AUT UNIVERSITY TE WANANGA ARONUI O TAMAKI MAKAU RAU Trade Union Membership and Happiness at Work: Lessons from Eastern and Western European Labor Markets Thomas Lange, Ph.D., Professor & Chair of Economics AUT Business School, Auckland, New Zealand Yannis Georgellis, Ph.D., Senior Lecturer in Economics Brunel University, London, United Kingdom

AUT UNIVERSITY TE WANANGA ARONUI O TAMAKI MAKAU RAU Unionisation and ‘Happiness at Work’ The dominant view in the job satisfaction literature suggests that there is a strong, negative relationship between unionization and job satisfaction “In survey after survey of job satisfaction, unionized workers … report themselves less satisfied with most facets of their work” (Freeman and Medoff, 1984) However, union objectives can be generally described as an endeavour to maintain and improve the conditions of employment, workers’ welfare and satisfaction by influencing the working environment and wages It follows that the widely reported negative relationship between unionization and job satisfaction is paradoxical

AUT UNIVERSITY TE WANANGA ARONUI O TAMAKI MAKAU RAU Pros and Cons It has been argued that unionized employment is inherently more unpleasant than non-union employment, with the union wage effect merely serving as a compensating differential that may be insufficiently large to counter less desirable working conditions Even when the wage variable is omitted from the estimating equation, the impact of unionization on satisfaction remains statistically significant and negative (Borjas 1979) Yet, it is equally plausible to contend that unions reduce wage inequality and influence control over job design This, in turn, may increase workers’ satisfaction

The most popular theoretical explanation Despite arguments for a positive relationship, the dominant empirical perspective suggests that unionized employment reduces job satisfaction The “voice hypothesis” serves as the most popular theoretical explanation for this finding: unionization politicizes the work force and makes workers more critical towards the workplace and more willing to complain about problems. Thus unionization legitimizes and facilitates the expression of dissatisfaction Is this a valid argument?

AUT UNIVERSITY TE WANANGA ARONUI O TAMAKI MAKAU RAU Problems with the argument A number of studies have questioned the validity of the argument on the grounds of imperfect data and modelling techniques: –Small sample sizes and missing observations –Lacking data on important aspects of a job –Limited cross-national data sets –Treating selection into union membership as a given

AUT UNIVERSITY TE WANANGA ARONUI O TAMAKI MAKAU RAU Objectives and Data The aim of this study is to fill the gap in the empirical literature by comparing the determinants of job satisfaction and the impact of union membership across a large number of Eastern and Western European labor markets The data used is derived from the third wave of the European Values Study (EVS), covering 14 Eastern European and 17 Western European countries. We use pooled data at regional level (Eastern vs Western Europe) to avoid small samples and missing observations In support of the present study, EVS provides information on: –Union membership –Job satisfaction –Demographics –Various labor market characteristics –Values, beliefs and important aspects of a job

AUT UNIVERSITY TE WANANGA ARONUI O TAMAKI MAKAU RAU Value added of the study Large data set, collected during 1999/2000 Data covers not only Western European, but also a large number of Eastern European labor markets, with an effective sample of 2670 and 3502 observations for Eastern and Western European workers, respectively (our sample is limited to male workers in salaried employment, aged 18-65). Unusually, the data also covers individual values, beliefs and workers’ perceptions of important aspects of a job Methodology explicitly tackles “endogeneity bias”

AUT UNIVERSITY TE WANANGA ARONUI O TAMAKI MAKAU RAU Empirical Framework Job satisfaction is measured by an ordinal, categorical variable (1 = extremely dissatisfied; 10 = extremely satisfied) We first follow the ‘traditional approach’ and estimate an ordered probit model, controlling for personal characteristics, educational achievements, values and beliefs, and important aspects of a job In recognition of endogeneity bias, we subsequently express our regression as a linear model and then correct this specification for unionization-job satisfaction endogeneity. For the latter, we use a slight generalization of Heckman’s bivariate selection model. The formal treatment of the model is provided in the text.

AUCKLAND UNIVERSITY OF TECHNOLOGY TE WANANGA ARONUI O TAMAKI MAKAU RAU Findings: Descriptive statistics (a) Table 1: The distribution of job satisfaction EASTERN EUROPEWESTERN EUROPE Job satisfactionUnion% Non-union%Union% Non-union% 1 – ≥ TOTAL Count

AUCKLAND UNIVERSITY OF TECHNOLOGY TE WANANGA ARONUI O TAMAKI MAKAU RAU Findings: Descriptive statistics (b) Table 2: Important aspects of a job EASTERN EUROPEWESTERN EUROPE Job attributesUnion% Non-union%Union% Non-union% Pay Job security Respected Hours Initiative Achievement Responsibility Interaction with colleagues Promotion Count

AUCKLAND UNIVERSITY OF TECHNOLOGY TE WANANGA ARONUI O TAMAKI MAKAU RAU Regression analysis - selected findings (full set of results in text) EASTERN EUROPEWESTERN EUROPE Ord. Probit Linear Linear CorrectedOrd. Probit Linear Linear Corrected Constant7.604** 8.216** 7.597**7.516** (0.611)(0.672)(0.430)(0.448) Union member-0.150**-0.308** 1.377** * (0.046)(0.100)(0.534)(0.038)(0.065)(0.320) Age * (0.013)(0.029)(0.029)(0.012)(0.021)(0.021) (Age) * (0.016)(0.035)(0.035)(0.015)(0.026)(0.025) Married *0.166* (0.051)(0.110)(0.120)(0.042)(0.072)(0.072) Main earner0.227**0.509** 0.471**0.110*0.215* (0.055)(0.120)(0.125)(0.056)(0.096)(0.099) Income Middle0.207**0.518** 0.412** * (0.060)(0.131)(0.137)(0.050)(0.086)(0.091) Upper0.405**0.965** 0.888**0.205**0.384** 0.257** (0.060)(0.130)(0.138)(0.054)(0.092)(0.099) Part-time worker (0.083)(0.181)(0.190)(0.085)(0.146)(0.146)

AUCKLAND UNIVERSITY OF TECHNOLOGY TE WANANGA ARONUI O TAMAKI MAKAU RAU EASTERN EUROPEWESTERN EUROPE Ord. Probit Linear Linear CorrectedOrd. Probit Linear Linear Corrected Values and beliefs Competition is harmful **-0.086**-0.065** (0.009)(0.019)(0.019)(0.008)(0.014)(0.014) State should control firm * (0.007)(0.015)(0.015)(0.007)(0.012)(0.013) Inequality not a concern **0.442** 0.282* (0.086)(0.186)(0.195)(0.078)(0.131)(0.141) Important aspects of a job Pay-0.177*-0.381* (0.070)(0.152)(0.157)(0.048)(0.082)(0.083) Job security * (0.048)(0.104)(0.116)(0.039)(0.068)(0.072) Respected (0.049)(0.106)(0.113)(0.040)(0.068)(0.070) Hours ** (0.044)(0.095)(0.101)(0.039)(0.066)(0.068) Initiative * (0.051)(0.110)(0.113)(0.043)(0.073)(0.074) Achievement (0.050)(0.110)(0.114)(0.041)(0.070)(0.072) Responsibility0.308**0.655** 0.588**0.117**0.177*0.189** (0.051)(0.110)(0.114)(0.041)(0.070)(0.071) Interaction w/colleagues0.119*0.279** 0.294** (0.048)(0.104)(0.107)(0.043)(0.074)(0.075) Promotion *-0.150*-0.082) (0.050)(0.108)(0.113)(0.042)(0.073)(0.075)

AUCKLAND UNIVERSITY OF TECHNOLOGY TE WANANGA ARONUI O TAMAKI MAKAU RAU Key Results & Future Research After controlling for union-job satisfaction endogeneity, a positive relationship between the two variables can be observed This questions the validity of the voice hypothesis Results for Eastern Europe evince traits of the region’s communist past as well as experiences during socio-economic transition Implications for the evolving process of European labor market integration are complex and as yet not fully understood In particular, treating Eastern Europe as a homogenous group may mask important country and sub-regional differences Future research should disentangle the latter