What Do Labor Laws Do?

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Does pro-union collective bargaining legislation increase a country's rate of union membership? Contrary to conventional thinking, this paper argues that a number of significant pro-union labor laws may actually reduce union membership rates. The paper develops a series of closely-related models to explore the intuition for this argument. The first model is a sequential interdependence model of collective action that illustrates how labor law may have a substitution effect on labor unions and labor union membership. A second model shows how legal provisions that bolster union power can lead to greater employer opposition to unions. A third model develops the idea of a hold-up effect on union density: where labor law exacerbates this problem, it will also lead to greater employer resistance to unionization. Finally, the paper argues that, ultimately, labor law's most important consequence may be, not to increase the rate of union membership, but to increase the rate of union coverage. This happens, however, not by strengthening unions per se but by encouraging employers to bargain with unions in employer associations as a means of avoiding problems introduced by pro-union labor legislation. Surprisingly, pro-union labor law may be more effective at organizing employers than employees.


Paper presented at the American Law and Economics Association, May, 2013, Vanderbilt Law School.