Who Captures the Rents from Unionization? Insights from Multiemployer Pension Plans

American University Business Law Review, Vol. 1, No. 2, pp. 193-262, 2012

George Mason Law & Economics Research Paper No. 16-07

71 Pages Posted: 24 Feb 2016

Multiple version iconThere are 2 versions of this paper

Date Written: February 23, 2016

Abstract

From 1945 to 2010 the proportion of private-sector workers covered by collective bargaining agreements declined from 36% to a once unthinkable 6.9%. This decline raises the question of how well labor unions serve their rank and file. This study addresses the economics of labor unions in an attempt to determine who captures the rents from unionization. Among other things, it examines the generosity of multiemployer defined benefit pension plans for rank-and-file union members and the officer and staff plans for the union that administers them. For a given wage, it finds that union officers and staff enjoy pensions and related benefits that are lavish by comparison. Although this could be the outcome of efficient implicit contracting, given the high agency costs workers and employers face monitoring union administration, it is impossible to reject the hypothesis that union officers and staff are the primary beneficiaries of unionization in the multiemployer setting. Multiemployer plans now appear obsolete and should be replaced by 401(k) defined contribution plans despite resistance from union officials anxious to preserve their private benefits of control.

Keywords: 401(k) defined contribution plans, ERISA, labor unions, multiemployer bargaining, pension contracting, Service Employees International Union, United Food and Commercial Workers Union, unionization

JEL Classification: J26, J32, K31

Suggested Citation

Johnsen, D. Bruce, Who Captures the Rents from Unionization? Insights from Multiemployer Pension Plans (February 23, 2016). American University Business Law Review, Vol. 1, No. 2, pp. 193-262, 2012, George Mason Law & Economics Research Paper No. 16-07, Available at SSRN: https://ssrn.com/abstract=2736945

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