foundation of the American Federation of Labor(AFL) in 1886, most
unions in the united States have displayed a pragmatic out look,
largely compatible with that of business. The general purpose of
unions has been to protect and advance the well being of workers,
while that of business has been to promote the interests of
stockholders. Higher wages and higher profits are compatible over the
long run in a growing economy. Conflict does arise, however, from the
fact that in the short run higher wages for workers imply lower
profits for shareholders. Power, too, is a matter of dispute. In the
absence of unions, managers have a monopoly of power over their
employees. With unions on the scene, that power must be shared.
economic analysis of what gave a particular union the power to raise
the pay and benefits of its members was propounded by the eminent
English economist Alfred Marshall toward the end of the 19th century.
Marshall theorized that the strength of a union depended upon four
factors. First, demand for the product should be inelastic, so that
there is little, if any, decline in sales in response to price
increases. Second, labor costs should be a small portion of the total
costs of production, so that a rather large increase in wages would
generate only a small increase in the price of the product. Third,
the supply of factors that can be used as substitutes for union
labor, such as nonunion labor or labor-saving machinery, should be
inelastic, so that their price rises substantially as more units are
employed. Fourth, the ability of these factors to substitute for
union labor should be highly limited; it would be hard to substitute
for workers with very high skills or skills that are highly specific
to a single employer.
have been made to estimate the extent to which unions in the United
States have raised the wages of their members above what they would
otherwise have been. These studies show substantial differences in
the effectiveness of different unions, and that is in the spirit of
Marshall’s analysis. Substantial variation has also been found in
the effectiveness of unions over the course of business cycles. On
the average, unions have raised the wages of their members as
compared to nonmembers by about 15 percent, somewhat more during
periods of depression and somewhat less during periods of prosperity.
Empirical studies have also indicated that the productivity of union
workers has been higher than that of nonunion workers, largely
because union workers have tended to have more capital goods at their
disposal than nonunion workers. These studies also indicate that
unionized workers have had lower turnover rates. This has lowered the
costs of recruitment and training to employers. These cost savings
have materially diminished the wage disadvantage experienced by the
employers of unionized labor.
participants in and observers of the U.S. labor movement have viewed
unions as institutions with the potential to establish industrial
democracy and socialism. Others have viewed unions as highly
conservative institutions returning to workers the status lost in the
transition from village societies to urban anonymity. In reality,
their role has been more modest. In the early 1980’s they enrolled
in their ranks only one of five members of the labor force, down from
one of four in the 1950’s and 1960’s. These workers had a
somewhat greater say in their work lives and in the halls of Congress
and state legislatures. They received somewhat greater pay and were
more productive. They sometimes followed the political calls of their
leaders and sometimes did not.
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