The economics of labor union mergers

The purpose of this thesis is to advance the economic analysis of labor unions by applying microeconomic theory to the union merger process. Unions' incentives to merge are examined, and a model is built to predict the influence of merger on the relative levels of earnings and employment. Through the merger process, unions can internalize the costs and benefits their activities have on workers in related firms and industries. This internalization changes the "optimal" behavior of unions regarding their desired wages and strike activity, according to the economic relationship between the memberships of the merging unions.

Data were collected on the levels of earnings and employment in industries which experienced major union mergers in the 1960's and 1970's, and classified as complementary or substitute mergers. Multiple regression techniques were employed to test the prediction of the model, that merger between workers who are net substitutes lead to higher desired wages, and greater strike activity, and that mergers between workers who are net complements lead to lower desired wages, and less strike activity. The results lead to the conclusions that union mergers do have the predicted impact on earnings and employment.

Data were collected on the financial expenditures of merging unions to test the theories that merger leads to economies of scale, and that the separation of "ownership and control" allow union officers to use union mergers to advance their own interests. Multiple regression techniques were used to test these hypotheses with the expected results.

The United States Postal Service and the members of the postal unions are used as a case study of the incentives and implications of union mergers. The environment of the USPS, with a single employer, several rival unions, rapid technological change, and significant organizational changes provided an excellent opportunity to observe union behavior, and the impact of union consolidation, on the economic relationship between union and employer.