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Unions And The Labour Market For Managers

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  • Dinardo, John
  • Hallock, Kevin F
  • Pischke, Jörn-Steffen

Abstract

We examine the relationship between the employment and compensation of managers and CEOs and the presence of a unionized workforce. We develop a simple efficiency wage model, with a tradeoff between higher wages for workers and more monitoring, which requires more managers. The model also assumes rent sharing between workers, managers and the owners of the firm. Unions, by redistributing rents towards the workers, lead to lower employment and lower pay for managers. Using a variety of data sets, we examine the implications of the model for the relationship between the employment and wages of managers and unionization. We find several results generally consistent with our model. (1) Both a higher fraction of unionization in an industry and region and a higher union wage differential are associated with fewer managers. (2) Managers' wages are about 5 to 7 percent lower in unionized firms. (3) For CEOs the effects are larger: a 10 percent increase in unionization reduces the pay of CEOs by 2.5 percent or more.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2418.

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Date of creation: Apr 2000
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Handle: RePEc:cpr:ceprdp:2418

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Keywords: CEOs; Executives; Managers; Unions; Wage Structure;

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References

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  1. Joshua Angrist & Alan Krueger, 1998. "Empirical Strategies in Labor Economics," Working Papers 780, Princeton University, Department of Economics, Industrial Relations Section..
  2. Richard B. Freeman, 1991. "How Much Has De-Unionisation Contributed to the Rise in Male Earnings Inequality?," NBER Working Papers 3826, National Bureau of Economic Research, Inc.
  3. Bell, Brian D & Pitt, Michael K, 1998. "Trade Union Decline and the Distribution of Wages in the UK: Evidence from Kernel Density Estimation," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 60(4), pages 509-28, November.
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  5. Brian J. Hall & Jeffrey B. Liebman, 1997. "Are CEOs Really Paid Like Bureaucrats?," NBER Working Papers 6213, National Bureau of Economic Research, Inc.
  6. Allen, Steven G, 1984. "Unionized Construction Workers Are More Productive," The Quarterly Journal of Economics, MIT Press, vol. 99(2), pages 251-74, May.
  7. Acemoglu, D. & Newman, A.F., 1997. "The Labor Market and Corporate Structure," Working papers 97-8, Massachusetts Institute of Technology (MIT), Department of Economics.
  8. Clark, Kim B, 1984. "Unionization and Firm Performance: The Impact on Profits, Growth, and Productivity," American Economic Review, American Economic Association, vol. 74(5), pages 893-919, December.
  9. Conyon, Martin & Gregg, Paul & Machin, Stephen, 1995. "Taking Care of Business, Executive Compensation in the United Kingdom," Economic Journal, Royal Economic Society, vol. 105(430), pages 704-14, May.
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  12. Schlicht, Ekkehart, 1992. "Wage Generosity," Munich Reprints in Economics 3165, University of Munich, Department of Economics.
  13. Marianne Bertrand & Sendhil Mullainathan, 2000. "Do CEOs Set Their Own Pay? The Ones Without Principals Do," Working Papers 810, Princeton University, Department of Economics, Industrial Relations Section..
  14. Richard B. Freeman & Lawrence F. Katz, 1995. "Differences and Changes in Wage Structures," NBER Books, National Bureau of Economic Research, Inc, number free95-1.
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  16. Blanchflower, David G & Millward, Neil & Oswald, Andrew J, 1991. "Unionism and Employment Behaviour," Economic Journal, Royal Economic Society, vol. 101(407), pages 815-34, July.
  17. Joskow, Paul L. & Rose, Nancy L. & Shepard, Andrea., 1993. "Regulatory constraints on executive compensation," Working papers 3550-93., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  18. David Card, 1992. "The Effect of Unions on the Distribution of Wages: Redistribution or Relabelling?," NBER Working Papers 4195, National Bureau of Economic Research, Inc.
  19. Akerlof, George A & Yellen, Janet L, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 255-83, May.
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  21. Murphy, Kevin J., 1999. "Executive compensation," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 38, pages 2485-2563 Elsevier.
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  23. Abowd, John M, 1989. "The Effect of Wage Bargains on the Stock Market Value of the Firm," American Economic Review, American Economic Association, vol. 79(4), pages 774-800, September.
  24. Hallock, Kevin F., 1997. "Reciprocally Interlocking Boards of Directors and Executive Compensation," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 32(03), pages 331-344, September.
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Citations

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Cited by:
  1. Rafael Gomez & Konstantinos Tzioumis, 2006. "What Do Unions Do to Executive Compensation?," CEP Discussion Papers dp0720, Centre for Economic Performance, LSE.
  2. Kuhnen, Camelia M. & Niessen-Ruenzi, Alexandra, 2008. "Is Executive Compensation Shaped by Public Attitudes?," CFR Working Papers 08-09, University of Cologne, Centre for Financial Research (CFR).

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