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July 15, 2013

Essay Paper on Labor Unions

Canadian empirical research on the economic effects of unions is much more focused on the rate of wages on benefits. However, recent U.S. studies have shown that the effects of unionism on fringe benefits, the dispersion of wage rates, tenure, productivity and profits are important.  In theory, one would expect that unions exert upward effect on the relative wages of unionized workers and dampening effect on wage differentials between them. Other studies also argue that unions increase the share of total compensation is paid in benefits, mainly pensions. While the influence of unions on wage levels resulting from their monopoly power, wage dispersion and the level of pension benefits derive more preferences median unionized whose influence is exerted by the voter model median. 

In the case of wage levels, the results indicate that the salaries of those who were not unionized and are now following a job change, increased by 17.6% while the wages of those who have lost the status of unionized fell from 13.4%, leaving a net difference of 15.5% between the two categories. 
           The influence of unions on wage dispersion, as measured by the standard deviation of the wage equation in logarithmic form, is less consistent. The standard deviation decreases slightly for workers whose status changes to non-union than union but suddenly increases for those whose status changes from unionized to non-unionized. On average, it appears that unions reduce the standard deviation of about 5%. By monitoring the effect on wage levels, the impact of unionism on the probability of provisions to pension funds amounted to 19% when corrected through selectivity. However, when combined with the indirect effect of wage increases due to unionism, the overall effect of unions on the provisions relating to pension funds is 22%. 

                       What are the economic effects of a labor union? Investigations on the subject discussed in particular effects on three variables: wages, employment and investmentEmpirical studies generally confirm that workers union members get higher wages than non union. For Canada, they consider this difference to 15% on average, with variations across firms, industries, occupations and general employees. For the U.S., the gap is estimated at 17%.  This gap is higher for less skilled workers, this
suggesting that unions reduce wage dispersion between workers. In other words, the wage gap between most skilled workers and less skilled is lower in unionized than in non-unionized. Such a disparity should be perceived as a beneficial reduction of social inequalities, but only in terms of efficiency.
       Economically, this reduces the incentive for workers invest in their human capital through education and training in order to improve their wages. In Canada, the labor union must obtain legitimate authority through a secret vote of the majority of its members present at the polls. If the union does not comply with the established formalities, then it is liable to fines. In case when the demands of labor unions are not met, going on a strike is considered legal.  

    United States has put in place laws pertinent to the freedom of work and right to join labor unions. Consequently, labor union members get more benefits as compared to others. These benefits are valued at $ 12.41 per hour worked for union workers
cons $ 6.38 for non-union employees. In Canada, 89% of unionized workers have benefits in
one form or another, while only 64% of workers not enjoy such syndicated advantages.
Wages and other benefits achieved by higher labor go along with adverse effects on employment.
 As a matter of fact, once the labor becomes more expensive, businesses will use it
less and try to substitute it through machinery and equipment .The premium received by the unions to members implies a reduction in employment. Empirical studies confirm this conclusion by relying on the economic theories.
  The studies also show that employment growth is lower in unionized sectors than in sectors which are not unionized. For example, in Canada, over the period 1980-1985, the employment growth in unionized firms was lower than non-union: the gap was
3.7% per year in manufacturing.  
The factors which effect the growth are largely associated with the industry, size, and age of the firm.  Labor unions in Australia also cause signs of slow growth of employment for non-unionized labor with an increase of 2.5 percent points per year. In short, unionized workers receive wages higher at the expense of those who are pushed into unemployment. Labor unions try to increase the number of workers in different sectors and to depress wages for those outside of it. The unions thus redistribute income for their members at the expense of unemployed and unorganized workers.
There is a relationship between unionization and the unemployment rate. Although unemployment depends on many factors other than unionization.
The high unionization produces other economic effects as reducing the incentive to invest in capital physical and R & D. Indeed, insofar as the businesses fear that unions will appropriate the future profits generated by investment, including the strike threat, there will be less incentive to invest.
The investment is the engine of economic growth. If there is less investment, there 
will be less innovation, less production, fewer jobs and income generation 
and less prosperity. In a dynamic perspective, a strong union presence thus ends up having adverse effects not only on employment but also potentially on economic growth. 

Findings indicate that a strong union presence is not necessarily an asset to the workers as a whole or to the economy generally trying to maintain employment levels with reduced investment. Any rigidity of the labor market may have negative effects on employment. In Europe, for example, other types of rigidities institutional privileges beyond those related to trade unions have been identified as causes of rampant European unemployment rampant much higher than in North America. 
In contrast, flexible labor relations serve to create an environment which is more economically dynamism. This dynamic has the effect of increasing the demand for labor by companies and therefore increases the value of work and remuneration. The workers benefit by first finding a job more easily, but also receiving good wages according to their skills and productivity rather than their union membership. 

The unions have privileges that they use to set wages and to impose constraints that threaten the profitability and viability of enterprises; they are detrimental to employment and general prosperity.
 Three aspects of wage policy of unions, without any specific objective of equality 
occupational gender could contribute to a differential effect of unions on 
wages of men and women. First, unions may grant higher union premiums to women because their labor supply is more elastic than men. Then, reduction of wage dispersion in presence of a union should be accompanied by a decrease in wage inequality between men and women. Finally, the introduction of pay scales should standardize wages received by employees for equal work, regardless of their gender, and consequently reducing wage discrimination.  
Labor unions should be more favorable to women because they are more 
resilient than men. The intuition is as follows. If a demographic group has more 
income opportunities outside the labor market, its decision to participate in market 
work will be more sensitive to the level of wages that may be levied. Unions
then negotiate a higher salary level for the demographic group making the offer of employment more elastic and ensuring equality.
 Women have a more elastic labor supply than men because they have more opportunities outside the labor market, particularly in the domestic production. Union coverage should therefore provide a premium.
 A higher wage level, however, can affect negatively in terms of employment. Indeed, if the unions involved in wage bargaining, firms remain free to choose the level of employment. If men and women are substitutable in the production process, increasing the relative wage of women may induce decrease in their relative employment in the sector covered by negotiation. 
Second, the promotion of egalitarian wage structures by the unions should 
reduce wage inequality between men and women. Extensive literature has shown that unions have the effect of compressing the distribution of wages of individuals they represent. The union premium is higher for those with low wages, union coverage might cause a decrease in salaries on top of the distribution. Men outnumbering women at the top the wage distribution, compression of the structure of wages by the unions should be associated with the reduction of wage differentials between genders.

Third, through the introduction of pay scales, unions encourage remuneration based more on the characteristics of positions occupied on the characteristics of individuals who occupy these positions. This method of compensation should reduce wage inequality between men and women given job, and consequently reduce

These indirect effects of unions to reduce the wage gap between men and women may however be moderated due to the relatively low coverage rates. Separate unions for women should be established.   
Professional equality between men and women are explicitly included among the priorities of Unions in most OECD countries. This is for instance the case of the Trade Union Congress (TUC), which comprises the majority of British trade unions. This organization shows explicitly an objective of fighting against discrimination and equity between men and women on the scene work. Work and lectures on these topics are regularly coordinated by the TUC.
Equitable sharing of acquired union between men and women is in fourth
position of the objectives of the American Federation of Labor - Congress of Industrial Organizations (AFL-CIO), in the main trade union group in the United States. Gender equality is also a theme.
 An explicit objective of unions is therefore to further increase women's wages
than men in order to decrease the wage gap between these two groups.  However, this
effect may be limited due to the underrepresentation of women in unions.
Feminist work put forward an antagonism between the interests of women and
unions, mainly dominated by men.  They have long considered women's work as temporary, marginal and competitor of men.  Especially the work of Madden [1973], concerning the existence of ”Male monopoly” men in the labor market (employers, workers and consumers) would agree, in the manner of a cartel to negotiate for themselves for higher wages, and to retain certain economic activities, while keeping women out

            Also, some studies examine this question by estimating the overall effect of union coverage on the wage gap between men and women. 
Choice of econometric technique combined with the characterization of the variable on the
union coverage that should be retained. Some hold the organizing work, others
coverage by collective agreements. Taking into account the particularities of the labor market
considered in terms of union coverage is essential to determine the relevant variable.

The entire course of history has shown that an increase of wealth was only possible if the productivity of human labor was increased by the use of tools. For a given allocation of resources can produce more goods and thus will be consumed.
For individual workers, the ratio between the value provided by him and his reward is crucial. Its value is considerably higher than his salary.  If the value of a worker by his wage would have, then this downward be adjusted if the employer wants to avoid losses. On a free labor market, unaffected by the unions and the government can regulate themselves, forms spontaneously a well structured salary scale which refers to all skill levels a steady wage, to compensate for the supply and demand, and thus there is full employment.

Unions become more effective when a group of workers is not prepared to accept the market wage, but thinks it can prevail through the use of power resources to get a higher salary. If the state is supporting this project, then the union members can actually dictate their terms. The top performers among workers are at a loss. The unions have increased the incomes of lower income groups so much that they often lie about the value added in this skill area. However, labor union in a modern day workplace setting has become a striking reality and cannot be ignored.


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