The Collective

The single worker’s difficulty is that the bargain can end before his need for it does. An employer may replace him, postpone hiring or wait; he must find another income while the bills continue. Combination attempts to alter those terms. Workers who bargain together can withhold a service that is harder to replace, support one another through a stoppage and make a common demand where separate demands would fail. The union manufactures some of the power to wait that the isolated worker lacks. It does not make that power unlimited: the employer also has alternatives, and a strike consumes resources on both sides. But it changes who faces whom across the table. The question for this volume is whether the resulting settlement moves income from ownership to labor, or merely rearranges which workers receive labor’s existing portion.

There is no accounting law requiring a union gain to come from another worker. In an invented enterprise with one hundred of net value added, let sixty go to labor and forty to the owners, with no other claims in this simplified account. A settlement that raises labor compensation to seventy while employment, output and prices remain fixed leaves thirty for the owners. Labor’s share rises from sixty to seventy percent. That is a transfer between the two claims, not within the workforce. The hard question is whether those assumptions can persist. An owner may accept less of an existing surplus rather than abandon a profitable undertaking; over a longer horizon, investment, entry and production may respond. The example establishes a possibility. It does not establish the amount a particular union can win, or the point beyond which the enterprise changes what it produces and whom it employs.¹

The wage of those employed is a different measure from labor’s total receipt. Consider another invented case. A hundred workers each receive one, and the enterprise adds two hundred of value. Its wage bill is one hundred and its labor share one half. If pay rises to one and a tenth, employment falls to eighty, and value added falls to one hundred and seventy-six, the wage bill becomes eighty-eight and the share remains one half. Each retained worker earns ten percent more; the payroll falls twelve percent. These figures describe a possible account, not a predicted response to a union. They show why the members’ pay increase cannot answer the aggregate question alone. Workers leaving this enterprise must be followed into other employment or unemployment, and changes elsewhere must be counted before a claim about labor as a whole is complete.²

The effect turns partly on the bargain’s starting point and partly on its terms. In the familiar competitive model, a higher wage can reduce employment when the employer remains free to choose hiring along a downward-sloping demand for labor. Where an employer instead holds wages below the competitive level through buyer power, stronger worker bargaining can recover part of that gap without the same employment consequence. Neither description follows merely from the presence of a union. Nor does a union agreement reproduce a statutory wage floor automatically: it may contain work rules, staffing commitments, benefits and provisions for adjustment as well as a pay rate. Asking whether jobs are jointly negotiated or left to management is therefore substantive. So is asking whose interests the representatives pursue. Protecting incumbents, admitting new workers and sustaining the enterprise can pull the bargain in different directions.³

The product available to divide can change as well. Freeman and Medoff’s second face of unionism is collective voice: a channel through which workers can press grievances and improve conditions without relying entirely on departure. Lower turnover can preserve experience and save hiring and training costs. That gives a concrete reason why a pay increase need not be financed wholly by a loss to somebody else. Yet the mechanism requires a response: information must reach someone able to act, complaints must be resolved, and the resulting arrangements must permit the work to improve. A procedure that merely hardens an unproductive practice will not deliver the same result. Even where productivity rises, its fruits still require division. More output can raise both sides’ incomes while leaving their shares unchanged; an improvement in the workplace and a redistribution of the product are separate achievements.⁴

Winning recognition and winning a larger share are separate achievements. DiNardo and Lee’s 2004 study compared workplaces where unions narrowly won recognition elections with those where they narrowly lost. For their manufacturing wage data, covering organizing efforts during 1984–1999, the estimated average wage effects were small and close to zero. This was evidence about new recognition in that setting, not a comparison between an economy with collective bargaining and one in which workers could never organize. It also did not measure every benefit of representation. The result makes a useful demand on the argument: formal recognition, successful negotiation and a larger share are distinct events. None can be inferred merely from observing the previous one. Conversely, a limited effect at one margin cannot establish that mature bargaining institutions, different organizing conditions or wider coverage would have the same effect.⁵

Organized labor can lift its share of the product, and it can redistribute income among workers; both possibilities belong in the inquiry. The reckoning needs compensation and employment together, the value added against which they are measured, and the workers beyond the organized gate. A bargain that draws on an existing rent differs from one that excludes outsiders; a settlement accompanied by greater productivity differs from one that divides an unchanged sum. The collective does not suspend these relations. It creates an institution capable of acting upon them. Its importance lies in making the division contestable, so that the employer’s offer need not be the only organized claim in the room. Whether that contest enlarges labor’s share is decided by the agreement, its reach and the responses it sets in motion.