Definitions  Collective bargaining: A method of determining terms and conditions of employment through negotiation between a union and a firm.  Union- Any organization that represents a collective of employees with regard to compensation, hours, and working conditions.

Theory of labor movements: European Roots  Classical economists  Equilibrium analysis  Wages determined by long-run factors  Competition maximizes social welfare  Unions: short-run, disequilibrium, reduce competition, potentially harmful  Unions did not fit into the competitive theory that early market economists believed represented the ideal. McNulty Origins and Developments of Labor Economists

Adam Smith 18 th century  “It is but equity that they who feed, clothe, and lodge the whole body of the people should have such a share of the produce of their own labor as to be themselves tolerably well fed, clothed, and lodged.”  Government regulation “in favor of the workmen is always just and equitable…  [Unions] act with the folly and extravagance of desperate men who must either starve or frighten their masters into an immediate compliance with their demands.”

Karl Marx, early 19 th century  Class struggle between labor and capitalists  Union is a means of helping form class consciousness, short-run usefulness  Long-run: classless society without unions  Unions mainly political, pragmatic concentration on wages and benefits is dangerous  First International : Advocated elimination of wage labor (From each according to his ability….)

Lujo Brentano, latter 19 th century  Unions grow out of the gild system—a means by which craftsmen can maintain capitalist status and fight back industrialization  Unions are mainly a means of controlling quantity and quality of work.  Why did they persist?

Sydney and Beatrice Webb, latter 19 th century Industrial Democracy, 1897  Industrialization moves workers progressively further from ownership, power.  Unions provide a means of countervailing power  Worker class and capitalist class will cooperate in production decisions: socialist state  Unions are primarily pragmatic—means to economic gain for workers.

U.S. Theorists: Institutional School influenced by the Webbs began in early 20 th century  Institutional Economics: Effort to infuse theory with more reference to legal, historical and political contexts. Dominant school for industrial relations and collective bargaining textbooks.  Neo-classical labor economics: theoretical study of labor based on microeconomic principles.

Robert Hoxie, early 20 th century  Characterization of unions by function  Business unionism: emphasis on economic improvement  Uplift unionism: emphasis on improving the cultural level of workers (Webb)  Revolutionary unionism: emphasis on long-run rather than short-run goals (Marx)  Predatory unionism: Union leadership concentrates on extracting resources from the rank-and-file  Dependent unionism: firm controls the union as a means of controlling workers

John Commons, early 20 th century Father of Industrial Relations  Union development depends upon a country’s political, social and economic environment. Slow development on the U.S. is due to  Free land  Universal male suffrage  Rapid expansion of markets  Complex federal government  Immigration  Business cycles  Is this just the supply and demand for union services?—synthesis of neoclassical and institutional schools

Themes from 200 years of union theorists  Suspicion of unions as potentially lowering social welfare (classical economists)  Unions as means to balance power of monopoly capitalists  Unions as a way to improve the lot of the individual worker  Role of institutions: laws/politics/economy  Unions of skilled vs. unions of unskilled  Unions in Europe and the U.S. come from different roots

A Tale of Two Movements A Tale of Two Movements EuropeSocialist National labor party Bargaining across unions High density Gain ends through increased political power United States Capitalist Minority interest group Local bargaining Low density Gain ends through collective bargaining

Stylized facts regarding Union Importance in Europe vs. the United States  Higher density in Europe  Europe: Coverage>>Membership  Decline in density is worldwide  Decline in strikes is worldwide  Labor share comparable  Rising importance of public sector unionism worldwide