Subsidizing low-skilled jobs in a dual labor market

We introduce a matching model that allows for classical and frictional unemployment. The labor market is dual featuring low-skilled and high-skilled workers and simple and complex jobs. Simple jobs pay a minimum wage, while wages in the complex jobs are determined by Nash bargaining. Opportunities for low-skilled workers are limited to simple jobs; while high-skilled unemployed can apply for both types of jobs, and thereby can accept to be downgraded. We analyze the outcomes of simple job subsidy policies assuming that government budget is balanced through taxes on occupied workers. We first give conditions for the existence and uniqueness of a steady-state equilibrium and we then analyze the effects of different fiscal instruments. We show that in this set-up, increasing simple job subsidies does not necessarily reduce low-skilled unemployment or unemployment spells. By introducing heterogeneous skills and possible downgrading of the high-skilled workers, we show that the effectiveness of such policies in reducing the classical unemployment is decreasing. In fact, any additional classical unemployed re-entering the job market is accompanied by an increasing number of high-skilled workers downgrading to low-skilled jobs. We calibrate the model on French labor market data. It is found that for five low-skilled workers leaving classical unemployment, two high-skilled workers are downgraded.     

The effects of labor supply shocks on labor market outcomes: Evidence from the Israeli–Palestinian conflict

Since September 2000, as a result of mobility restrictions, the supply of Palestinian workers competing for local jobs in the West Bank has increased by about fifty percent. This paper takes advantage of this unique natural experiment to study the effects of labor supply shocks on labor market outcomes. Using quarterly information on wages and employment in each city in the West Bank, the paper analyzes the short-run adjustment of labor markets to a large inflow of workers separately from the effects of political instability. The results suggest that low-skilled wages are adversely affected by an increase in the supply of low- and high-skilled workers, while high-skilled wages are only weakly negatively related to an increase in their own supply. This is consistent with a scenario in which high-skilled workers compete for low-skilled jobs, pushing the low-skilled into unemployment. This latter hypothesis is confirmed by analyzing the effects of changes in labor supply on unemployment.     

Ambiguous effects of tax progressivity — theory and Danish evidence

Recent tax reforms in the OECD area have aimed at reducing the progressivity of labour income taxation by reducing marginal taxes for given average taxes. Theory has shown that this reduces employment/production when workers and firms determine wages through bargaining. This paper shows that an opposite effect arises when both wages and working hours are subject to bargaining. This may reverse the traditional result and this is especially likely if the bargaining power of workers is low and if labour supply is relatively elastic. In conclusion, the overall effect of a reduction in progressivity is ambiguous. The empirical estimates for Denmark indicate that the overall effect is negative for blue-collar workers and neutral for white-collar workers.     

The trade union response to agency labour in Britain

The growth of agency work in recent years has posed a challenge to trade unions, which must decide if they will accept agency workers as part of their constituency and accept employment agencies as legitimate labour‐market actors. This article analyses the reaction of British unions to agency work and identifies four main responses: exclusion, replacement, regulation and engagement. It concludes with an evaluation of union policies, which stresses the need for unions to secure broad regulation of the agency labour market either through multi‐employer bargaining or employment law.     

Commitment to company and labour union: empirical evidence from South Korea

Commitment is an important part of business and a vocal part of the lexicon of many commentators and actors in the employment relations arena, including management, trade unions and policy makers. This is partly in the context of the interest in many countries in human resource management, in which commitment is seen as a key part, and the more recent ideas of ‘employee engagement’. Commitment, and the related topic of dual commitment, has also generated academic interest. However, much of the work has come from the US. This paper applies such ideas via a set of hypotheses in a different context – South Korea – with commonly viewed widespread high commitment, both to (and from) companies (e.g., strong internal labour markets) and unions (e.g., militancy). Is there a paradox in this duality, or can workers be committed to both companies and unions? What are the antecedents of this? This paper finds that workers can have dual commitment and that different factors affect the commitment to company and labour union, although labour–management relations climate, job satisfaction, as well as company tenure, are common predictors     

Free riders: the rise of alternative unionism in Denmark

In this article we analyse some disturbing trends in the Danish labour market: while collective bargaining coverage is still relatively high, union density has been declining and—worse than that—there has been a substantial shift away from recognised and in favour of alternative unionism. The alternative unions are not parties to collective agreements, and they offer membership much cheaper than the recognised unions, in effect taking a free ride on the institutional supports that used to be effective only for the recognised unions. The article explains this conundrum by pointing to the political and institutional backgrounds to this development, which threatens to erode the very basis for the Danish collective bargaining system. On the background of general statistics and of a general employee survey, we point out the reasons behind the challenges confronting the recognised unions, pointing out that the recognised unions must become both more efficient in the member services and more cost efficient, if they wish to halt the present downhill trend.     

Coordinated employer bargaining and globalisation: a study of the men's clothing industry in Quebec, 1974–2012

This article looks at the political economy of employer coordination of collective bargaining in the clothing or apparel manufacturing industry in Canada over three phases of globalisation: from the Multi‐Fiber Agreement in 1974 to the impact of the entry of China in the WTO. Although prevailing accounts emphasise the force of exogenous change and the likely decentralisation of bargaining structures and demise of bargaining coordination by employers, this case highlights how unions and employers sought to preserve their institutional model. We find that actor strategies and their interrelations are a central part of the explanation of this apparent institutional stability, despite the real force of economic, organisational and public policy factors. However, it is a dynamic stability in which change processes, reflecting shifting power relations, are leading to important shifts in the nature of employer coordination.     

Intraindustry trade and the gains from fragmentation

The process of cross-border production fragmentation has received much attention as a possible source of deteriorating labor-market prospects, in particular for low-skilled workers. Of the research that has concentrated on the labor-market consequences of intra-product specialization, some has been rather skeptical of whether this notion generally holds true. The paper complements this research insofar as we explicitly acknowledge that fragmentation is associated with increasing returns as they might give rise to additional labor market and welfare effects. Though these effects tend to benefit high-skilled labor, we can also identify cases in which it is the low-skilled that benefit the most. In any case, there is a range of parameter values for which both skill levels do better.     

Technical skill bias as a response of firms to unemployment: A matching model with applicant ranking and endogenous skill requirements

This paper considers an economy with heterogeneous workers where identical firms optimally decide on the degree of complexity of jobs. Meetings are depicted by an urn-ball process where firms rank their applicants and pick the best one. We show that a general rise in unemployment induces an increase in the employment shares of high-skilled workers which, in turn, makes firms choose more complex jobs, leading then to a decrease in the output of low-skilled workers. The technical skill bias is therefore related to the usual explanations of unemployment. Next, we state that a decentralized equilibrium is efficient in terms of job complexity but inefficient in terms of job creation when firms internalize the usual congestion effect. We then extend the analysis to a dynamic model.     

Union effects on pay levels in Britain

The contraction of union representation in Britain raises the question of whether or not unions still achieve a wage premium. Analysis of matched employer–employee data from the 1998 Workplace Employee Relations Survey shows that there is now no demonstrable premium for private sector workers in general. However, unions do achieve a wage premium of around 9% for about half of employees covered by collective bargaining arrangements. The effect of union bargaining spills over to other employees in the same workplaces. The paper identifies circumstances where union effects are strongest—employer endorsement of union membership, high collective bargaining coverage and multi-unionism.     

Taxes on labour and unemployment in a shirking model with union bargaining

This paper studies the impact of a cut in labour taxes in a model that combines two explanations for equilibrium unemployment: employee shirking and union bargaining. It is shown that if the ratio of unemployment compensation to the net-of-tax wages is kept fixed, a tax cut leads to higher unemployment. When the unemployment benefits are fixed in real terms, the effect of a tax cut on unemployment is ambiguous. Adverse employment effects are ruled out if unions are powerless or the labour share is constant.     

Offshoring and job loss fears: An econometric analysis of individual perceptions

We quantify the impact of offshoring and other globalisation measures on individual perceptions of job security. For the analysis we combine industry-level offshoring measures with micro-level data from a large German household panel survey and estimate ordinal fixed effects models. Our results indicate that offshoring to low-wage countries significantly raises job loss fears whilst offshoring to high-wage countries somewhat lowers them. Over our sample period from 1995 to 2006, offshoring to low and high-wage countries together can account for about 13% of the total increase in job loss fears. High-skilled workers are more sensitive to offshoring although their objective job loss risk is lower relative to low-skilled workers, which we argue reflects the fact that they have more to lose from unemployment.     

Unions fit for young workers?

If trade unions are to reverse the membership decline sustained since 1979, more young workers must be recruited. This paper examines the views of young workers towards trade unions by reference to survey data. It argues that there is little evidence of a ‘Thatcher’s children’ effect in which principled opposition to trade unionism is widespread. Instead the paper shows that shifts in the labour market, the effects of employer resistance to trade unionism and union inefficiencies have a marked effect on the unionisation of young workers.     

Wage Bargaining in Industries with Market Power

We develop a game-theoretic version of the right-to-manage model of firm-level bargaining where strategic interactions among firms are explicitly recognized. Our main aim is to investigate how equilibrium wages and employment react to changes in various labor and product market variables. We show that our comparative statics results hinge crucially on the strategic nature of the game, which in turn is determined by the relative bargaining power of unions and managers.     

OFFSHORING, MULTINATIONALS AND LABOUR MARKET: A REVIEW OF THE EMPIRICAL LITERATURE

Abstract.  This paper reviews the empirical literature on the effects of offshoring and foreign activities of multinational enterprises on developed countries' labour markets. Results suggest that material offshoring worsens wage inequality between skilled and unskilled workers; it also seems to make employment more volatile, by raising the elasticity of labour demand and the risk of job losses. Service offshoring exerts at most small negative effects on total employment, and changes the composition of the workforce in favour of high-skilled white-collar employees. Multinationals tend to substitute domestic and foreign labour in response to changes in relative wages across countries; substitutability is weak, however, and mainly driven by horizontal, market-seeking foreign direct investments.     

Barriers to cross‐border trade union cooperation in Europe: the case of the graphical workers

This paper is concerned with exploring the barriers to cross‐border trade union cooperation among graphical workers in Europe. Highlighting the increasing globalisation of graphical multinationals, the paper illustrates that graphical unions cannot restrict their activities to developments within national boundaries. As such it highlights some of the obstacles that unions face in attempting to instigate transnational cooperation strategies. These obstacles include: the role of employers, the prevailing practices of the unions, employee reticence, the role of the law and resource constraints. It concludes by stressing the continuing need to strengthen cross‐border trade union networks with the ability to impose effective sanctions against the unbridled growth of multinational power.     

The bargaining power of teachers’ unions and the allocation of school resources

This paper examines how district size affects the bargaining power of teachers’ unions and the allocation of school resources. Our identification strategy exploits the fact that 33 states mandate collective bargaining while 5 states prohibited it. In states that mandate collective bargaining, we find that beginning salaries and the premium paid to experienced teachers increase with district size while the teacher–pupil ratio declines with district size. In contrast, in states that prohibit collective bargaining we find a negative relationship between district size and the premium paid to experienced teachers. District size also has a stronger positive effect on beginning salaries and a weaker negative effect on teacher–pupil ratios in states that prohibit collective bargaining. Collectively, our results suggest that more powerful unions bargain for more generous returns to teacher seniority at the expense of staffing ratios and base salaries.     

Bargaining and strikes: Towards an evolutionary framework

Conventional models of strikes start with the assumption that the bargainers' uniquely rational beliefs can be worked out in advance. Strikes are then explained as either the result of institutional constraints or of the possibility of irrationality. By contrast the evolutionary approach begins with a recognition that bargaining is naturally indeterminate and that, in the absence of a unique model of rational bargaining, conflict-free agreements between rational trades unions and firms reflect the evolution of one out of many possible conventions. This paper explores the alternative interpretation of strikes afforded by this perspective. In particular, it shows how strikes help shape the dispositions of bargainers (as opposed to just revealing it), how periods of conflict are succeeded by periods of industrial peace (and vice versa), and how the stability of bargaining protocols depends not only on the conventions regulating the relations between unions and firms but also on those between workers and union leaders as well as on technological innovations.     

The effectiveness of socially sustainable sourcing mechanisms: Assessing the prospects of a new form of joint regulation

The traditional mechanisms for improving and protecting labour standards in advanced economies are failing. In Britain, the effectiveness of collective bargaining has diminished substantially over the past quarter century. Legally enforceable minimum labour standards have been an inadequate substitute. A new form of ‘joint regulation’ is emerging that may be better attuned to the contemporary structure of product market competition. It involves employers and unions coordinating action on labour standards across the supply chains of firms that contribute to the production of a particular good or service. This article explores the circumstances in which these ‘socially sustainable sourcing’ mechanisms develop and examines their impact on labour standards, by means of two case studies.