South-Western College Publishing - Economics  
Unions Dismembered
Subject Unions, Union Membership
Topic Labor Markets
Key Words Union, Strike, Outsourcing, Technology, Union Dues
News Story

The United Auto Workers (UAW) is often complimented for its effectiveness in bargaining, its lack of violence and corruption, and its flexibility in the face of new economic realities.

However, everything is far from rosy. It is losing members because union jobs are disappearing. Although it had 1.5 million members in 1979, it has only half that number now. Even with a successful compromise in the General Motors strike, the result is likely to be the protection of the jobs of senior members, but the loss of other jobs due to cost-cutting through more outsourcing, production abroad, and the use of new technology. Many GM workers will retire in the next few years, adding to the membership loss. Union dues have fallen by 42 percent in real terms in 20 years. The UAW is recruiting in 34 industries to maintain membership and dues.

Other unions are facing the same trends. The percentage of workers who are unionized is 14 percent, down from 39 percent in 1954. Business is increasingly in the lesser-unionized service sector, in the South and West, engages in outsourcing, and uses labor saving technology. Government regulations now perform many union functions. One of the few encouraging signs is that labor has won significant strikes at UPS and American Airlines. (Updated October 15, 1998)
Questions

1. Why might workers demand union representation? Think of some of the determinants of product demand. Based on the news story, can you explain why the demand for union services may have declined?

2. What factors affect the supply of union services? According to the news story, what are unions doing to increase the supply of union services?

3. Draw a graph of the market for union services in which the axes represent the price of union services (dues) and the quantity of union services. Add a demand curve and a supply curve. Show an initial equilibrium. Shade in the area representing revenue.
a) Show the effect of the reduced demand for union services and a smaller increase in supply on the dues rate, the amount of union services provided, and the revenues from dues.
b) Use your diagram to explain the trends in union membership and dues income.
Source Del Jones, "UAW faces cloudy future", USA Today, June 17, 1998

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