Union Voice Effects in Mexico
| Author | David Fairris |
| DOI | http://doi.org/10.1111/j.1467-8543.2006.00523.x |
| Published date | 01 December 2006 |
| Date | 01 December 2006 |
British Journal of Industrial Relations
44:4 December 2006 0007– 1080 pp. 781– 800
© Blackwell Publishing Ltd/London School of Economics 2006. Published by Blackwell Publishing Ltd,
9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.
Blackwell Publishing Ltd.Oxford, UKBJIRBritish Journal of Industrial Relations0007-1080Blackwell Publishing Ltd/London School of Economics 2006December 2006444781800Articles
Union Voice Effects in MexicoBritish Journal of Industrial Relations
David Fairris is at the Department of Economics, University of California, Riverside, California.
Union Voice Effects in Mexico
David Fairris
Abstract
This paper utilizes establishment survey data from Mexico to explore the impact
of union voice on fringe benefits, turnover, job training and productivity.
Mexican unions have a significant effect on these outcome measures for workers
and firms. Unions increase both the value of fringe benefits per worker and the
ratio of fringe benefits to total compensation, increase job training and raise
productivity per worker. However, contrary to the broader literature on union
voice effects, unionized establishments in Mexico appear to possess greater
worker turnover.
1. Introduction
In their widely cited book,
What Do Unions Do?
, Richard Freeman and James
Medoff (1984) argued that, in addition to behaving as a ‘monopoly’ and to
raising wages above those of similarly situated non-union workers, unions
affect a host of other worker and firm outcomes based on their ‘voice’ in
collective bargaining. This voice view of unions held that union goals were
broader than just wages, that labour markets contained impediments to
labour mobility, which made voice a good substitute for exits, and that there
was slack and inefficiency in managerial performance, which allowed voice
to enhance firm efficiency.
The real power of the book lay in its empirical findings. Freeman and
Medoff marshalled persuasive evidence to support their position that union
voice effects are quantitatively and statistically significant. They found that
unions raise wages, consistent with the earlier work of H. Gregg Lewis (1963),
but that unions also decrease overall wage inequality, raise fringe benefits and
productivity, and lower turnover and profits. Since the book’s publication, the
empirical analysis has undergone further refinement and testing. We now
possess a body of empirical evidence supporting many of the propositions
put forth by Freeman and Medoff and for a variety of developed economies,
such as the UK, Japan and Australia, in addition to the USA.
782
British Journal of Industrial Relations
© Blackwell Publishing Ltd/London School of Economics 2006.
However, union voice effects are largely unexplored terrain in developing
country contexts.
1
Standing’s (1992) analysis of union voice in Malaysia is the
only existing contribution of which I am aware. The absence of empirical
work on union voice effects in developing countries is unfortunate. Unions
in select developing countries are as pervasive and politically powerful as
those in some developed economies, and their impact on economic efficiency,
growth and distribution is arguably a more pressing matter than in developed-
country contexts. Moreover, the evidence to date on union wage impacts in
developing countries suggests magnitudes that are generally larger than those
found for developed economies. With regard to voice effects, Standing’s anal-
ysis found that unions lower the quit rate, raise the level of productivity,
stimulate product and process innovations, increase firm-sponsored worker
training and enhance the likelihood that a worker is enrolled in a pension
plan.
The absence of a well-developed literature on union voice effects in devel-
oping country contexts is, in part, explained by the fact that high-quality
micro-survey data on households and establishments have historically been
lacking in these counties. However, data gathering of this sort has now
reached a level in both quality and quantity in many developing countries,
Mexico among them, that there is nothing currently preventing an extension
of Freeman and Medoff’s analysis to a number of developing economies.
This paper utilizes recent establishment surveys in Mexico to explore the
voice effects of unions on workers and firms in this developing country. After
a review of the institutions of collective bargaining in Mexico, I turn to a brief
discussion of union density and wage effects from previous research. This is
followed by a discussion of the data and the basic empirical approach to be
followed in estimating union voice effects. The results reveal that unions
increase fringe benefits (both per worker and in relation to overall compen-
sation), raise job training and increase productivity, all of which are consistent
with a voice view of union behaviour. However, unionized establishments in
Mexico also experience greater worker turnover — an effect that is inconsis-
tent with the voice view of unions but which appears to be exclusive to the
domestic sector of the economy. Foreign firms that are unionized experience
lower turnover than their non-union foreign counterparts.
2. The institutions of collective bargaining in Mexico
Research on the labour movement in Mexico is typically devoted to an
analysis of the political power held by unions. A great deal is known about
the history of the alliance between Mexican unions and the Institutional
Revolutionary Party (PRI), for example, about the power this alliance
granted labour, but also the ways in which it prevented independent,
democratic unions from forming (Middlebrook 1995). The recent struggle to
form independent unions, current efforts to change labour law, the decline
in labour’s influence in determining the minimum wage, the difficulty of
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