The Impact of Unions in Wage Determination

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Wordweb defined Union as an organization of employees formed to bargain with the employer.

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The Impact of Unions in Wage Determination

Impact on general wage and benefit levels Impact on the structure of wages Impact on non-union firms (spillover) Impact on wage and salary policies and practices in unionized firms
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Union Impact on General Wage Levels

Unions do make a difference in wages. Union workers earn between 8.9% and 12.4% more than non-union workers/counterparts. The size of the gap varies from year to year. During periods of higher unemployment and slow economies, the impact of unions is larger. During strong economies the unionnonunion gap is smaller.
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The Structure of Wage Packages

The presence of a union adds 20% to 30% to employee benefits. Unionized employees have a greater percentage of their total wage bill allocated to employee benefits. Benefits are 34.5% of the total compensation package for union workers Benefits are 25.6% for nonunion workers The higher costs are from higher pension expenditures and higher insurance benefits. Unions are reluctant to accept a two-tier McGraw 2002 by The McGraw-Hill Companies, Inc. All

Union Impact: The Spillover Effect

Employers seek to avoid unionization by offering workers the wages, benefits, and working conditions won in rival unionized firms. The nonunion management continues to enjoy the freedom from union interference in decision making. The nonunion workers receive the spillover of rewards obtained by McGraw

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Role of Unions In Wage and Salary Policies and Practices

The role of unions in administering compensation is outlined primarily in the contract. This includes: Basis of pay Regular pay Overtime pay Occupation - wage differentials Experience / merit differentials

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Role of Unions In Wage and Salary Policies and Practices (continued)

Other differentials new and probationary employees pay to unionized employees employed by firm in different geographic areas part-time and temporary employees

Vacations and holidays Observance of the following Legal Holidays New Years Day (Jan. 1) - Independence Day (June 12) Maundy Thursday - National Heroes Day (Aug. 29) - Bonifacio Day (Nov. 30) Good Friday - Christmas Day (Dec. 25) Araw ng Kagitingan (April 9) - Rizal Day (Dec. 30) Labor Day (May 1) McGraw 2002 by The McGraw-Hill Companies, Inc. All

Role of Unions In Wage and Salary Policies and Practices (continued)

Wage Adjustment Provisions

wage increases - is negotiated at the time of initial contract negotiations with the timing and amount specified in the contract. Re-opener clauses - specifies that wages, and sometimes such nonwage items as pension and benefits, will be renegotiated at a specified time or under certain conditions. Cost-of-Living Adjustments (COLA) or Escalator clauses - involves periodic adjustments based typically onAll McGraw 2002 by The McGraw-Hill Companies, Inc.
Deferred

Summary
Due to increased international competition, U.S. labor costs must be cut to improve competitive position. Unions face a difficult situation. How should they respond to the attacks on traditional compensation systems? The crisis demands changing attitudes from both management and labor.

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Reference:
Milkovich, G.T. & Newman, J.M. (2002). Compensation 8th Eds., USA: McGraw-Hill Higher Education.

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2002 by The McGraw-Hill Companies, Inc. All