How does the presence of a union affect the wage structure?
What will be an ideal response?
Union membership tends to be higher in manufacturing and the public sector. Research indicates that the presence of a union adds about 20 to 30 percent to employee benefits. Whether because of reduced management control, strong union-worker preference for benefits, or other reasons, unionized employees also have a greater percentage of their total wage bill allocated to employee benefits. Typically, the higher costs show up in the form of higher pension expenditures or higher insurance benefits. With two-tier pay plans, basically a phenomenon of the union sector, a contract is negotiated which specifies that employees hired after a given target date will receive lower wages than their higher seniority peers working on the same or similar jobs. From management's perspective, tiers can be used as a cost-control strategy to allow expansion or investment, or as a cost-cutting device to allow economic survival. Collective bargaining can reduce inequality and narrows the wage gap. From a union's perspective, wage tiers are viewed as better options than wage freezes and staff cuts among existing employees.
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