Exam 15: Union Role in Wage and Salary Administration

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Do unions raise wages? Are unionized employees better off than they would be if they were nonunion? Several measurement problems are difficult to overcome.The ideal situation would compare numerous organizations that were identical except for the presence or absence of a union.Any wage differences among these organizations could then be attributed to unionization.Few such situations exist.One alternative strategy that has been adopted is to identify organizations within the same industry that differ in level of unionization.For example,consider company A,which is unionized,and company B,which is not.Although they are in the same industry,it is still difficult to argue with assurance that wage differences between the two firms are attributable to the presence or absence of a union.First,the fact that the union has not organized the entire industry weakens its power base.Consequently,any union impact might underestimate the role of unions in an industry where the percentage of unionization is greater.A second problem in measuring union impact is apparent.What if company B grants concessions to employees as a strategy to avoid unionization? These concessions,indirectly attributable to the presence of a union,would lead to underestimation of union impact on wages.
Another strategy in estimating union impact on wages is to compare two different industries that vary dramatically in the level of unionization.This strategy suffers because nonunionized industries are markedly different from unionized industries in the types of labor employed and their general availability.Such differences have a major impact on wages independent of the level of unionization and make any statements about union impact difficult to substantiate.
Historically,union wages have experienced multiple-year upswings followed by multiple-year downswings.
From a summary analysis of 114 different studies about union versus nonunion wage differences,two important points emerged:
1.Unions do make a difference in wages,across all studies and all time periods.Union workers earn between 8.9 and 12.4 percent more than their nonunion counterparts.
2.The size of the gap varies from year to year.During periods of higher unemployment,the impact of unions is larger.During strong economies the union-nonunion gap is smaller.Part of the explanation for this time-based phenomenon is related to union resistance to wage cuts during recessions and the relatively slow response of unions to wage increases during inflationary periods.
In recent years,wage concessions have become more prominent.Some experts claim these concessions are more common in unionized firms and that this reduces the advantage union workers hold in wages,particularly during downturns in the economy.