Unions, Job Security, and Incentives of Workers

Kyota Eguchi
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Kyota Eguchi: Faculty of Economics, University of Tokyo

No CIRJE-F-91, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: We consider why blue collar workers are more likely to organize unions than white collar workers by looking at commitment devices and imperfect signals on workers' actions. Under contractual incompleteness, firms cannot ex ante promise to keep employment levels high. However, if unions resist firms' dismissal policies by the request of high severance pay, unions can play a significant role as a commitment device for job security. Then, since firms can decrease wage and increase employment level, the profit of unionized firms can be more than that of non-union firms. Furthermore, we show that imperfect signals on workers' actions weakens the role of unions as a commitment device. This results in less union organizing by white collar workers since the efforts level of white collar workers is more difficult to observe than that of blue collar workers.

Pages: 32 pages
Date: 2000-09
New Economics Papers: this item is included in nep-lab
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Persistent link: https://EconPapers.repec.org/RePEc:tky:fseres:2000cf91

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