Looking to Benchmark Pay?
Union assessment of ability to pay
A union presumably attempts to estimate an organization's ability to pay before making its demands.
High current profits or favorable future prospects:
- signal ability to pay
- strengthen the union's bargaining power
Q: Does unionization of employees increase the overall pay level?
A: Yes, it probably does. But measuring the effect of unions on pay is very difficult, as it is hard to find comparable union and non-union samples. Compounding the problem is the spillover or threat effect. Non-union firms may increase their salary levels in order to keep up with unionized competitors or to keep unions out.
A review of studies done in this area came up with the following two conclusions:
- Union pay is between 9% to 12% greater than non-union organization pay
- The size of the difference changes from year to year reflecting economic conditions.
Unions in the private sector have adjusted their bargaining stance during bad economic times. They accept more concessions to save the jobs of their members and often the emphasis has been on maintaining benefits, not pay. In recent years union bargaining power has declined along with union membership.
Collective bargaining
| Collective bargaining agreements | Agreements between employees and employers outlining acceptable work conditions including working hours, vacation, holidays, and termination of service guidelines. These employees are typically part of a bargaining unit represented by a union. |
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Collective bargaining is a predictive process. Since the contract runs over a number of years, wages are adjusted during the contract. Adjustments may result strictly from a bargaining process OR the determinant may be some external or derivative factor. This aspect of the contract is called a sliding scale.
Examples of derivative factors that may be used are:
- selling prices
- cost-of-living index
- employer's annual budget
- future profitability of the employer
In the past, the most common of these has been the cost of living. More recently, profitability has gained popularity. (Note, cost of living is clearly not related to the company's ability to pay.)
Memory Jogger
The impact of unions on pay is: