Labor quality upgrading and restrictive hiring practices in union workplaces

This dissertation is concerned with the issue of rationing of scarce union jobs. A number of alternative rationing devices are possible: a simple lottery, job queues and positive selection. The conjecture that unionized employers upgrade the quality of labor they hire (positive selection) appears frequently in the literature. This dissertation addresses two questions: (1) What is the impact of the locus of hiring control (employer or union) on quality upgrading in unionized jobs? (2) What determines the locus of union control?;The literature has assumed implicitly that unions have no incentive to upgrade labor quality. A model of hiring by unions is used to show that incumbent workers in a unionized firm would upgrade quality of new hires as long as they attach more value to their own rents than to the rents of newcomers. The hypothesis suggested by this analysis, that upgrading in union-controlled-hiring situations is less than or equal to that in employer-controlled-hiring situations, is tested using data from the National Longitudinal Surveys. The results indicate that upgrading of labor quality does not differ across union-controlled and employer-controlled sectors.;If quality upgrading does not differ by sector, what explains the union's desire to control hiring? It is hypothesized that concerns about job security, particularly in high turnover situations, leads a union to push for control over hiring. Whether or not the union succeeds in obtaining control depends on whether the employer's disutility from such control, as well as on the bargaining power of the two parties. A Nash bargaining model suggests that the probability that a union controls hiring is related positively to its utility and negatively to the employer's disutility from such control. The effect of union power is ambiguous. These hypotheses are tested with interindustry data on the prevalence of the closed shop in 1946, the year before it was made illegal (Taft-Hartley Act), and of hiring clauses in union contracts in 1979. The results strongly support the hypothesis that unions tend to control hiring in situations of high job turnover.