IDEAS home Printed from https://ideas.repec.org/p/iza/izadps/dp150.html
   My bibliography  Save this paper

Unions and the Labor Market for Managers

Author

Listed:
  • 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.

Suggested Citation

  • DiNardo, John & Hallock, Kevin F. & Pischke, Jörn-Steffen, 2000. "Unions and the Labor Market for Managers," IZA Discussion Papers 150, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp150
    as

    Download full text from publisher

    File URL: https://docs.iza.org/dp150.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. George A. Akerlof & Janet L. Yellen, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, Oxford University Press, vol. 105(2), pages 255-283.
    2. Machin, Stephen J & Wadhwani, Sushil, 1991. "The Effects of Unions on Organisational Change and Employment," Economic Journal, Royal Economic Society, vol. 101(407), pages 835-854, July.
    3. 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.
    4. 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 704-714, May.
    5. Paul Gregg & Stephen Machin & Stefan Szymanski, 1993. "The Disappearing Relationship Between Directors' Pay and Corporate Performance," British Journal of Industrial Relations, London School of Economics, vol. 31(1), pages 1-9, March.
    6. 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..
    7. Barry T. Hirsch, 1991. "Labor Unions and the Economic Performance of Unions," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number luepf, july-dece.
    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. 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.
    10. Brian J. Hall & Jeffrey B. Liebman, 1998. "Are CEOs Really Paid Like Bureaucrats?," The Quarterly Journal of Economics, Oxford University Press, vol. 113(3), pages 653-691.
    11. Schlicht, Ekkehart, 1992. "Wage Generosity," Munich Reprints in Economics 3165, University of Munich, Department of Economics.
    12. repec:fth:prinin:431 is not listed on IDEAS
    13. Acemoglu, Daron & F. Newman, Andrew, 2002. "The labor market and corporate structure," European Economic Review, Elsevier, vol. 46(10), pages 1733-1756, December.
    14. Hallock, Kevin F., 1997. "Reciprocally Interlocking Boards of Directors and Executive Compensation," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 32(3), pages 331-344, September.
    15. 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.
    16. Steven G. Allen, 1984. "Unionized Construction Workers are More Productive," The Quarterly Journal of Economics, Oxford University Press, vol. 99(2), pages 251-274.
    17. Blanchflower, David G & Millward, Neil & Oswald, Andrew J, 1991. "Unionism and Employment Behaviour," Economic Journal, Royal Economic Society, vol. 101(407), pages 815-834, July.
    18. repec:eee:labchp:v:3:y:1999:i:pb:p:2485-2563 is not listed on IDEAS
    19. David Orr, 1999. "Book," Journal of Industrial Ecology, Yale University, vol. 3(4), pages 155-156, October.
    20. Freeman, Richard B. & Katz, Lawrence F. (ed.), 1995. "Differences and Changes in Wage Structures," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226261607, February.
    21. 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.
    22. Marianne Bertrand & Sendhil Mullainathan, 2000. "Do CEOs Set Their Own Pay? The Ones Without Principals Do," NBER Working Papers 7604, National Bureau of Economic Research, Inc.
    23. Angrist, Joshua D. & Krueger, Alan B., 1999. "Empirical strategies in labor economics," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 23, pages 1277-1366, Elsevier.
    24. David Neumark & Michael L. Wachter, 1995. "Union Effects on Nonunion Wages: Evidence from Panel Data on Industries and Cities," ILR Review, Cornell University, ILR School, vol. 49(1), pages 20-38, October.
    25. Paul Joskow & Nancy Rose & Andrea Shepard, 1993. "Regulatory Constraints on CEO Compensation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(1 Microec), pages 1-72.
    26. 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 509-528, November.
    27. Brian D. Bell & Michael K. Pitt, 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 509-528, November.
    28. N. Gregory Mankiw & James M. Poterba, 1996. "Stock Market Yields and the Pricing of Municipal Bonds," NBER Working Papers 5607, National Bureau of Economic Research, Inc.
    29. 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.
    30. Jensen, Michael C & Murphy, Kevin J, 1990. "Performance Pay and Top-Management Incentives," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 225-264, April.
    31. Bell, B. & Pitt, M.K., 1995. "Trade Union Decline and the Distribution of Wages in the UK: Evidence from Kernel Density Estimation," Economics Papers 107, Economics Group, Nuffield College, University of Oxford.
    32. Richard B. Freeman & Lawrence F. Katz, 1995. "Differences and Changes in Wage Structures," NBER Books, National Bureau of Economic Research, Inc, number free95-1, January.
    33. William T. Dickens & Lawrence F. Katz, 1986. "Interindustry Wage Differences and Industry Characteristics," NBER Working Papers 2014, National Bureau of Economic Research, Inc.
    34. Lawrence F. Katz & Lawrence H. Summers, 1989. "Industry Rents: Evidence and Implications," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1989 Micr), pages 209-290.
    35. 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 509-528, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. 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).
    2. Rafael Gomez & Konstantinos Tzioumis, 2006. "What Do Unions Do to Executive Compensation?," CEP Discussion Papers dp0720, Centre for Economic Performance, LSE.
    3. Henry S. Farber & Daniel Herbst & ilyana Kuziemko & Suresh Naidu, 2018. "Unions and Inequality Over the Twentieth Century: New Evidence from Survey Data," Working Papers 620, Princeton University, Department of Economics, Industrial Relations Section..
    4. Boodoo, Muhammad Umar, 2018. "Do heavily-unionized companies compensate their CEOs less in periods of financial distress? Evidence from Canadian companies during the financial crisis," LSE Research Online Documents on Economics 69601, London School of Economics and Political Science, LSE Library.
    5. Henry S. Farber & Daniel Herbst & Ilyana Kuziemko & Suresh Naidu, 2021. "Unions and Inequality Over the Twentieth Century: New Evidence from Survey Data," Working Papers 2021-91, Princeton University. Economics Department..
    6. Muhammad Umar Boodoo, 2016. "Do heavily-unionized companies compensate their CEOs less in periods of financial distress? Evidence from Canadian companies during the financial crisis," LSE Research Online Documents on Economics 67557, London School of Economics and Political Science, LSE Library.
    7. Daron Acemoglu & James A. Robinson, 2013. "Economics versus Politics: Pitfalls of Policy Advice," Journal of Economic Perspectives, American Economic Association, vol. 27(2), pages 173-192, Spring.
    8. Juan E. Jacobo, 2022. "Back to the Surplus: An Unorthodox Neoclassical Model of Growth, Distribution and Unemployment with Technical Change," Papers 2211.14978, arXiv.org.
    9. Kilman, Josefin, 2020. "Monetary Policy and Income Inequality in the United States: The Role of Labor Unions," Working Papers 2020:10, Lund University, Department of Economics, revised 20 Sep 2022.
    10. Daron Acemoglu & James A. Robinson, 2013. "Ekonomia kontra polityka: niebezpieczne rady w kwestiach polityki ekonomicznej," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 11-12, pages 113-136.
    11. Henry S. Farber & Daniel Herbst & Ilyana Kuziemko & Suresh Naidu, 2018. "Unions and Inequality Over the Twentieth Century: New Evidence from Survey Data," NBER Working Papers 24587, National Bureau of Economic Research, Inc.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. John DiNardo & Kevin Hallock & Jorn-Steffen Pischke, 1997. "Unions and Managerial Pay," NBER Working Papers 6318, National Bureau of Economic Research, Inc.
    2. Gomez, Rafael & Tzioumis, Konstantinos, 2006. "What do unions do to executive compensation?," LSE Research Online Documents on Economics 19865, London School of Economics and Political Science, LSE Library.
    3. Xavier Gabaix & Augustin Landier, 2008. "Why has CEO Pay Increased So Much?," The Quarterly Journal of Economics, Oxford University Press, vol. 123(1), pages 49-100.
    4. John M. Abowd & David S. Kaplan, 1999. "Executive Compensation: Six Questions That Need Answering," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 145-168, Fall.
    5. Pierre-André Chiappori & Bernard Salanié, 2002. "Testing Contract Theory : A Survey of Some Recent Work," Working Papers 2002-11, Center for Research in Economics and Statistics.
    6. Vicente Cuñat & Maria Guadalupe, 2005. "How Does Product Market Competition Shape Incentive Contracts?," Journal of the European Economic Association, MIT Press, vol. 3(5), pages 1058-1082, September.
    7. Hall, Brian J. & Murphy, Kevin J., 2002. "Stock options for undiversified executives," Journal of Accounting and Economics, Elsevier, vol. 33(1), pages 3-42, February.
    8. John T. Addison & Ralph W. Bailey & W. Stanley Siebert, 2009. "Wage Dispersion in a Partially Unionized Labor Force," GEMF Working Papers 2009-09, GEMF, Faculty of Economics, University of Coimbra.
    9. Susan Hayter, 2015. "Unions and collective bargaining," Chapters, in: Janine Berg (ed.), Labour Markets, Institutions and Inequality, chapter 4, pages 95-122, Edward Elgar Publishing.
    10. Hibbs, Douglas A, Jr, 2000. "Bread and Peace Voting in U.S. Presidential Elections," Public Choice, Springer, vol. 104(1-2), pages 149-180, July.
    11. Gary Gorton & Frank Schmid, 2000. "Class Struggle Inside the Firm: A Study of German Codetermination," NBER Working Papers 7945, National Bureau of Economic Research, Inc.
    12. Donna Brown & Peter Ingram & Jonathan Wadsworth, 2004. "Everyone's A Winner? Union Effects on Persistence in Private Sector Wage Settlements: Longitudinal Evidence from Britain," School of Economics Discussion Papers 1104, School of Economics, University of Surrey.
    13. Sandvik, Jason & Saouma, Richard & Seegert, Nathan & Stanton, Christopher T., 2018. "Analyzing the Aftermath of a Compensation Reduction," CEPR Discussion Papers 13242, C.E.P.R. Discussion Papers.
    14. John M. Abowd & Felipe Balmaceda & David Kaplan., "undated". "Accounting Profits, Market Profits, and the Compensation of Regular Employees," ILADES-UAH Working Papers inv119, Universidad Alberto Hurtado/School of Economics and Business.
    15. Jenter, Dirk, 2004. "Executive Compensation, Incentives, and Risk," Working papers 4466-02, Massachusetts Institute of Technology (MIT), Sloan School of Management.
    16. Otten, J.A. & Heugens, P.P.M.A.R., 2007. "Extending the Managerial Power Theory of Executive Pay: A Cross National Test," ERIM Report Series Research in Management ERS-2007-090-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    17. Brunello, Giorgio & Graziano, Clara & Parigi, Bruno, 2001. "Executive compensation and firm performance in Italy," International Journal of Industrial Organization, Elsevier, vol. 19(1-2), pages 133-161, January.
    18. Jeff Borland, 2000. "Economic Explanations of Earnings Distribution Trends in the International Literature and Application to New Zealand," Treasury Working Paper Series 00/16, New Zealand Treasury.
    19. Agyei-Boapeah, Henry & Ntim, Collins G. & Fosu, Samuel, 2019. "Governance structures and the compensation of powerful corporate leaders in financial firms during M&As," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 37(C).
    20. Dittmann, Ingolf & Maug, Ernst & Zhang, Dan, 2011. "Restricting CEO pay," Journal of Corporate Finance, Elsevier, vol. 17(4), pages 1200-1220, September.

    More about this item

    Keywords

    executives; managers; unions; wage structure; CEOs;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp150. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/izaaade.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Holger Hinte (email available below). General contact details of provider: https://edirc.repec.org/data/izaaade.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.