Sluggish Institutions in a Dynamic World: Can Unions and Industrial Competition Coexist?

30 Pages Posted: 19 Jul 2007

See all articles by Barry T. Hirsch

Barry T. Hirsch

IZA Institute of Labor Economics; Georgia State University

Date Written: July 2007


During the 1930s and 1940s, collective bargaining emerged as the workplace governance norm in much of the U.S. industrial sector. Following its peak in the 1950s, union density in the U.S. private sector fell steadily, to only 7.4 percent in 2006. Governance shifted from a formalized union norm to one of constrained managerial discretion. In competitive and dynamic economic environments, a union tax on company earnings and slow response to economic shocks combine to produce poor performance by union companies. Two industries - automotives and airlines - are used to illustrate these points. If worker-based institutions are to flourish, they must add value and permit companies to perform at levels similar to those obtained under evolving nonunion governance norms.

Keywords: labor unions, workplace governance, wages, wage premium, economic performance, membership, density, airlines, motor vehicles

JEL Classification: J5, J31, J2

Suggested Citation

Hirsch, Barry T. and Hirsch, Barry T., Sluggish Institutions in a Dynamic World: Can Unions and Industrial Competition Coexist? (July 2007). IZA Discussion Paper No. 2930, Available at SSRN: or

Barry T. Hirsch (Contact Author)

Georgia State University ( email )

Department of Economics
Andrew Young School of Policy Studies
Atlanta, GA 30302-3992
United States
404-413-0880 (Phone)
404-413-0145 (Fax)


IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072

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