Labor Unions: Membership, Wages, Competition, and Performance in the Private and Public Sectors

Transcription

1 Labor Unions: Membership, Wages, Competition, and Performance in the Private and Public Sectors Barry Hirsch Economics 8220 Human Resources & Labor Markets April

2 1. The labor demand curve D L as a wage-member tradeoff constraint a. Starting point for understanding union bargaining power and the economic analysis of unions is the labor demand curve D L b. The demand curve can be thought of as the constraint facing unions, with the employment level determined by the demand level (interacting with labor supply) and the elasticity determining the W-E (member) tradeoff. The elasticity is determined by substitution in consumption and production (auto industry and other examples). c. Unions prefer policies and contractual arrangements that shift out D L and that reduce labor demand elasticities d. Strikes are rare but the strike threat is a primary source of bargaining power and is dependent on the ease of substitution by consumers, firms, and workers 1

3 2. National Labor Relations Act (NLRA) legal process and union governance a. Summarize legal process and labor law (NLRA, NLRB, petitions, representation elections). i. The NLRA is the body of labor law based on the NLRA/Wagner Act (1935), Taft- Hartley (1947), and Landrum-Griffin (1959) plus NLRB rulings/interpretation of law ii. Current: 30%+ card check (signing) to get NLRB supervised secret ballot representation election. A 50%+ yes vote for union establishes union as workers exclusive bargaining agent. Employer must bargain in good faith with union. A first contract may or may not result. iii. Employee Free Choice Act (EFCA). Favored by Democrats and President Obama in Same as process above if card check signatures less than 50%. Three new provisions. (1) Majority card check produces NLRB recognition of union and eliminates secret ballot election. (2) If contract not signed within 120 days, a first contract (two years) is determined through mandatory arbitration. Thus, majority card check is sufficient for both union recognition and first contract. (3) Increase in penalties for employer unfair labor practices. Politically dead. b. Union governance (formalized/contractual workplace governance; limits discretion of managers) vs. nonunion governance (employer discretion subject to market constraints) 3. Private sector union rise and long-run decline. Spurt from 15% to 35% occurred over brief period after Will argue that decline is largely a competition story. Contrast the private and public sectors [show figures] Compilations from CPS for

4 1983 Total 20.1% Private 16.5% Public 36.7% 1993 Total 15.8% Private 11.1% Public 37.7% 2003 Total 12.9% Private 8.2% Public 37.2% 2011 Total 11.8% Private 6.9% Public 37.0% 3

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6 1983 Private Members million Public Members 5.74 million 1993 Private Members 9.58 million Public Members 7.02 million 2003 Private Members 8.45 million Public Members 7.32 million 2011 Private Members 7.20 million Public Members 7.55 million 4

7 1973 Emp 20.1 m. %Mem 38.9% 1983 Emp 19.1 m. %Mem 27.8% 1993 Emp 18.7 m. %Mem 19.2% 2003 Emp 16.1 m. %Mem 13.5% 2011 Emp 13.6 m. %Mem 10.5% 5

8 1973 Emp 4.13 m. %Mem 39.5% 1983 Emp 4.11 m. %Mem 27.5% 1993 Emp 4.64 m. %Mem 20.0% 2003 Emp 7.13 m. %Mem 16.0% 2007 Emp 8.56 m. %Mem 13.9% 2011 Emp 6.24 m. %Mem 14.0% 6

9 Why the Decline in Private Sector Unionization? 1. Structural changes in the type of jobs Shifts in employment away from industries, occupations, and locations highly unionized historically. Shift toward those with traditionally low union density. Much of the structural change is driven by technological change and globalization. IT and technological change have been labor saving in middle-class jobs with routinizable (programmable) tasks, including many jobs previously unionized. Important, but explains only a modest proportion of union decline, perhaps a quarter to a third. 2. The competitive process Unions increase wages and benefits, but this is not fully offset by productivity increases. Thus, union companies tend to be at a competitive disadvantage, having lower profits, investment, and growth. Thus, union density declines over the long run. Globalization and other forms of competition speed up the process of union decline. Globalization movement of goods (trade), capital (investment), and people (immigration) across borders. All have increased over time, increasing competitiveness and dynamism. Labor costs (relative to productivity) are increasingly in competition. Increased competitiveness and dynamism (rapid change), e.g., automotives, communications, etc. have limited union density and bargaining power. Union governance is deliberate (formalized) and reduces managerial discretion. Does this place union companies at a disadvantage the more fast-changing the economic environment? 7

10 3. Ability to organize In an accounting sense, the reason for declining union density is that organizing rates have been insufficient to offset prevailing levels of job destruction and new job creation. worker sentiment management opposition labor law (and public support/opposition for labor law changes) employment law protections may reduce union demand among workers These explanations not independent of structural and competitive explanations. 4. Future for private sector unions? As long as economy remains highly competitive and dynamic, it s hard to see there being a strong resurgence in traditional (adversarial) unionism But it s hard to predict the future more of the same is likely, but we are often surprised If worker-based institutions are to flourish, they must add value and permit companies to perform at levels similar to those obtained under evolving nonunion governance norms We now turn to the public sector, with far less exposure to the factors accounting for private union decline. Public sector churn in firms (cities and states) and in jobs far lower than in the private sector. We first examine public sector employment and membership trends 8

11 1983 Emp 2.4 m. %Mem 19.4% %Cov 29.4% 1993 Emp 2.6 m. %Mem 17.0% %Cov 25.7% 2003 Emp 2.4 m. %Mem 18.5% %Cov 24.1% 2011 Emp 2.9 m. %Mem 18.3% %Cov 23.4% 9

12 1983 Emp t. %Mem 74.2% %Cov 83.5% 1993 Emp t. %Mem 71.6% %Cov 78.9% 2003 Emp t. %Mem 65.9% %Cov 72.7% 2011 Emp t. %Mem 68.2% %Cov 73.3% 10

13 1983 Emp 3.8 m. %Mem 28.2% %Cov 35.9% 1993 Emp 4.9 m. %Mem 30.9% %Cov 35.8% 2003 Emp 5.6 m. %Mem 30.3% %Cov 34.2% 2011 Emp 6.3 m. %Mem 31.5% %Cov 34.9% 11

14 1983 Emp 8.7 m. %Mem 42.2% %Cov 51.0% 1993 Emp 10.2 m. %Mem 43.4% %Cov 49.4% 2003 Emp 10.8 m. %Mem 42.6% %Cov 46.7% 2011 Emp 10.6 m. %Mem 43.1% %Cov 46.6% 12

15 1983 USPS 0.8% Federal 2.7% State 4.3% Local 9.9% Total 17.7% 1993 USPS 0.8% Federal 2.5% State 4.7% Local 9.7% Total 17.7% 2003 USPS 0.7% Federal 2.0% State 4.6% Local 8.8% Total 16.1% 2011 USPS 0.6% Federal 2.3% State 5.0% Local 8.5% Total 16.3% Note: Federal excludes USPS. Source: CPS ORG files,

16 Union/Nonunion Wage Differentials within the Private and Public Sectors Public sector differentials lower than in private sector. Gradual decline since mid-1990s estimates: private.243 log points public.094 log points 1993 estimates: private.230 log points public.126 log points 2003 estimates: private.198 log points public.111 log points 2011 estimates: private.183 log points public.095 log points Source: B.T. Hirsch & D.A. Macpherson, Union Membership and Earnings Data Book, BNA,

17 How Have Average (Mean) Public vs. Private Wages Grown Over Time? Pub/Priv Wage Ratio 1983: : : 1.16 Public Wages (2011$) 1983: $ : $ : $24.03 Private Wages (2011$) 1983: $ : $ : $20.77 In short, a modest rise in relative public sector pay during the 2000s, but not high historically. Note: These are average wages and do not control for worker, job, or location characteristics. 15

18 Evaluation of Public-Private Wage and Benefits Comparability Punch-line: With exception of USPS, we do not observe large average public/private wage premium State and local public workers have wages somewhat lower than private workers with similar measured attributes. The controls matter (e.g., union, size) and job comparisons are difficult. Most important difference is not level of pay but a more compressed distribution in public sector. Lower skill workers/jobs are paid more generously in public sector Higher skill workers/jobs are paid less generously in public sector Public sector benefits higher than in private sector, but the valuation of benefits and state liabilities is difficult. Lower expected returns on investment imply that public pension funds are more seriously underfunded than indicated by legally required measures. Defined benefit (DB) pensions more prevalent in public sector; these benefits accrue to longtenured but not short-tenured workers. DB pensions provide strong incentives for workers not to leave early (may make sense given firm-specific nature of public human capital) and incentives not to stay late in career (which may not make sense). By standard estimates federal pay somewhat higher than private. But estimates sensitive to treatment of occupation and accounting for private area wage differences (DC high wage/price area). Estimation issues in wage comparability analyses: Job tasks. Choice of controls (union status). Etc. Comparability analysis should look not just at wages, but at benefits, job tasks, working conditions, job security, quit rates, job queues, wage gains/losses shifting between public and private sectors. 16

19 Union vs. Nonunion Governance, Dynamism, and Competition in the Private Sector Nonunion governance provides high degree of management discretion, constrained by employer norms; government regulations/mandates; and incentives and constraints produced by market forces (financial viability and need to attract and retain qualified employees). Union governance subject to the above constraints, plus: formalized governance structure that relies on collective bargaining, explicit contracts, and structured channels for worker voice; reduced managerial discretion. CB contracts permit considerable employer discretion in daily operation of a workplace, discretion/flexibility is constrained with substantive changes in wages, pay methods, benefits, job assignments, working conditions requiring negotiation with union. Union governance by design is deliberative and often slow to respond to change. Sluggish governance is partly due to union democracy. Rank and file must approve union leaders and negotiated agreements. Union governance may be advantageous in static or slow-moving economic environments, but is less well-suited the more dynamic and competitive the economic environment. Decline in private sector unionism has coincided with increasing competiveness and dynamism. 17

20 Implications of Deliberative Union Governance for the Public Sector State and local governments are fixed in location and over time (i.e., less dynamic). They face less competition than do private companies. By design, governance is political and deliberative. Optimal governance in the public sector may well differ from that in the private sector Union and nonunion public sector workplaces often look a lot more alike than do private sector union versus nonunion workplaces. Union governance is less of a big deal in the public sector. Public sector representation provides a collective voice for workers that is often effective and useful (or not) in improving the workplace and quality of governance. It can place checks on arbitrary and inefficient administrative and public managerial behavior (or not). Union representation can be particularly appropriate for workforces with career or longtenured jobs, common to the public sector (and rightly so). Most public workers care deeply about their mission and the public good; a vehicle for employee voice is essential. Major caveat: Public unions influence the political process, both electoral outcomes and public policies. Ideally, one would want to limit or isolate public union political influence while at the same time retaining the positive roles they can and often do play in public workplaces. It is not so obvious how to do this. Even absent full CB rights (as the case in the federal government and in many states), public sector representation can provide limited voice for workers. Public unions have influence absent formal collective bargaining over wages and benefits (e.g., NC teachers, federal workers). 18