Effect of Labor Unions Economic Performance
Effect of Labor Unions Economic Performance
Dec. 10, 2012
Kidong Kang(Kenny)
I. Introduction According to the Bureau of Labor Statistics in 2011, 11.8% of workers are members of unions in the labor force as a whole. Especially in the private sector, there was obvious tendency to decrease of unionization. Only 6.9% workers in the United States belong to labor unions in 2011. That was more than 2% drops compared to in 2000 era. The basic dilemma faced by unionization is the need to serve the interests of their members and be seen to serve the interests of society as a whole at the same time.
The labor unions solved this dilemma by playing several key roles within the US manufacturing-based economy such as auto industries from 1940s to the 1970s. The wage increase negotiated in collective bargaining ensured that consuming power kept constant pace with the economic capacity to produce. However, since the 1980s, the postwar solution to the unions’ basic dilemma had lost its power, and union density had fallen below a quarter of the workforce. In an economy with rising imports and lagging productivity growth, union wage increases and work rules were seen as contributing to inflation and making US products less competitive. (Stephen Herzenberg, 2000) In this view point, this paper will seek to review the research evidences discussing whether unionization have fundamental and positive effects on the economic performance of corporations or not. In addition, I’d like to examine in what are the effects of unions about profit or productivity after all. In this paper, I will show the effect of labor union on the economic performance of firms by three research factors. The first one is that the relationship between compensation and the profit in the firm with unionization because employee wages or compensation directly affect the firm’s profitability. The second one is the employee engagement with unionization. This may explain the evidence of relationship between
Dec. 10, 2012
Kidong Kang(Kenny)
I. Introduction According to the Bureau of Labor Statistics in 2011, 11.8% of workers are members of unions in the labor force as a whole. Especially in the private sector, there was obvious tendency to decrease of unionization. Only 6.9% workers in the United States belong to labor unions in 2011. That was more than 2% drops compared to in 2000 era. The basic dilemma faced by unionization is the need to serve the interests of their members and be seen to serve the interests of society as a whole at the same time.
The labor unions solved this dilemma by playing several key roles within the US manufacturing-based economy such as auto industries from 1940s to the 1970s. The wage increase negotiated in collective bargaining ensured that consuming power kept constant pace with the economic capacity to produce. However, since the 1980s, the postwar solution to the unions’ basic dilemma had lost its power, and union density had fallen below a quarter of the workforce. In an economy with rising imports and lagging productivity growth, union wage increases and work rules were seen as contributing to inflation and making US products less competitive. (Stephen Herzenberg, 2000) In this view point, this paper will seek to review the research evidences discussing whether unionization have fundamental and positive effects on the economic performance of corporations or not. In addition, I’d like to examine in what are the effects of unions about profit or productivity after all. In this paper, I will show the effect of labor union on the economic performance of firms by three research factors. The first one is that the relationship between compensation and the profit in the firm with unionization because employee wages or compensation directly affect the firm’s profitability. The second one is the employee engagement with unionization. This may explain the evidence of relationship between
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