The labor market effects of trade unions in an open economy: Layard meets Melitz

Pinto, Marco de; Michaelis, Jochen

doi:10.1007/s10368-014-0301-z

Cited by 4 publications

(3 citation statements)

References 24 publications

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“…To these ends, occupational safety and health assurance enacted in 1970 includes a "General Duty Clause" that prohibits any workplace practice that represents a clear risk to workers (Pazos, 2016; National Institute for Occupational Safety and Health, 2020); company-funded health insurance regulations passed in 2010 requires that employers with 50 or more full-time workers offer them a minimal level of health insurance or pay a substantial penalty (Internal Revenue Service, 2021); whistleblower protectionist policies consist of acts that directly safeguards those who highlight violations of environmental law and uncover unlawful manufacturing policies (US Department of Labor, 2022). Other examples such as trade unions are founded by the people and legalized by the government for workers' rights and improved working conditions (Britannica, 2019;Pinto & Michaelis 2014;Walters & Mishel, 2003). These federal policies not only shield employees against unfairness and exploitation but also provide general employment interests, thus creating incentives for the unemployed to actively seek work without restraining the attractiveness and the bargaining power of the workers themselves.…”

Section: Alternative To the Minimum Wagementioning

confidence: 99%

Analyzing the Socio-Economic Impacts of the US Federal Minimum Wage

Wang¹

2022

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With United States president Joe Biden announcing plans to raise the federal minimum wage to $15 an hour, conversations surrounding minimum wage laws have resurfaced yet again as businesses and policymakers look to get ahead of its effects on the economy. This paper will analyze the economic and social impacts of the US federal minimum wage by drawing on economic models and empirical data from sources such as the Congressional Budget Office and Bureau of Labor Statistics. Various studies have shown that raising the minimum wage would result in large-scale unemployment effects, severely hurting the economy in the midst of the COVID-19 recession. Firstly, minimum wage policies fail to combat poverty and instead induce cost-push inflation, reducing real wages. Secondly, many contract and self-employed workers are not covered by minimum wage regulations at all. Thirdly, by directing those at the lowest end of the wage spectrum into the ranks of the unemployed, minimum wage laws have an unfairly disproportionate effect on the impoverished, thereby exacerbating income inequality. Finally, from a social perspective, minimum wage policies violate workers' freedom of contract by interfering with their employment seeking process, and the existence of minimum wages can weaken workers' negotiation power in wage bargaining. This weakness is especially evident when considering that there are many other alternatives in safeguarding workers' rights such as workplace safety laws and trade unions. In light of these negative impacts, this essay warns policymakers to not be too optimistic towards the minimum wage and encourages governments to seek other alternatives to protect workers' rights and secure higher wages. By analyzing the potential drawbacks of the minimum wage, this paper addresses a gap in the existing literature, which mainly focuses on the benefits of the policy. Therefore, not only will this paper contribute to existing work in the field of labor economics, it also provides a more holistic, well-rounded perspective of the federal minimum wage.

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Section: Alternative To the Minimum Wagementioning

confidence: 99%

Analyzing the Socio-Economic Impacts of the US Federal Minimum Wage

Wang¹

2022

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“…(). See also de Pinto and Michaelis () and de Pinto (), who implement this approach in an open economy model with monopolistic competition and unionized labor markets.…”

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confidence: 99%

The Impact of Unionization Structures with Heterogeneous Firms and Rent‐Sharing Motives

Pinto

2018

Scandinavian J Economics

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How are unemployment and output affected if wages are set on the sector level rather than firm level? We take a new look at this question, allowing for heterogeneous firms and rent-sharing motives. Without these motives, employment and output are lower under sector-level wage-setting due to higher wage markups. With rent-sharing motives, however, firm selection is higher under sector-level wage-setting, which tends to increase employment and output, thus counteracting the markup effect. Simulations show that the firm-selection effect decreases the difference between the two unionization structures substantially but it does not change the signs of the effects on output and employment.

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“… If we would relax our assumption of a monopoly union and allow for a bargaining between unions and firms, the wage markup θ would decrease – depending on the union's strength in the bargaining. The less powerful the union is, the lower is the wage markup and the higher the reduction in the target real wage is compared to the monopoly union case (see de Pinto and Michaelis, , who analyse the effect of an increasing union's bargaining power). However, this would not influence the effects of the policy variables on the target real wage; the sign of the respective partial derivatives remains the same.…”

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confidence: 99%

Redistribution of Trade Gains in the Presence of Firm and Worker Heterogeneity

Pinto

2015

World Economy

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Trade gains are unequally distributed; in particular, low‐ability workers lose out in terms of wages and employment probability. In this paper, we investigate the impact of redistribution schemes on aggregate and disaggregate variables. To this end, we built a trade model with trade unions, heterogeneous firms and workers. Three redistribution schemes are distinguished: unemployment benefits financed by either a wage tax, a payroll tax or a profit tax. We find that: (i) all three redistribution schemes reduce output per capita; (ii) but the marginal reduction is lowest in the wage tax funding scenario; and (iii) If the profit tax is used, labour demand for low‐ability workers increases.

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The labor market effects of trade unions in an open economy: Layard meets Melitz

Cited by 4 publications

References 24 publications

Analyzing the Socio-Economic Impacts of the US Federal Minimum Wage

Analyzing the Socio-Economic Impacts of the US Federal Minimum Wage

The Impact of Unionization Structures with Heterogeneous Firms and Rent‐Sharing Motives

Redistribution of Trade Gains in the Presence of Firm and Worker Heterogeneity

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