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Unions and the Labor Market for Managers

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Author Info

  • DiNardo, John

    ()
    (University of Michigan)

  • Hallock, Kevin F.

    ()
    (Cornell University)

  • Pischke, Jörn-Steffen

    ()
    (London School of Economics)

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 Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 150.

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Length: 53 pages
Date of creation: May 2000
Date of revision:
Handle: RePEc:iza:izadps:dp150

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Keywords: executives; managers; unions; wage structure; CEOs;

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  1. Abowd, John M, 1989. "The Effect of Wage Bargains on the Stock Market Value of the Firm," American Economic Review, American Economic Association, American Economic Association, vol. 79(4), pages 774-800, September.
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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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