Who Captures the Rents from Unionization? Insights From Multiemployer Pension Plans

D. BRUCE JOHNSEN

From 1945 to 2010 the proportion of private-sector workers covered by collective bargaining agreements declined from 36% to a once unthinkable 6.9%.  This decline raises the question of how well labor unions serve their rank and file.  This study addresses the economics of labor unions in an attempt to determine who captures the rents from unionization.  Among other things, it examines the generosity of multiemployer defined benefit pension plans for rank-and-file union members and the officer and staff plans for the union that administers them.  For a given wage, it finds that union officers and staff enjoy pensions and related benefits that are lavish by comparison.  Although this could be the outcome of efficient implicit contracting, given the high agency costs workers and employers face monitoring union administration, it is impossible to reject the hypothesis that union officers and staff are the primary beneficiaries of unionization in the multiemployer setting.  Multiemployer plans now appear obsolete and should be replaced by 401(k) defined contribution plans despite resistance from union officials anxious to preserve their private benefits of control.

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