Freeman and Medoff's 'two faces of unionism' distinguish between...
APublic sector unions and private sector unions
BThe monopoly face (unions raise wages by restricting labor supply, creating inefficiency) and the collective voice face (unions improve communication and reduce turnover, creating efficiency gains)
CSkilled worker unions and unskilled worker unions
DThe demand effect and the supply effect of unions
The monopoly face captures the standard economic critique: by bargaining wages above the competitive level, unions misallocate labor (too few workers in the union sector, too many in the non-union sector) and reduce total output. The collective voice face captures the institutional benefit: unions give workers a collective mechanism to communicate preferences about workplace public goods (safety, grievance procedures, benefit structure) that individual workers cannot effectively demand. The net effect of unions depends on the relative magnitude of these two faces.
Question 2 True / False
The decline of union membership in the US has had no effect on wage inequality.
TTrue
FFalse
Answer: False
Multiple studies (Card, Lemieux, DiNardo, Fortin) find that union decline is a significant contributor to rising wage inequality, particularly among male workers. Unions compress the wage distribution by raising wages at the bottom and middle relative to the top, reducing within-firm and between-firm inequality. As union density fell from ~35% in the 1950s to ~6% in the private sector today, this equalizing force weakened. Western and Rosenfeld (2011) estimated that union decline accounts for one-third to one-fifth of the increase in male wage inequality since the 1970s.
Question 3 Short Answer
Why have unions declined in most developed countries, and what are the competing explanations?
Think about your answer, then reveal below.
Model answer: Explanations include: (1) structural change — the shift from manufacturing (highly unionized) to services (less unionized); (2) globalization — increased competition from low-wage countries reducing employer willingness to share rents; (3) employer opposition — aggressive anti-union strategies, particularly in the US; (4) legal and regulatory changes — weakening of labor law enforcement, right-to-work legislation; (5) changing workforce composition — more part-time, temporary, and gig workers who are harder to organize; and (6) declining perceived relevance — as government regulation replaced union-provided protections.
No single explanation is sufficient. The timing and magnitude of decline vary across countries — the US experienced steeper decline than Nordic countries, suggesting institutional and legal factors matter beyond structural change alone. The US employer opposition explanation is supported by the sharp decline in union election win rates from the 1950s onward, concurrent with increasing employer campaign expenditures and unfair labor practice charges. The decline has distributional consequences beyond wages: reduced union political influence has likely weakened support for redistributive policies.