South-Western College Publishing - Economics  
When You're Fighting for Jobs, "International Brotherhood" May Be Just Words
Topic Labor Markets
Key Words unions, decline, Employment Free Choice Act, NLRB
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Reference ID: A151827124

News Story The number of unionized workers in the US fell to 13% of the workforce by 2005, and there's no sign that participation rates will rise again, unless unions are able to get what their members want. Or so they think

Unions are concerned about a group of cases being argued before the National Labor Relations Board (NLRB), which regulates union activity. The so-called Kentucky River cases will serve to help to re-interpret the definition of "workers in a supervisory role." This is significant, as those workers classified as supervisory are not allowed to organize into a union. Such a ruling would hurt the available member pool for unions; in fact, the Economic Policy Institute and AFL-CIO estimates that up to 8 million workers will lose the right to organize, including 2 million current union workers. Since this represents about 13% of the current level of unionized workers in the US, the losses could be significant.

Unions are also focusing on the Employee Free Choice Act in Congress. This act would reduce the incentive for firms to intimidate workers from joining unions, would mandate third-party arbitration in the event that agreements cannot be reached, and would eliminate the secret ballot as a prerequisite for union recognition. Unions have pledged to fight the reelection of any Congressperson who does not come out in favor of this bill.

It's the rejection of the secret ballot that seems most at odds with democracy. Unions want to be recognized on a "card-check" basis--recognition as long as a majority of workers have signed a card, instead of having voted in a secret ballot. Secret ballots were the chief means of union ratification back in the days when companies would wage campaigns against unionization. Unions believe that workers' right to unionize should be a public choice, based on card-checks rather than on secret ballots.

Economists in general aren't sure who--or what--is to blame for falling union memberships. Some believe that it's a result of company pressures to abandon unions. Others believe that the job market is changing so much that it's no longer in an individual's best interests to join one. This is reinforced by noting that unions have declined in all sectors of the economy, including the service sector, although it is true that unions have been relatively less successful in unionizing the service sector than it was in unionizing manufacturing. If unions can't protect against potential job loss, why bother paying the dues? Further, working conditions at most jobs have become safer and more humane since the days when unions were a necessary protection for workers.

But is joining a union what needs to happen? Unionizing does help eliminate inequality, but unions flatten pay ranges rather than expanding them. Human capital theory suggests that individuals who are more skilled at a particular job will receive higher compensation as a result; that's why people go to college. While unions do serve to increase wages for all workers, those wages are increased together. Solidarity implies that, even if one worker may be more skilled than another, they will receive the same pay scale for the same job. Wages do increase, but all wages increase together: think of a spectrum of wages that is increasing but shrinking in size as it increases. Non-union shops tend to have more inequality, but far greater increases in pay for the most productive workers. And that may be part of the reason for union decline, too...more productive workers just don't see the benefit in joining the union.

Discussion Questions:
1. European nations have managed to do an exceptional job of unionizing service workers - Denmark has unionized 90% of its service sector - but the U.S. unions have had no such luck. Why do you think this is the case?
2. Consider a unionized shop, and a non-unionized shop. What can you say about the elasticity of labor supply of a unionized shop relative to the non-unionized shop? What can you say about the elasticity of labor demand of a unionized shop? Why? Draw a graph of supply and demand for labor to illustrate your answer.
3. It has been shown that unions have a difficult time unionizing women in the workforce. Why do you think this is the case? Consider the costs and benefits of female union workers in your answer.
Multiple Choice/True False Questions:
1. The unionized percentage of the workforce has declined for all of the following reasons except:
  1. Manufacturing has gone overseas
  2. Workers are seeing greater benefits in unionization
  3. People no longer have job security
  4. More productive workers could do better without a union's presence
2. The Kentucky River cases raise issues about the abilities of unions to consider unionizing. This is primarily because:
  1. Demand for unionized workers would fall as a result.
  2. Demand for unionized workers would rise as a result.
  3. Supply of unionized workers would fall as a result.
  4. Supply of unionized workers would rise as a result.
3. In a dynamic, increasingly globalized, economy, it can be said that
  1. The perceived benefits from unionizing are falling
  2. The perceived benefits from unionizing are rising.
  3. The perceived costs of unionizing are rising.
  4. A and C
Source "The Limits of Solidarity." The Economist. 21 September 2006.
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