Individual Mobility and Union Voice in the Labor Market

Abstract

Standard economic analysis of the impact of trade unions on the labor market is straightforward: unions are monopolistic organizations that raise wages and create inefficiency in resource allocation. Industrial relations experts tell a more complex story, stressing the diverse effect of unions on work rules, managerial decision making, and virtually every aspect of the activity of enterprises. This article focuses on the impact of the non-wage effects of collective bargaining on the monopoly model. This article also examines the non-wage effects of trade unions in the context of the exit-voice model of the social system developed by economist Albert 0. Hirschman in 1970. Unions are treated as the institution of collective voice in the job market; voluntary quits as the expression of exit. Comparisons are made between the free market quit and union voice mechanisms for transmitting worker desires for conditions of employment, compensation packages, and rules of the work place to employers; some empirical implications of the analysis are drawn and preliminary empirical findings described.