What Do Unions Do - Essay Example

Discuss and assess two or three models of union behavior that were presented in and in the textbook Employees in a country collectively form unions that will fight for them. The unions are tasked with the improvement of the working conditions and the economic status of their members. The unions are, however, met with constraints in achieving these goals (Ehrenberg, Ronald and Robert 450). The mission objective of majority of unions is to ‘get more’. Get more, in the sense of improving members’ welfare and not compensation as is conceived by their respective governments.

Constraints are everywhere, to overcome them, the unions develop models. The models revolve on the wages, employment and benefits agreement between the unions and its members. Monopoly-Union model This is regarded as the most fundamental model for unions and employers. In this model, the unions have the upper-hand in setting the labor price. The employers respond by choosing the levels of employment. In a perfectly competitive market, the higher the wages demanded the fewer the employment rate (Ehrenberg, Ronald and Robert 451).

In another scenario, the unions might increase the jobs for its members in the market. Its members earn the same wage rate as non-union members. In the latter scenario, the union is not benefitting its members, thus it is not adapted. The main concern for unions in this model is to bargain over wages and not employment levels. This model is not socially conscious, that is, it is not pareto-efficient. Efficient contracts model The simplicity of the monopoly unionism is admirable; however, it is not efficient.

Increasing the wage rates of its union members ultimately leads to lower levels of unemployment. In the efficient contracts model, the union and the employer both set the wages and the employment terms. Both parties benefit from this model (Ehrenberg, Ronald and Robert 452). The bargaining also discusses the number of hours that workers will input. The contracts are meant to benefit both parties. In reality, the employers and the unions bargain over the wage rates. The levels of employment, however, cannot be specified in contracts.

Describe the main findings of labor economists’ studies concerning the effects of unions on: wages, wage inequality, employment, employee turnover, productivity and profits Union activities affect how the labor market operates. It has effects on: i) Wages The labor market is comprised of both union and non-union workers. The wages of the former are determined by the unions while the employers determine the wages of the latter. In this war of wages, the union workers are at an advantage compared to the non-union workers.

The advantage of unionism is universal; union workers earn more than their counterparts. There are a lot of theories that try to explain this advantage. Firstly, the unions bargain for higher wages for their members. Managers and shareholders compromise their rent in order to accommodate the gains for its members. This model is referred to as the rent sharing model. Secondly, union workers are viewed as superior to non-union workers. Employers hire the ‘superior workers’ despite the higher wages.

This is referred to as the superior workers model (Ehrenberg, Ronald and Robert 474). Last but not least, the spillover effect. Unemployed union workers undergo ‘wait unemployment’. They prefer waiting for job openings offered in the union to spill-over to the non-union sector. This preference is due to the abundance of labor in the non-union sector upon lowering their wages. These models explain the effect of the unions on the labor wages for all sectors in the labor market. ii) Wage inequality Increase in union activity in the economy of a country ultimately leads to reduced wage inequality.

The unions advocate for equal pay for equal work. In addition to this, unions also promote reasonable wage hierarchies. In the labor market, unskilled labor is often underpaid despite their workloads. Trade unions in the industrial sector bargain for increased wages for unskilled labor (Ehrenberg, Ronald and Robert 475). This balances their workload and their wages. In the long run, this wage increase in unskilled labor reduces the wage variance for all unionized workers. Industrial unions also promote racial equality in matters concerning wages.

The case study of the U.S shows the effect of unions on the wage equality. In recent years, the wage inequality has increased due to reduced unionism in the U.S. iii) Employment In their activities, unions affect the employment of both union and no-union workers. The example of increased union wage premium reduced the employment in 42 metro areas by 0.06 per cent. The effect is minute; nonetheless there are workers that occupy that minute percentage. According to the rent-sharing model, the money used to increase wages is derived from other sources: therefore, there is no decline in employment levels.

On the other hand, unions often cause the decasualization of employment (Ehrenberg, Ronald and Robert 480). The contracts between unions and employers aid in this transformation. Jobs categorized as daily laborer are transformed into more structured forms of employment. The unions organize hiring hall to undertake the employment of laborers via multi-employer agreements. The laborers are awarded the opportunity of having a career promoting stability for both employer and employee. This transformation is evident among hotel workers in major cities all across America. iv) Productivity The effects of unions are viewed as both positive and negative to the productivity of a firm.

The union monopoly is viewed as a hindrance to the decision making of the managers of the firm, ultimately undermining productivity. However, the view of the union voice results in more productivity (Ehrenberg, Ronald and Robert 481). The union voice leads to fewer quits and improved training. Empirical evidence found that the union voice dominated most of the industries. v) Profits In the labor markets, it is generally known that profits in unionized industries are lower. This observation is universal in spite of increase in productivity.

Higher wages promoted by the unions are derived from the profits (Ehrenberg, Ronald and Robert 482). Profits in non-unionized industries are used to fund technology used to increase efficiency. Discuss how labor economists account for the simultaneous stability of union membership in the public sector and the decline of union membership in the private sector Majority of the employees in the government sector are union members. This basis for this empirical data is the United States (Ehrenberg, Ronald and Robert 489).

The private sector is competitive and enjoys high elasticity in terms of product price and wages. This property of the private sector leads to the little or no interference from unions. Demand for higher wages, by the unions, would lead to employment decline. Companies in the private sector have low population of workers. Economists have observed that unionization demand is lower in small firms. The public sector, however, is populated with employees across all hierarchies. Also, the public sector is not as competitive as the private sector.

The profitability of the public sector is lower and thus the union must promote the increasing of wages of its employees in this sector. Work Cited Ehrenberg, Ronald G, and Robert S. Smith. Modern Labor Economics: Theory and Public Policy. Upper Saddle River, N.J: Pearson Education, 2011. Print