Labour Econ Unit 3

Labour market outcome

Outcome generated from the labour market as a result of labour supply and labour demand

Union-Non union Wage differential

The percentage difference in wage rates between union workers and otherwise comparable non-union workers

(Union wage/Non union wage) - 1

What is the wage differential equation?

Spillover effect

Union increasing wages in the union sector causes workers to spillover to the non union sector, decreasing wages and increasing employment in the non union sector

Threat effect

Non union firms increasing wage rate in order to discourage unionization

-Leads to wages increasing and employment decreasing for non union firms that are threatened (choose to increase)

-Leads to wages decreasing and employment increasing even further for non union firms that aren’t threatened (in addition to the spillover effect)

High, Easy, Aggressive, Aversion

The threat effect is greater when:
-Union non union differential is (high/low)

-Non union sector is (easy/hard) to organize

-The union is (aggressive/passive)

-The employer has (aversion/indifferent) to unions

Wage employment Contracts

If the union and firm negotiate a wage employment outcome on the contract curve (right of the demand curve), the spillover effect does not occur

-wages and employment stay the same in the non union sector

Queue employment

When unemployed workers in the union sector wait for jobs to open up instead of exiting to the non union sector

-The spillover effect is less

-This effect is greater if there is rapid turnover in union sector, and if it is difficult to get a union job if already employed

Success in non-unionized sector (demand)

If non union firms have better profits because of the lower wage rates from the spillover effect, demand for non union labour will increase

-the wage differential gap will narrow

Controlling for other relevant factors

When measuring the wage effect of unions, we want to hold all other variables fixed. It is difficult to find “all other variables” without missing some

Omitted variable bias

Some variables (such as skill) are too hard to measure, so they may be excluded from analysis

Selection bias

When selecting relevant variables, it is okay to omit some as long as they are the same for both union and non union members. However, it is likely those variables are different between them (ex. political compass)

Reverse causality

Unions may cause higher wage rate. However, it could also be the case that higher wage rates cause unions. We don’t know

Differs, Similar

The union wage effect generally (stays the same/differs) across individual workers

Canadian effect is (similar/different) to US studies

15%, 5%

The union non union wage differential has historically been (blank %), fallen to (blank %) over time

High

If the industry has a (high/low) union density, the union non union wage differential tends to be higher but diminishing after a certain point

Larger

If the firm size is (larger/smaller), the union non union wage differential tends to decrease

Low skill

The union non union wage differential is greater for (high skill/low skill) workers

Less

Industries with (more/less) regulation tend to have lower union non union wage differentials

Smaller

The public sector wage differential is (larger/smaller) than the private sector wage differential

Positive

There is a small (positive/negative) wage differential for university workers

women

The wage differential tends to be higher for (men/women)

increases

The union non union wage differential (increases/decreases) in recessions. The opposite occurs in expansions

(Union Wage/W*) - 1

What is the equation for the pure union wage differential?

-Where W* is the non union equation using variables of average union workers

Less

There is (more/less) wage dispersion among union workers compared to non union workers

Lower, Increase

There is (higher/lower) wage dispersion within the union sector

Unions (increase/decrease) the wage differential between union and non union work

The overall effect is ambigous

Less than 10%

Overall, unions reduce wage unequality by (more than/less than blank%)

Workers

This group likes wage benefits because they are often non taxable

Employers

This group likes wage benefits because they reduce turnover

Governments

This group likes wage benefits because they reduce the expenditure needed for similar things

Greater

Because unions secure (greater/less) fringe benefits for their workers, the total compensation gap is understated

Lower

Research shows employment growth is (higher/lower) in union firms compared to non union firms

More, Faster

Union firms tend to be governed by (more/less) rules

Union firms tend to have (faster/slower) pace

Less, Less

Union workers report (more/less) job satisfaction due to expectations

Union members tend to perceive (more/less) job security

More, Less

Unions are associated with (more/less) non-fatal injuries and (more/less) fatal injuries

Potentially due to:

-Better reporting

-Unionization occuring in select industries

-Managers needing to offset higher wages

-Workers being more careless due to more rules

-Conversion from fatal to non-fatal

Lower

The quit rate is significantly (higher/lower) for union workers

-more total comp and greater voice

Higher

Union employees have much (higher/lower) rates of absenteeism due to sickness

-Union protection or members abusing protections

Creative destruction

Economic growth that occurs through the continous creation of new technologies that replace older ones

-Unions need to protect workers who lose thier jobs

-Unionization shifts due to employment changing across industries

-Unions may encourage innovation if firms substitute labour for capital

Joseph Shumpeter

The one who developed the concept of Creative Destruction

Peter Howitt

The economist who won the nobel prize in 2025 for his work on Creative Destruction

Union Dues

Regular payments made by workers to fund activities of their union (ex. strike fund)

-Small % (1-2.5%) of before tax earnings, non taxable

-Set by the union, not the employer

Strike

A collective work stoppage initiated by the union to put pressure on the employer to meet collective bargaining

Lockout

An action taken by the employer where workers are prevented from working to put pressure on the union to accept collective bargaining

T = Resources/Cost

Tolerance equation in the model of strikes

U = w - Cu * t

Union’s utility in the model of strikes

U = Revenue - w - Cf * t

Firm’s utility in the model of strikes

W* = Wf + Beta*(Wu - Wf)

What is the equilibrium wage outcome in the model of strikes?

VuCf / (VuCf + VfCu)

Beta equation in model of strikes

T = 0

What is the equilibrium time that the model of strikes predicts?

T > 0

If there is private information or commitment to endurance, this could make the time outcome: (Blank)

UWOFA

An association that represents two groups of workers at Western (each group is its own bargaining unit with its own collective agreement)

-Full time and part time faculty (1700 members)

-Librarians and archivists (45 members)

-Associated with OCUFA and CAUT unions (but not part of a larger union)

-Board of Directors and 6 paid staff

-Has never gone on strike

PSAC 610

A union that represents three groups of workers at Western (each group is its own bargaining unit)

-Graduate TAs (2,200)

-Postdoctorate scholars (290)

-Graduate assistants (300)

-Graduate assistants currently negotiating their first collective bargaining agreement

-Elected excutive team and 2 paid staff

-Local arm of a larger union

-Graduate TAs went on strike in Winter 2024

PSAC 610 Most common grievances

-Issues with wages

-Issues with hours of work

-Over time pay and personal leave

-Harassment and bullying