James L. Medoff

The Employer Size-Wage Effect

We consider six explanations for the positive relationship between employer size and wages: large employers (1) hire higher-quality workers, (2) offer inferior working conditions, (3) make more use of high wages to forestall unionization, (4) have more ability to pay high wages, (5) face smaller pools of applicants relative to vacancies, and (6) are less able to monitor their workers. We find some support for the first of these, but there remains a significant wage premium for those working for large employers.

Trade Unions in the Production Process

In order to estimate the effects of unions on worker productivity, a Cobb-Douglas production function is modified so that unionization is included as a variable. The resulting functional form is similar to that used to isolate the effect of worker quality in previous studies. Using state by two-digit SIC observations for U.S. manufacturing, unionization is found to have a substantial positive effect on output per worker. However, this result depends on two important assumptions which we cannot verify directly; attempts to relax these assumptions are not conclusive.

New estimates of private sector unionism in the United States

Estimates the extent of unionism in the United States. Prerequisite for analysis of the economic effects of trade unions; Membership rates for occupational groups and geographical areas; Information on a principal establishment survey; Purpose of data derived from household surveys; Importance of membership data provided by unions. (Abstract copyright EBSCO.)

Length of Service and Promotions in Union and Nonunion Work Groups

This study provides evidence on the relative importance of seniority and ability in the promotion process in union and nonunion settings. The analysis is based on survey data collected from managers in a random sample of about 400 firms, supplemented by an examination of personnel records concerning the pattern of promotions in two manufacturing firms. The results show that, as expected, the weight assigned seniority is significantly greater in union than in nonunion settings, but the difference is smaller than many would have predicted.

U.S. Labor Markets: Imbalance, Wage Growth, and Productivity in the 1970s

DURING THE 1970s there was a marked increase in both the turnover and perceived shortages in U.S. labor markets that were associated with a given rate of unemployment. In those years a given unemployment rate became linked with much faster wage growth and much slower productivity growth than it was before. This paper presents evidence that relates the apparent increasing difficulty employers have had in satisfying their labor demands at given rates of unemployment to the U.S. record of wage and productivity growth. Throughout he discussion the extent of labor turnover (measured in terms of discharge and quit rates for the manufacturing sector) and the degree of apparent shortages (reflected primarily in help-wanted advertising per employee) associated with particular unemployment rates are referred to as labor market imbalance. In the 1970s the average annual growth rate of the civilian labor force was much greater than it was in the preceding twenty years: 2.5 percent a year in the 1970s, 1.7 percent a year in the 1960s, and 1.1 percent a year in the 1950s. To put the rate for the 1970s in better perspective, one should include in the picture the forecasts of labor force growth by the

Trade Unions and Productivity: Some New Evidence on an Old Issue

Econometric investigations have yielded new evidence concerning collective bargainings impact on productivity for workers of a given quality working with the same amount of capital. These findings indicate that in many sectors—in particular, manufacturing and construction—unionized work places are on average more productive than nonunion ones. This positive effect is not an immutable constant. For example, in the underground bituminous coal industry, unionized mines were less productive than nonunion mines in 1975, with the reverse true in 1965. The routes by which unions affect productivity have not yet been carefully delineated, but they appear to differ from sector to sector. In manufacturing, reduced turnover and improved management seem to be key; in construction, better-trained workers and more rationalized hiring and supervision seem to be primary. Finally, while the union/nonunion productivity differential is likely to be positive, it is on the average not large enough to offset the greater compensation and capital intensity under unionism. Hence, higher productivity and lower profitability appear to go hand in hand under collective bargaining.

Employers Large and Small

Examines the role that small firms play in the American labor market. The authors seek to dispel two commonly held misconceptions: that small businesses generate the vast majority of jobs and that small business owners face limited political influence. Empirical data from the U.S. Small Business Administration, the Bureau of Labor Statistics, and the Census Bureau for the mid-1980s as well as privately collected data are reviewed to determine the differences between large and small firms as employers. The share of new jobs created by small firms, the percentage of the workforce employed by small firms, and the longevity of jobs created by small firms reveal that while these firms are responsible for a disproportionate share of new jobs, small firm employment share has largely remained constant. This results from the fact that new firms, and the new jobs they produce, tend to be small; small firms do not often produce new, long-lived jobs. Compensation and working conditions are reviewed. Although small firm wages tend to be lower, the traditional explanations -- more favorable working conditions at small firms, union avoidance, and discouragement of shirking -- are shown to have minimal explanatory power. Rather, lowered non-labor input prices for large firms enables those firms to pay higher wages. Quit rates and applicants-per-vacancy reveal that intangibles such as job satisfaction fail to explain the compensation differential. Unionization rates and union desirability among employees reveals that small firms could be prime targets for organizing drives. Lastly, the political influence of small businesses and the wisdom of governmental aid to small businesses and statutory exemptions or lax enforcement are critically assessed. (CAR)