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Download (PDF) Building and Using Strategic Capacity Labor Union Confederations and Economic Policy John S. Ahlquist A dissertation submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy University of Washington 2008 Program Authorized to Offer Degree: Department of Political Science University of Washington Graduate School This is to certify that I have examined this copy of a doctoral dissertation by John S. Ahlquist and have found that it is complete and satisfactory in all respects, and that any and all revisions required by the final examining committee have been made. Co-Chairs of the Supervisory Committee: Margaret Levi Michael D. Ward Reading Committee: Margaret Levi Michael D. Ward Christopher Adolph Erik Wibbels Date: In presenting this dissertation in partial fulfillment of the requirements for the doctoral degree at the University of Washington, I agree that the Library shall make its copies freely available for inspection. I further agree that extensive copying of this dissertation is allowable only for scholarly purposes, consistent with “fair use” as prescribed in the U.S. Copyright Law. Requests for copying or reproduction of this dissertation may be referred to Proquest Information and Learning, 300 North Zeeb Road, Ann Arbor, MI 48106-1346, 1-800-521-0600, or to the author. Signature Date University of Washington Abstract Building and Using Strategic Capacity Labor Union Confederations and Economic Policy John S. Ahlquist Co-Chairs of the Supervisory Committee: Jere L. Bacharach Professor of International Studies Margaret Levi Department of Political Science Professor Michael D. Ward Department of Political Science Mancur Olson made strong claims about the importance of “encompassing” groups for economic performance. He argues that broadly-based interest groups, especially those that transcend regional or industrial barriers, are more likely to push for policies that yield longer- term benefits for a larger proportion of the population. Groups with narrower constituencies tend to pursue parochial goals with the aim of securing a bigger share of the national income for themselves. Observers of labor market institutions have relied on this line of reasoning, especially pertaining to the centralization of wage bargaining, to explain the variance in macroeconomic performance of rich democracies since the oil shocks. Even though the “encompassingness” of unions drives these theories no one has attempted to explain how union federations develop the capacity to bargain at the national level or the wide variation they display in their abilities to influence outcomes they care about. This project begins to explain how economic actors aggregate their interests and how these aggregates develop the capacity to influence national-level policy, with an empirical focus on confederations of national labor unions. The first part of the project asks why labor unions form confederal organizations and what explains the variation in the confederal authority over affiliates. I devise a model of confederal organization in which I conceive of the confederal problem as akin to a re- peated Stag Hunt game. Unions have an incentive to cooperate in collective projects but they vary in how much they value the collective project. To enable ongoing cooperation, unions have the option of signing a contract that allocates decision rights about how best to invest collective effort. Weaker affiliates have an incentive to yield decision rights to the stronger. For their part, stronger unions will only permit confederal influence over wage bargaining when there are pronounced economies of scale in cooperation and/or they are compensated in other ways, e.g., through political concessions. The model also predicts a trade-off between the size of the confederation and the number of domains over which it has competency. Subsequent chapters explore the model empirically. Chapter 3 is a paired historical study of the American Federation of Labor and the Knights of Labor. Chapter 4 presents the first econometric study of union confederal centralization. I find consistent evidence for the size-scope trade-off as well as evidence that the structure of political au- thority, especially federalism and more frequent Left government, affect degree to which unions centralize membership and authority in confederal organizations. I also find large and significant effects for structural variables like trade exposure, size of the economy, and cultural/linguistic fractionalization. The second half explores the emergence of formal policy agreements between govern- ments and unions in 20 OECD countries, 1974-2000. In chapter 6 I model these agreements as self-enforcing contracts that allow political parties to make policy promises credible to voters. Unions agree to abide by the pact so long as economic conditions make policy a better tool than industrial action for achieving gains in living standards. The model implies that 1) the emergence of pacts should follow the electoral cycle and that the 2) organiza- tional linkages between unions and parties are critical for providing both the incentives for partisan politicians and unions to sign pacts and for making agreements self-enforcing in equilibrium. Chapter 7 is an event history analysis of pact onset using an original dataset of social pacts covering 20 OECD countries between 1974 and 2000. I find that, as expected, pacts are strongly influenced by the electoral cycle. In chapter 8 I apply the model to an empirical puzzle in the cases of Australia and New Zealand. Both countries faced similar economic crises in the early 1980s yet a pact emerged in Australia but not in New Zealand. Relying on original interviews with key policy makers in both countries, I conclude that the organizational relationship between the union peak associations and the Labor parties were the critical differences that made intertemporal political transactions possible (and self-enforcing) in Australia but not in New Zealand. The findings in the dissertation have implications across several areas. Part I endo- genizes a key variable in current models of wage-price bargaining: union centralization. Part II links the literatures on social pacts and wage bargaining with the larger debates on political business cycles in policy and outcomes. I provide better micro-foundations for the- ories relating the organizational structure of unions to macroeconomic outcomes. Overall I contest Olson’s pessimism about the emergence of strategically meaningful encompass- ing groups. There are also normative implications for inequality and democracy. Findings in the study show that the cost of implementing needed economic reforms has been both lower and more equitably shared in countries where unions and employers were capable of behaving as unified strategic actors in national-level politics and industrial relations. TABLE OF CONTENTS Page List of Figures . iii List of Tables . v Chapter 1: Introduction . 1 1.1 Union Confederations, wage bargaining, and policy making . 3 1.2 Outline of the dissertation . 16 Chapter 2: Building Strategic Capacity: a theory of group encompassingness . 24 2.1 Extant work . 26 2.2 The Basic Model . 33 2.3 Why a confederal organization? . 46 2.4 Summary and implications . 48 Chapter 3: Who Sits at the Table in the House of Labor? . 53 3.1 Mapping the model onto history . 55 3.2 The Knights of Labor and American Federation of Labor . 58 3.3 Conclusion . 70 Chapter 4: The Centralization of Labor Movements . 73 4.1 Extant work and empirical hypotheses . 75 4.2 Data and modeling framework . 80 4.3 Confederal fragmentation . 85 4.4 Bargaining Coordination . 90 4.5 Summary of findings and limitations of the analysis . 97 Chapter 5: Part II: Social Pacts . 102 5.1 Economics, elections, and social pacts . 103 i Chapter 6: Modeling Social Pacts . 108 6.1 Pacts and Elections: a Model . 109 6.2 Limitations and extensions of the model . 120 6.3 Conclusion . 123 Chapter 7: The Determinants of Social Pacts, 1974-2000 . 124 7.1 Explaining social pacts . 125 7.2 Data . 131 7.3 Models and results . 135 7.4 Conclusion . 147 Chapter 8: Policy by Contract Social pacts in Australia and New Zealand . 149 8.1 Australia and New Zealand: case selection . 149 8.2 Policy responses to crisis . 157 Chapter 9: Conclusion . 182 9.1 Recapitulation . 182 9.2 Implications . 186 Appendix A: Proofs from Chapter Two . 190 Appendix B: Details on the interviews reported in Chapter Eight . 193 Appendix C: Definitions and descriptions of data used in the figures and analyses . 195 C.1 Variables from chapter 1 . 197 C.2 Variables from chapter 4 . 198 C.3 Variables from chapter 7 . 199 C.4 Variables from chapter 8 . 200 ii LIST OF FIGURES Figure Number Page 1.1 Inequality is declining in bargaining centralization. Data are averages for all available years, 1950-1995. See appendix for data definitions and sources. 4 1.2 The concentration of union members across unions and union federations as a function of historical basis for organizing. Membership concentration is an average from 1950-1995. See appendix for data definitions and sources. 7 1.3 Inter-union, within-confederation membership concentration has been increas- ing while union density has been decreasing since the 1980s. See appendix for data definitions and sources. 8 1.4 Inter-confederal membership concentration and the share of unionists orga- nized into confederations show no clear pattern over time or in relation to one another. See appendix for data definitions and sources. 9 1.5 The centralization of wage bargaining and number of union confederations has varied both longitudinally and cross sectionally. See appendix for data definitions and sources. 11 1.6 Strike powers ceded to labor confederations vary across countries but are relatively stable within countries. See appendix for data definitions and sources. 12 2.1 Illustrating lemma 2.1. Changes in the net utility of being in a confederation as a function of β depend on the relative size of rmax, rα, andr ¯Cα .
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