by Jim Rose in applied welfare economics, labour economics, unions Tags: inequality of bargaining power

In the U.S. and Japan, 15% of workers have their wages determined by unions. In Sweden and France, 90% of workers are covered by union collective agreements.

Social Democrats argue that unions and collective bargaining improve the earnings of the working class relative to the owners of capital.

Neoclassical economic theory predicts that competition among firms for workers ensures that they earn wages equal to the additional revenue that the firm earns by employing them.

Tino Sanandaji at his Super-Economy blog plotted the share of workers who are covered by collective bargaining agreements and the share of national factor costs that goes to labour as wages and other employee compensations:

The way the economy gets divided between capitalists and workers is virtually identical in weak union countries such as the U.S. as it is in countries with powerful unions, such as France and Sweden. If anything, American workers with weak unions get a bigger share of the cake compared to European workers with strong unions. Due to high labour costs, European workers have to some extent been replaced by machines.

via Super-Economy: The class struggle in one picture.