The Union-Nonunion Income Differential - Assignment Example

Chapter 11 The general belief that union workers earn more than nonunion workers has some validity to it. In 2008 union workers earn an average of $23.82 per hour which is $3.87 per hour higher than nonunion workers. A union gains power from the possibility of using strikes against a corporation. One of the goals of unions is for their reach to extend one company into entire industries. Unions are more effective in product markets that are imperfect. One of the reasons that nonunionized workers earn less is because the composition of these workforces has more women participation in them than a union workforce. Women due to discrimination and other factors earn less than men in general. There are some concerns about the reasons for the union-nonunion income differential. The use of union can affect the non-union markets driving their wages either upwards or downwards. The spillover effect refers to the decline in non-union wages that result from displaced union workers supplying their labor in non-union labor markets. The threat effect is the increase in nonunion wages that the employer offers as the result of the threat of unionism. The product effect is the increase in non-union wages associated with consumer demand shifting. The superior worker effect establishes that the higher wages offered by union jobs will cause workers to queue up for union jobs. Empirical evidence reveals that in 2009 union workers received 17% more in wages in comparison with nonunion workers. Also the fringe benefits received by union workers are superior. Total compensation refers to the addition of wages plus fringe benefits. There are negative views associated with the use of unions. Unions can impair productivity and efficiency by imposing restrictive work rules on management. Unions negotiate about 700 collective bargaining agreements each year. Another negative aspect of unions is the use of strikes. The actual negative effect so strikes are exaggerated due to the fact that most strikes only last a few days. The incidence of strikes in the United States is much lower than in other parts of the world. The wage advantage union workers represent another negative aspect for businesses. Employers look for cost reduction through the use of technology in order to offset the cost associated with a union workforce. An advantage union provide for corporation is lower employee turnover rates. Empirical studies show that unions provide a 3% productivity advantage for companies. Unions promote greater equality among the workforce. Some scholars believe that unions create inequality in the workplace. For example nonunion workers receive lower salaries. Chapter 12 In the United States the government represents a large employer. There were more people in 2009 working for the government than in the manufacturing sector. There are many jobs that exist only to serve the government. A few examples are firefighters, cops, and park rangers. The government creates jobs at all levels which include federal, state, and local. The government regulatory role has expanded during the last five decades which has created a higher demand for governmental employees. Between 1960 and 2006 state and local governmental jobs increased from 7% to 13.6% of the total jobs in the marketplace. Population growth, urbanization, and urban sprawl increased the demand for governmental services. The baby boomer population increased the number of children born in America which in turn raised the demand for school teachers. The higher income of Americans raised the demand for income elastic governmental services such as higher education, health services, and clean environment. The governmental wage differential has increased for low skill level position, but it has decreased for high skill positions in comparison with the private industry. Public sector employees receive higher fringe benefits than private industry workers. Governmental workers have higher employee retention rates. Sweden at 34.4% has the highest governmental labor composition in the world. In 2008 the public sector average pay was $22.50 which is $2.47 higher than private sector employees. The government stopped used the draft to force adults to serve the military after 1973. Since then the military recruits its personnel by offering attractive compensation packages. Governmental purchases include procurement of items such as computers, tanks, medical supplies, buses, and textbooks among other items. The government is responsible for paying transfer payment to beneficiaries such as social security, unemployment benefits, and welfare payments. The government also pays subsidies such as low rent housing benefits. Medicare is another example of a governmental subsidy program. The provision of public sector goods and services influences labor demand. Publicly provides goods and services can reduce the quantity of labor supplied. The income generated by workers represents 70% of the national income in the United States. This income is subject to governmental taxation. Germany has the higher personal income tax rate at 52.5%. The effect of personal income on wages and unemployment depends principally on the elasticity of labor supply. Both the employer and the employee pay 7.65% social security tax rate. Chapter 13 The government is responsible for establishing the legal rules of the economy. These regulations affect wage and employment outcomes. Labor laws and collective bargaining agreements influence wages, employment, and resource allocation. In the 1930’s union membership accounted for 30% of the labor force. Prior to the 1930’s there was discrimination against workers that participated in unions. Some of them were blacklisted and could not find jobs elsewhere. Yellow dog contracts prohibited workers from joining union membership. The law did not protect unionism of workers during the first decades of the 20th century. After 1930 the government passed different laws to protect unionism. Two laws that created to protect union membership were the Norris-La Guardia Act of 1932 and the Warner Act of 1935. The Norris-La Guardia significantly reduced to cost of joining a union. A factor that explained the rapid growth of unionism was laws recognizing the right of state workers to organize. Many provisions of labor laws enhanced the bargaining power of unions which help them secured higher wages for its members. Hot cargo clauses stated that trucking companies did not have to carry cargo from unfair employers involved in labor disputes. The Fair Labor Standard Act established a minimum wage of $0.25 an hour. The current minimum wage in the United States is $7.25 an hour. The use of minimum wage creates allocative inefficiencies. A monopsonist marginal wage cost exceeds its average wage cost at each level of employment. A 10% increase in minimum wage causes a 1-3 percent decline in the number of jobs held by teenagers. Based on the findings of Card and Krueger the use of minimum wage does not increase employment. A lot of firms pay lower wages during the training period. The use of minimum wage does not reduce poverty in America. The Occupational Safety and Health Act of 1970 mandates that firm purchase insurance that pays specified benefits to workers injured on the job. In 2006 a total of 5,000 workers died on the job and another 3.7 people suffered from work related injuries. The marginal cost of job safety states that companies receive reduced safety benefits as more money is spend in safety related expenses. The country of Spain has the highest incidence of job related injuries at 587 injuries per 10,000 workers. OSHA is the agency responsible for developing safety and health standards and enforcing them. Economic rent in the labor markets is the difference between the wage paid to a worker and the wage sufficient to keep that person in his current job. In the US 20% of the workforce is required to comply with some sort of licensing. Tariffs are a tax that is paid on imported goods. Quotas are a limitation in quantity or value of imported goods. Chapter 14 Statistical discrepancies exist that leads one to suspect the presence based on age and gender discrimination. From 1973 to 1978 the wages of women were 65% of those of men. Currently the gap has been closed a bit with women earning 76% of what men make. The gender gap in the United States in higher than in other industrialized nations such as Australia, Belgium and France. There is also a gap between the white and black race. Other minorities also are discriminated against in terms of wages. One of the causes of wage discrepancies among groups is the educational attainment. Caucasian people go to better schools and have greater education. Better education leads to higher salaries for employees. Male white people with bachelor’s degrees earn roughly $80,000 a year, while African-American males earn over $55,000. ` There are different types of discriminations. Some of the types of discrimination are wage, occupational, employment, and human capital. Better looking people earn more than ugly people. Becker’s taste for discrimination model envisions discrimination as a preference or “taste” for which the discriminator is willing to pay. After 9/11 discrimination against Arabs increased in America. 20-60% of Arab American feel discriminated against. One of the results of the end of discrimination would be higher wages for women and minorities. The country with the highest segregation index is Sweden at 63%. The female-male salary ratio went up 8 percentage points between the 1980 and 1990. There is controversy in the ability of empirical studies to isolated true discriminatory outcomes. Title VII of the Civil Rights Act of 1964 is a centerpiece anti-discrimination legislation. Affirmative action programs were developed to close the discriminatory gap in the United States. The increased educational attainment of African-Americans has help close the wage gap. Read More