workforce is an effective way to reduce costs when business conditions
deteriorate.
Whatever unions’ specific goals, they must deal with a fundamental
dilemma.
An inherent conflict exists between the level of wages and the size of the union itself.The more successful a union is in raising wages, the more management
will reduce the size of its workforce, reducing costs by substituting capital
for labour. This will lead to lower union membership. However, if the
union is unable to offer better wages or benefits to its members, they
have little incentive to remain with the union and will eventually seek
employment elsewhere.
The Union Wage Premium
Despite the costs to unions (i.e., reduced membership) of pushing for
higher wages, there is clear evidence in Canada of a union wage premium
—that is, a higher wage attributed only to the union status of the job. It is
not easy to measure this wage premium, however, because it is not
appropriate simply to compare the average wage of unionized workers
with the average wage of non-unionized workers. After all, unions may
occur mainly in industries where workers have higher skills or where
working conditions are less pleasant. And we know from the first section
of this chapter that differences in skills or working conditions can lead to