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Abstract
In the past several years the American public has shown a growing concern about the issue of 'productivity' because the rate of productivity growth in the U.S. has been lagging behind other leading industrial nations. Some experts feel that the key factors to improve productivity may be found in more effective cooperation between employers and workers. Attempts have been made by businessmen and union leaders alike to raise the growth rate of productivity in order to produce higher wages and profits and to challenge international competition.
It is the objective of this study to estimate and quantify the impact of unionization labor productivity in the aluminum industry, specifically, that segment of the industry which produces aluminum foil. The primary means that are used by unions to (1) retard productivity and (2) improve it are examines. The basic conclusion drawn from a review of these union activities is that unions can significantly affect productivity in either direction of a firm or industry. The relationship between wages and productivity is also discussed. This analysis considers how wage increases above the competitive level affect the average product of labor.
The empirical estimation of the union productivity effect is based on the Cobb-Douglas production function that includes three inputs for each sector and a parameter which captures the organizational determinants of productivity. The econometric research of this thesis is mainly concerned with a cross-section analysis of the model using data from individual plants which produce aluminum foil.
The estimates of the union productivity differential are mixed and tend to indicate that (a) when the parameters of the production function are identical in both sectors and only intercepts are varied, a positive union productivity effect can be found and (b) when the assumption of constant technology is relaxed and parameters are allowed to vary, the positive union effect found in the previous case was not confirmed by the evidence. The findings of the empirical model of this study do not provide any conclusive evidence of the union effect on productivity.
