
had the highest unionization rates in 2008. Sales and related occu-
pations (3.3 percent) and farming, fishing, and forestry occupations
(4.3 percent) had the lowest unionization rates. (See table 3.)
Demographic Characteristics of Union Members
The union membership rate was higher for men (13.4 percent) than
for women (11.4 percent) in 2008. (See table 1.) The gap between
their rates has narrowed considerably since 1983, when the rate for
men was about 10 percentage points higher than the rate for women.
Between 1983 and 2008, the union membership rate for men declined
by 11.3 percentage points, while the rate for women declined by 3.2
percentage points.
In 2008, black workers were more likely to be union members (14.5
percent) than workers who were white (12.2 percent), Asian (10.6
percent), or Hispanic (10.6 percent). Black men had the highest
union membership rate (15.9 percent), while Asian men had the lowest
rate (9.6 percent).
By age, union membership rates were highest among workers 55 to 64
years old (16.6 percent) and 45 to 54 years old (16.0 percent). The
lowest union membership rates occurred among those ages 16 to 24 (5.0
percent). Full-time workers were about twice as likely as part-time
workers to be union members, 13.7 compared with 6.7 percent. (See
table 1.) http://www.bls.gov/news.release/union2.t01.htm
Union Representation of Nonmembers
About 1.7 million wage and salary workers were represented by a
union on their main job in 2008, while not being union members them-
selves. (See table 1.) About half of these workers were employed
in government. (See table 3.) http://www.bls.gov/news.release/union2.t03.htm
Earnings
In 2008, among full-time wage and salary workers, union members had
median usual weekly earnings of $886 while those who were not repre-
sented by unions had median weekly earnings of $691 – 77.9% of the union wage. (See table 2.) http://www.bls.gov/news.release/union2.t02.htm
The difference reflects a variety of influences in addition to cover-
age by a collective bargaining agreement, including variations in
the distributions of union members and nonunion employees by occupa-
tion, industry, firm size, or geographic region.
Union Membership by State
In 2008, 29 states and the District of Columbia had union member-
ship rates below that of the U.S. average, 12.4 percent, while 20
states had higher rates, and 1 state had the same rate. All states
in the East North Central, Middle Atlantic, and Pacific divisions
reported union membership rates at or above the national average, and
all states in the East South Central and West South Central divisions
had rates below it. Union membership rates rose over the year in 26
states and the District of Columbia, declined in 20 states, and were
unchanged in 4 states. (See table 5.) http://www.bls.gov/news.release/union2.t05.htm
Six states had union membership rates below 5.0 percent in 2008,
with North Carolina having the lowest rate (3.5 percent). The next
lowest rates were recorded in Georgia (3.7 percent), South Carolina
(3.9 percent), Virginia (4.1 percent), Texas (4.5 percent), and Lou-
isiana (4.6 percent). Three states had union membership rates over
20.0 percent in 2008--New York (24.9 percent), Hawaii (24.3 percent),
and Alaska (23.5 percent).
The largest numbers of union members lived in California (2.7 mil-
lion) and New York (2.0 million). About half (8.0 million) of the
16.1 million union members in the U.S. lived in just 6 states (Cali-
fornia, 2.7 million; New York, 2.0 million; Illinois, 0.9 million;
Pennsylvania, 0.8 million; Michigan, 0.8 million; and Ohio, 0.7 mil-
lion), though these states accounted for only one-third of wage and
salary employment nationally.
State union membership levels depend on both the employment level
and union membership rate. Texas, with 449,000 union members in 2008,
had less than one-quarter as many union members as New York, despite
having over 1.8 million more wage and salary employees. Similarly,
North Carolina and Hawaii had a comparable number of union members
(132,000 and 136,000, respectively), though North Carolina's wage and
salary employment level, at 3.8 million, was almost seven times that
of Hawaii at 562,000.