Reducing Unemployment: A Case for Government Deregulation

By Garry K. Ottosen; Douglas N. Thompson | Go to book overview

CHAPTER 7
UNION PRODUCTIVITY EFFECTS, LABOR LAW, AND THE NAIRU

Union effects on wages and fringe benefits are not the only ways unions can increase the NAIRU or the rate of unemployment that is consistent with stable inflation. If, by reducing productivity growth, unions increase business costs, then this will increase the NAIRU through the same mechanism whereby other increased business costs, like government regulation-imposed costs, increase the NAIRU.

Do unions reduce productivity growth? Or do unions increase productivity growth? If unions increase productivity growth, then they may actually offset the union wage premium discussed in the previous chapter. What does the economic literature have to say on this issue?


THE LITERATURE ON UNIONS AND PRODUCTIVITY

When most people think of unions and productivity, they think of union work rules, featherbedding, and other inefficient union practices that would seem to reduce productivity But beginning with a study by Charles Brown and James Medoff in 1978, several studies have claimed that unions may actually increase the productivity of firms that they organize. These studies argue that unions may boost productivity, first, by "shocking" management into adopting more efficient techniques and, second, by acting as a "collective voice" of workers.

The group of studies that kicked off the union-productivity debate is sometimes referred to as the Harvard studies. Brown and Medoff's paper was the first of the Harvard studies. 1 Their approach differed from the conventional monopoly model view of unions in substance and result. Contrary to the restrictive (productivity-inhibiting) monopoly model, in this new model unions are seen as an institutional force acting as a collective voice of workers and boosting productivity by reducing labor

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Reducing Unemployment: A Case for Government Deregulation
Table of contents

Table of contents

  • Title Page iii
  • Contents v
  • Chapter 1 - THE COSTS OF UNEMPLOYMENT 1
  • Notes 10
  • Chapter 2 - THE NAIRU 11
  • Notes 28
  • Chapter 3 - A FAULTY DIAGNOSIS OF UNEMPLOYMENT 30
  • Notes 48
  • Chapter 4 - BUSINESS COSTS, GOVERNMENT REGULATIONS, AND THE NAIRU 51
  • Notes 73
  • Chapter 5 - UNEMPLOYMENT INSURANCE, SOCIAL WELFARE, AND THE NAIRU 75
  • Notes 96
  • Chapter 6 - THE UNION WAGE PREMIUM AND THE NAIRU 98
  • Notes 114
  • Chapter 7 - UNION PRODUCTIVITY EFFECTS, LABOR LAW, AND THE NAIRU 117
  • Notes 133
  • Chapter 8 - PRODUCTIVITY AND THE NAIRU 136
  • Notes 143
  • Chapter 9 - SUMMARY 144
  • Notes 155
  • Bibliography 157
  • Index 165
  • About the Authors 173
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