Unions Go Hi-Tech
Subject Unions
Topic Labor Markets
Key Words Immigration, illegal immigration, resources, worker shortage, recessionInternet employees, layoffs, stock options, workers, job security, pay, working conditions, unions, sick-out, raises
News Story

Internet employees were once the millionaires or hoped to be in the future. However, as financing for dot-coms has dried up, so layoffs have increased, and stock options have diminished in value. Suddenly, workers in online firms care more about job security, pay and working conditions.

Some, especially support staff, are turning to unions. For example, at Etown.com in San Francisco, service representatives are voting on whether to join the Northern California Media Workers Guild. They say that promises of pay raises were not kept, that the employees were not listened to, and following a sick-out to protest, four were fired. Management claims that wages are competitive, the workweek is fixed at 40 hours, and that there is an open-door policy. At Amazon.com, 450 headquarters customer service representatives and 5000 workers at eight distribution centers are contemplating joining an affiliate of the Communication Workers of America because of the prospect of the distribution centers moving to low-cost locales, and the attendant job insecurity.

Some observers are worried that if unionization is successful, the same employee relations problems that occur in the Old Economy may begin to affect the New Economy.

(Updated January 1, 2001)

1. Draw diagrams of the labor market for customer service representatives in the hi-tech industry and at Etown.com specifically.
a) At Etown.com, management alleges that wages are competitive. Assuming that this is true, show the equilibrium wage and employment level in the market and in the firm.
b) If unionization is successful at Etown.com, the power of the union may result in an increase in the wage rate, independent of supply and demand. Show such a wage rate on your diagram.
c) How might workers at Etown.com suffer as a result? Refer to your diagram. On what would the magnitude of the problem depend?
d) On balance, would unionization benefit the employees of Etown.com? Explain why or why not.
2. In some cases, unionization can have positive effects for companies, perhaps increasing productivity by minimizing conflicts at work and suggesting improvements, or reducing turnover costs by offering disgruntled workers avenues for resolving grievances.
a) Which curve on your diagram would this affect? Why?
b) On your diagram, show the implications for the equilibrium wage and employment levels.
3. Some observers fear that unions may cause employee relations problems. It may be, for example, that management at Amazon.com is unable to trim the numbers of distribution center workers for fear of union action.
a) In a new set of diagrams representing the labor market for distribution workers in hi-tech firms and at Amazon.com in particular, show the effect of downsizing (if management were to be successful) on the curves and on wages and employment. Explain what you have drawn.
b) If the union were successful, what would happen to the curves and thereby wages and employment?
c) On balance, would a union benefit distribution workers at Amazon.com? Explain.
Source Jon Swartz, "Online firms may get a blast from past: unions," USA Today, November 30, 2000.

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