BUSI 343 Week 7 Final Presentation Project Example

What Do Unions Do? Evidence a Manager Can Use

Slide 1: What Do Unions Do? Evidence a Manager Can Use

• Final Presentation Project, BUSI 343
• One question, five kinds of evidence, five principles

Speaker notes: Hello. Managers often form opinions about unions from headlines or from one bad experience. This presentation asks a simple question, what do unions actually do, and answers it with research rather than opinion. I will look at five kinds of evidence: wages and inequality, quits and voice, productivity, conflict and quality, and worker representation abroad. Then I will turn the findings into five principles a manager can use, whether or not the workplace has a union.

Slide 2: The Framework: Efficiency, Equity, Voice

• Efficiency: getting work done well and competitively
• Equity: treating workers fairly
• Voice: giving workers a real say

Speaker notes: Throughout this course, Budd (2012) has asked us to judge the employment relationship by three objectives: efficiency, equity and voice. A union can affect all three, sometimes in opposite directions. It may raise wages, which serves equity but adds cost. It may give workers voice, which can improve efficiency. Keeping all three in view helps avoid the common mistake of judging unions only by labor costs.

Slide 3: Unions and Wages

• Members earn more than similar nonunion workers
• Unions historically organized less-educated workers
• Union decline tracks rising inequality

Speaker notes: The first finding is the one everyone expects. Union members earn more than comparable nonunion workers. What is less well known is who benefited. Survey records running back almost a century let Farber et al. (2021) show that members were drawn heavily from workers with less schooling, and that the union pay advantage lifted precisely those workers. As membership rose through midcentury, the gap between high and low earners narrowed; as it fell, the gap widened again.

Slide 4: Effects Beyond Union Members

• Union threat raises nonunion pay
• Right-to-work laws lower wages broadly
• Spillovers reach workers who never join

Speaker notes: Union effects also spill over. Nonunion employers often pay more to keep unions out. Fortin et al. (2021) tied right-to-work laws to lower pay, and the reduction extended beyond union members to workers who never belonged to one. For a manager in a nonunion firm, that means local labor relations shape your pay decisions even when no union is present at your site.

Slide 5: Voice Instead of Exit

• Union members quit less often
• Grievance channels replace resignations
• Lower turnover saves hiring and training costs

Speaker notes: The second kind of evidence concerns voice. Comparing union and nonunion workers with similar jobs and pay, Freeman (1980) found markedly lower quit rates among the union group, and traced the gap to the grievance and bargaining channels a union provides. A worker with a place to complain has less reason to walk out the door. In Budd's terms, this is the collective voice face of unions. For managers, lower turnover means more experienced workers and lower hiring and training costs, a benefit that rarely appears in debates about union wages.

Slide 6: Productivity: No Single Answer

• Meta-analysis: effects vary by country, industry, period
• Positive in some settings, negative in others
• The average hides the variation

Speaker notes: What about productivity? Here the honest answer is that it depends. Pooling the estimates of many earlier studies, Doucouliagos and Laroche (2003) found that the sign of the union effect itself changed with the setting: it leaned positive in American manufacturing and negative in British data, and it shifted over the decades studied. An average near zero hides some workplaces where unions helped and others where they hurt. The next slide shows what explains the difference.

Slide 7: The Relationship Decides

• Union plus cooperative practices: higher productivity
• Union plus traditional relations: lower productivity
• Management's choices shape the outcome

Speaker notes: In a national survey of American workplaces matched to productivity data, Black and Lynch (2001) found a split result. Union sites that had brought workers into decisions and shared profits with them outproduced comparable nonunion sites. Union sites run the old, arms-length way underproduced them. The union did not determine the result; the relationship did. This is perhaps the most useful finding for managers, because the relationship is something management helps choose.

Slide 8: When Conflict Reaches the Product

• Labor strife at a tire plant
• Defect rates rose during the dispute
• Conflict costs more than the settlement shows

Speaker notes: The fourth kind of evidence concerns conflict. At the Decatur, Illinois tire plant studied by Krueger and Mas (2004), the mid-1990s dispute brought concessions demands, a long strike and replacement workers. Tires made during those years failed at much higher rates than tires from the same plant before or after, or from the company's other plants, and many ended up in the recall that followed. Hostile labor relations do not stay at the bargaining table; they show up in the work.

Slide 9: Lessons From Abroad

• German law puts workers on many company boards
• No loss of profitability found
• More capital investment, no clear wage gains

Speaker notes: The fifth kind of evidence comes from Germany, which gives workers seats on many company boards. Because German law grants the one-third board share only to firms founded before a 1994 date, Jäger et al. (2021) could compare companies that differed mainly in that legal accident. The ones with employee directors earned no less, built up more capital per worker and paid about the same wages. Shared governance did not produce the losses its critics predicted, though U.S. law does not allow simply copying the system.

Slide 10: Judging Procedures, Not Just Outcomes

• Dispute systems should serve efficiency, equity and voice
• Cheap procedures can fail fairness tests
• Measure all three

Speaker notes: Budd and Colvin (2008) argue that workplace dispute procedures, whether union grievance systems or nonunion complaint processes, should be measured against efficiency, equity and voice together. A procedure that resolves complaints cheaply but feels unfair to workers fails two of the three tests. For managers, this means asking not only how much a dispute system costs, but whether workers trust it and whether it gives them real input.

Slide 11: Five Principles for Managers

• Count turnover and quality, not just wages
• Build voice channels, union or not
• Choose cooperation; it pays in union settings
• Avoid conflict that reaches the product
• Judge procedures by efficiency, equity and voice

Speaker notes: Five principles follow from this evidence. First, when assessing a union's effect, count turnover, training and quality, not just wages. Second, build real channels for voice, because voice reduces exit whether or not a union is present. Third, if a workplace is unionized, invest in cooperative practices, since the research suggests that is where unions raise productivity. Fourth, treat bitter conflict as a risk to the product itself. Fifth, judge dispute procedures by all three of Budd's objectives. Thank you for watching.

Slide 12: References

Speaker notes: Black and Lynch (2001); Budd (2012); Budd and Colvin (2008); Doucouliagos and Laroche (2003); Farber et al. (2021); Fortin et al. (2021); Freeman (1980); Jäger et al. (2021); Krueger and Mas (2004). Full entries in current APA format follow.

References

Black, S. E., & Lynch, L. M. (2001). How to compete: The impact of workplace practices and information technology on productivity. The Review of Economics and Statistics, 83(3), 434-445. https://doi.org/10.1162/00346530152480081

Budd, J. W. (2012). Labor relations: Striking a balance (4th ed.). McGraw-Hill/Irwin.

Budd, J. W., & Colvin, A. J. S. (2008). Improved metrics for workplace dispute resolution procedures: Efficiency, equity, and voice. Industrial Relations: A Journal of Economy and Society, 47(3), 460-479. https://doi.org/10.1111/j.1468-232X.2008.00529.x

Doucouliagos, C., & Laroche, P. (2003). What do unions do to productivity? A meta-analysis. Industrial Relations: A Journal of Economy and Society, 42(4), 650-691. https://doi.org/10.1111/1468-232X.00310

Farber, H. S., Herbst, D., Kuziemko, I., & Naidu, S. (2021). Unions and inequality over the twentieth century: New evidence from survey data. The Quarterly Journal of Economics, 136(3), 1325-1385. https://doi.org/10.1093/qje/qjab012

Fortin, N. M., Lemieux, T., & Lloyd, N. (2021). Labor market institutions and the distribution of wages: The role of spillover effects. Journal of Labor Economics, 39(S2), S369-S412. https://doi.org/10.1086/712923

Freeman, R. B. (1980). The exit-voice tradeoff in the labor market: Unionism, job tenure, quits, and separations. The Quarterly Journal of Economics, 94(4), 643-673. https://doi.org/10.2307/1885662

Jäger, S., Schoefer, B., & Heining, J. (2021). Labor in the boardroom. The Quarterly Journal of Economics, 136(2), 669-725. https://doi.org/10.1093/qje/qjaa038

Krueger, A. B., & Mas, A. (2004). Strikes, scabs, and tread separations: Labor strife and the production of defective Bridgestone/Firestone tires. Journal of Political Economy, 112(2), 253-289. https://doi.org/10.1086/381479