ABSTRACT Hollowed out and Turned About: New Social Cleavages and Institutional Change in Advanced Democracies Brett Meyer
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Hollowed Out and Turned About: New Social Cleavages and Institutional Change in Advanced Democracies Brett Meyer Submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy in the Graduate School of Arts and Sciences COLUMBIA UNIVERSITY 2015 c 2015 Brett Meyer All Rights Reserved ABSTRACT Hollowed Out and Turned About: New Social Cleavages and Institutional Change in Advanced Democracies Brett Meyer This dissertation concerns itself with the negative effects of two structural economic changes in advanced industrial democracies, technological change and financialization on trade unions and how in turn labor market changes in interaction with existing po- litical institutions affect the development of minimum wage policy and individuals’ po- litical affinities. I address these issues in four main chapters. In Chapter 2, I develop a new theory of how technological change causes trade union decline. Following work in labor economics, which shows that automation eliminates middle-wage routine task jobs and causes employment growth in non-routine task high- and low-wage jobs, I find that decline in routine task employment is a robust predictor of decline in trade union density for 21 OECD countries. Using linked employer-employee data from Germany, I find that higher levels of heterogeneity in between-worker skill profiles at the firm-level and in between-firm worker skill profiles at the industry level are associated with increased probability of withdrawal and a lower percentage respec- tively of participation in collective agreements. In Chapter 3, I argue that there should be a negative relationship between stock market development and various measures of trade union strength. Investors have a preference for lower labor costs and higher short-term profits and increased control over management compensation enables them to realize these preferences. Using time series cross-sectional data for 21 OECD countries 1969-2008, I find that short-run increases in stock market development consistently associated with a decline in wage bargaining coordination and centralization, although less consistently associated with changes in union density and opening clauses. In Chapter 4, I explain a counterintuitive fact about wage setting regulation: coun- tries with the highest labor standards and strongest labor movements are among the least likely to set a legal minimum wage. This, I argue is due largely to trade union op- position. I argue that trade unions will oppose the legal minimum wage when they are strong, specifically when they have high levels of what I call effective coverage, a combi- nation of workforce coverage and permissiveness of labor law for cross-union sympathy action. After demonstrating preference variation in line with the theory, I demonstrate the importance of effective coverage by showing how union minimum wage preferences responded to three labor market institutional ’shocks’: the Conservatives’ labor law re- forms in the UK, the European Court of Justice’s Laval ruling in Sweden, and the Hartz labor market reforms in Germany. In Chapter 5, I examine how labor market rigidity affects the political affinities of those marginally employed, termed ’outsiders’ in recent comparative political economy literature. I argue that outsider attitudes should vary as a function of two types of institutions, employment protection and spending on labor market policy, which worsen and improve outsiders’ labor market opportunities respectively. Using data on trade union attitudes and party preferences for 27 OECD countries, I find that relative to non- outsiders, outsiders are less likely to have favorable attitudes toward trade unions and more likely to favor far-right parties in countries with higher labor market institutional rigidity, those in which the difference between employment protection and labor market policy spending is greater. I conclude in Chapter 6 by briefly presenting a normative conception of economic regulation, which I term ’Social Protection as Social Balance.’ While recent work on the growth of economic inequality has focused largely on the growth in wealth of the top 1% in various countries, I argue that we should be more concerned with declining labor market opportunities for lower-skills, lower-education individuals. Social Protection as Social Balance’ argues for a dual approach to protecting the least well-off: continued vocational and education training to help improve the skills of those who would lose their jobs to structural changes and stronger trade unions to both help ensure that the negative distributional consequences of these changes do not fall entirely on the least well-off and to boost the wages of the jobs which remain. Table of Contents List of Figures . v List of Tables . vi 1 Introduction 1 1.1 Inequality and Labor Market Institutions . 6 1.2 The Dissertation in Summary . 13 I Economic Structural Change and Trade Union Decline 26 2 Hollowed Out: Labor Market Polarization, and Trade Union Decline 27 2.1 Introduction . 27 2.2 Previous Explanations for Trade Union Decline . 31 2.3 Technological Change, Worker Heterogeneity, and Union Decline . 35 2.3.1 Offshoring . 39 2.4 Cross-National Analysis . 41 2.4.1 Results . 44 2.5 German Firm-Level Analysis . 45 2.5.1 Firm-Level Analysis . 50 2.5.2 Industry-Level Analysis . 52 2.6 Discussion and Conclusion . 55 i 3 Financialization and the Two Faces of Trade Union Decline 58 3.1 Introduction . 58 3.2 Financialization, Labor Relations, and Labor Outcomes . 62 3.2.1 Previous Empirical Findings . 66 3.3 Types of Union Institutions and Institutional Change . 67 3.3.1 Equity Investors and Union Institutions . 67 3.3.2 Previous Explanations of Within-Institution and Institutional Form Strength . 69 3.4 Data and Methods . 72 3.5 Results and Interpretation . 76 3.5.1 Main Results . 76 3.5.2 Interpretation and Robustness Checks . 80 3.6 Discussion . 83 II Social Cleavages, Institutions, and Institutional Change 87 4 Protecting Strategic Capacity: Trade Unions and the Politics of the Minimum Wage 88 4.1 Introduction . 88 4.2 Union Preferences for the Legal Minimum Wage: History and Theory . 92 4.2.1 Explaining Variation in Strength and Preferences . 96 4.3 Examining Preferences . 99 4.3.1 Case Selection . 99 4.3.2 Germany . 100 4.3.3 The United Kingdom . 104 4.3.4 Sweden . 106 ii 4.4 Regulatory Shocks and Unions’ Minimum Wage Preferences . 109 4.5 Union Preferences and Party Positions . 115 4.6 Discussion and Conclusion . 117 5 The Space Between: Labor Market Regimes and Political Attitudes 120 5.1 Introduction . 120 5.2 Background . 123 5.3 Employment Protection and Outsider Attitudes Toward Trade Unions and Far-Right Parties . 127 5.4 Outsider Attitudes toward Trade Unions and Far-Right Parties: Literature Review and Mechanisms . 129 5.4.1 Labor Market Policy . 133 5.5 Data . 135 5.5.1 Coding Outsiders . 137 5.6 Methods and Results . 138 5.6.1 Marginal Effects . 141 5.7 Conclusion . 143 III Conclusions 145 6 Conclusion 146 6.1 On Preferences for Redistribution, Inequality, and the Evolution of Income Shares . 148 6.2 ...For the Greatest Benefit of the Least Well-Off . 153 6.3 Social Protection as Social Balance . 156 6.4 War, Society, and Inequality . 163 iii IV Bibliography 166 V Appendices 187 A Appendix to Chapter 2 188 A.1 Tables . 188 A.2 Figures . 193 A.3 Robustness Checks . 197 A.3.1 Cross-National Two-Stage Least Squares Regression . 197 A.3.2 Additional Firm-Level Results . 199 B Appendix to Chapter 3 203 B.1 Tables . 203 B.2 Figures . 213 C Appendix to Chapter 4 223 C.1 Tables . 223 C.2 Figures . 224 D Appendix to Chapter 5 226 D.1 Coding Outsiders and Far-Right Parties . 226 D.1.1 Coding Far-Right Parties . 228 D.2 EVS/WVS Data . 230 D.3 Tables . 233 D.4 Figures . 237 iv List of Figures A.1 CME/LME Union Density 1970-2010 . 194 A.2 Scandinavia Union Density 1970-2010 . 195 A.3 German Firm Participation in Collective Agreements . 196 B.1 Stock Market Development 1969-2010 . 213 B.2 Stock Market Development 1969-2010 . 214 B.3 Union Density 1969-2010 .............................215 B.4 Opening Clauses 1969-2010 ............................216 B.5 Opening Clauses 1969-2010 ............................217 B.6 Opening Clauses 1969-2010 ............................218 B.7 Wage Bargaining Coordination 1969-2010 . 219 B.8 Wage Bargaining Coordination 1969-2010 . 220 B.9 Wage Bargaining Centralization 1969-2010 . 221 B.10 Wage Bargaining Centralization 1969-2010 . 222 C.1 Minimum Wage around the World . 224 C.2 Minimum Wage in Europe ............................225 D.1 Employment Protection and Active Labor Market Policy . 237 D.2 Marginal Effects: Trade Unions . 238 D.3 Marginal Effects: Far Right Parties . 239 v List of Tables A.1 Cross-National Union Density . 189 A.2 Cross-National Union Density: Lagged Covariates . 190 A.3 German Firm Participation in Industry-Level Collective Agreements . 191 A.4 German Firm Participation in Industry+Firm-Level Collective Agreements191 A.5 German Firm Participation in Collective Agreements: Industry-Level Analysis .......................................192 A.6 German Firm Participation in Collective Agreements: Industry-Level Analysis, Lagged Covariates . 192 A.7 Cross-National Union Density: Two-Stage Least Squares Regressions . 198 A.8 Firm-Level Regressions: Separate Skill and Task Variables . 200 A.9 Firm-Level Regressions: Separate Skill and Task Variables . 201 A.10 German Firm Participation in Collective Agreements: Single-Record Restart ........................................201 A.11 German Firm Participation in Collective Agreements: Multiple-Record.