Working Paper: NBER ID: w1249
Authors: Richard B. Freeman; James L. Medoff
Abstract: This paper summarized some new evidence concerning the impact of collective bargaining on productivity for workers of a given quality working with the same amount of capital. The new findings, which are based on econometric investigations, indicate that in many sectors,in particular manufacturing and construction, unionized work places are on average more productive than those that are nonunion. This positive union productivity effect is not an immutable constant. For example,in the underground bituminous coal industry, unionized mines were significantly less productive than nonunion mines in 1975 although they were significantly more productive in 1965.The routes by which unions affect productivity have not yet been carefully delineated, and 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 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.
Keywords: Trade unions; Productivity; Collective bargaining
JEL Codes: J51; J53
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| unionization (J50) | productivity (O49) |
| unionization in manufacturing (L69) | productivity (O49) |
| unionization in construction (J51) | productivity (O49) |
| reduced turnover (J63) | productivity (O49) |
| improved management practices (Q15) | productivity (O49) |
| better training (M53) | productivity (O49) |
| rationalized hiring (M51) | productivity (O49) |
| unionization (J50) | higher compensation (J33) |
| higher compensation (J33) | lower profitability (L21) |
| unionization (J50) | lower profitability (L21) |
| quality of industrial relations (J53) | productivity (O49) |