Trade Unions and Productivity: Some New Evidence on an Old Issue

Abstract

Econometric investigations have yielded new evidence concerning collective bargaining's impact on productivity for workers of a given quality working with the same amount of capital. These findings indicate that in many sectors—in particular, manufacturing and construction—unionized work places are on average more productive than nonunion ones. This positive effect is not an immutable constant. For example, in the underground bituminous coal industry, unionized mines were less productive than nonunion mines in 1975, with the reverse true in 1965. The routes by which unions affect productivity have not yet been carefully delineated, but they appear to differ from sector to sector. In manufacturing, reduced turnover and improved management seem to be key; in construction, better-trained workers and more rationalized hiring and supervision seem to be primary. Finally, while the union/nonunion productivity differential is likely to be positive, it is on the average not large enough to offset the greater compensation and capital intensity under unionism. Hence, higher productivity and lower profitability appear to go hand in hand under collective bargaining.

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References

1. Derek C. Bok and John T. Dunlop , Labor and the American Community (New York: Simon and Schuster, 1970), p. 260.

and idem , What Do Unions Do? (New York: Basic Books, 1984).

3. We recognize that decreases in turnover that benefit a firm could reduce mobility in the economy to a point at which they reduce national output. That unions substantially reduce turnover is documented in R. B. Freeman , “The Exit-Voice Trade Off in the Labor Market, Unionism, Job Tenure, Quits, and Separations,” Quarterly Journal of Economics, 94:643-673 (June 1980); evidence that this reduction in quits increases productivity is presented in C. Brown and J. Medoff , “Trade Unions in the Production Process,” Journal of Political Economy, 86:355-378 (June 1978).

4. Much of the relevant evidence is the basis for Sumner H. Slichter , James J. Healy , and E. Robert Livernash , The Impact of Collective Bargaining on Management (Washington, DC: Brookings Institution, 1960).

See also Robert Cochran , “Productivity Among Union/Nonunion Construction Workers” (Paper, Harvard University, 1979).

6. See Freeman and Medoff , What Do Unions Do?, chap. 12.

7. Bok and Dunlop, p. 261.

8. Investment to modernize plants was especially important in the recent give-back negotiations of the steelworkers.

John W. Kendrick and Elliott S. Grossman , Productivity in the United States: Trends and Cycles (Baltimore, MD: Johns Hopkins University Press, 1980) find a positive relation between growth of productivity and growth of unionism. From their data, however, it is apparent that there is a positive correlation between the level of unionism and productivity growth as well as between the changes.

10.

10. R. B. Freeman and J. L. Medoff , “Substitution Between Production Labor and Other Factors in Unionized and Nonunionized Manufacturing,” Review of Economics and Statistics, 64(2):tab. 4, pp. 220-233 (May 1982).

11.

11. Technically, if we have a general production function, the first-order Taylor series expansion terms do not include the elasticity of substitution. It enters with the second-order terms.

12.

and Clinton C. Bourdon and Raymond E. Levitt , Union and Open-Shop Construction (Lexington, MA: D.C. Heath, 1980).

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For the Allen results, see S. Allen , “Unionization and Productivity in Office Building and School Construction,” National Bureau of Economic Research, Working Paper no. 1139 (Cambridge, MA, 1983), pp. 27-30.

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14. K. Clark , “The Impact of Unionization on Productivity: A Case Study,” Industrial and Labor Relations Review, 33:451-468 (July 1980).

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15. Slichter, Healy, and Livernash, p. 951.

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16. The statement is from John T. Dunlop's lecture, “Labor-Management Response to Productivity Change,” delivered 1 Apr. 1982, in George S. Eccles, Distinguished Lecture Series, 1981-82 (Logan: Utah State University, 1982), p. 34.

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Michael Schuster , “The Impact of Union-Management Compensation on Productivity and Employment,” Industrial and Labor Relations Review, 36(3):415-430 (Apr. 1983).

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18. For a history of coal see William H. Miernyck , “Coal,” in Collective Bargaining: Contemporary American Experience, ed. Gerald G. Somers (Madison, WI: Industrial Relations Research Association, 1980), especially pp. 17-23; the quotation concerning Lewis's views of technological change is from p. 26. Further explanation of Lewis's view may be found in U.S. News and World Report, 9 Nov. 1959, pp. 60-64.

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19. See Peter A. Navarro , “Union Bargaining Power in the Coal Industry, 1945-1981,” Industrial and Labor Relations Review, 36(2):214-229 (Jan. 1983).

20.

20. John T. Addison and Barry T. Hirsch , “Do Unions Really Raise Productivity? Alternative Views and Evidence,” mimeographed (Columbia: University of South Carolina, June 1983).

21.

21. Allan B. Mandelstamm , “The Effect of Unions on Efficiency in the Residential Construction Industry: A Case Study,” Industrial and Labor Relations Review, 18(3):503-521 (July 1965).