combined with weak institutions in the labor market;and macroeconomic performance will be worse when the political economies are incoherent(Garrett 1998). A large literature of comparative political economy has argued that labor unions and other labor market institutions have to be considered the integral parts of modern capitalist economies,and they condition many of the political economic outcomes(Hall and Soskice 2001b;Pontusson 2005;Wallerstein 1990,1999;Hall and Franzese 1998).8 We consider the ability of labor unions to intervene in labor markets,as indicated by union centralization.Following Miriam Golden,labor union centralization refers to the degree of internal authority exercised by union confederations over lower level organizational bodies.Confederations mean labor's central peak associations;they comprise individual national unions,and they are multi-sectoral,economy-wide bodies engaged to varying degrees in collective bargaining with government (Golden 1993; Golden et al.2006).When union centralization is high,the central confederation alone officially calls strikes and may have the authority to negotiate wage agreements,which extend to entire industries or even the whole economy (Golden 1993;Golden et al.2006). Under low union centralization,unions at industry or firm levels may be empowered to call strikes separately and sign agreements at their own discretion. Specifically,decentralized unions lean heavily toward extending the interests of their own respective members,even if this may be at the expense of other unions and their members Decentralized unions usually lack institutionalized coordination among themselves,and the nominal central confederations,if they exist at all,do not possess any It is possible that a parallel process works for the organization of capital such as the employers'association but in the opposite direction,yet insofar as interindustry labor mobility is concerned,labor organizations may have an immediate and first-order influence than do capital's organizations.The discussion here considers only the organizations of labor
combined with weak institutions in the labor market; and macroeconomic performance will be worse when the political economies are incoherent (Garrett 1998). A large literature of comparative political economy has argued that labor unions and other labor market institutions have to be considered the integral parts of modern capitalist economies, and they condition many of the political economic outcomes (Hall and Soskice 2001b; Pontusson 2005; Wallerstein 1990, 1999; Hall and Franzese 1998). 8 We consider the ability of labor unions to intervene in labor markets, as indicated by union centralization. Following Miriam Golden, labor union centralization refers to the degree of internal authority exercised by union confederations over lower level organizational bodies. Confederations mean labor’s central peak associations; they comprise individual national unions, and they are multi-sectoral, economy-wide bodies engaged to varying degrees in collective bargaining with government (Golden 1993; Golden et al. 2006). When union centralization is high, the central confederation alone officially calls strikes and may have the authority to negotiate wage agreements, which extend to entire industries or even the whole economy (Golden 1993; Golden et al. 2006). Under low union centralization, unions at industry or firm levels may be empowered to call strikes separately and sign agreements at their own discretion. Specifically, decentralized unions lean heavily toward extending the interests of their own respective members, even if this may be at the expense of other unions and their members. Decentralized unions usually lack institutionalized coordination among themselves, and the nominal central confederations, if they exist at all, do not possess any 8 It is possible that a parallel process works for the organization of capital such as the employers’ association but in the opposite direction, yet insofar as interindustry labor mobility is concerned, labor organizations may have an immediate and first-order influence than do capital’s organizations. The discussion here considers only the organizations of labor
real sanction power against the actions by their members.Centralized unions,by contrast, are distinguished by their effective coordination capacity and their possession of sanction power against stray member unions.They tend to be the hubs where decisions concerning the welfare of workers would be collected,compromised,and implemented as well as where the expectations of ordinary labor owners about their future economic interests will converge.In this scenario,the fact that unions are centralized means that they would strive to advance the interest of labor owners in general rather than some subset of labor owners,and they tend to have high capacity for collective political actions. For ease of developing the argument,we make the following stylized assumption: centralized unions strive to improve the welfare for all labor owners;decentralized unions want to improve the welfare only for some specific groups of labor owners.Such assumption echoes those common in the literature that each union tries to maximize its members'long term utility and that centralized union movement is analytically equivalent to an enlarged union that encompasses the whole labor force (Pontusson 2005; Wallerstein 1990). Well-coordinated unions aided by peak-level enforcement tend to be a critical source of political support to policies that benefit general labor.At the same time,the effectiveness of centralized union is reinforced by labor cohesiveness,because if labor groups have dissimilar economic interests,internal strife will rise and coordination and sanction become more costly.Therefore centralized unions will prefer to have a highly cohesive labor class.Given the positive correlation between labor cohesiveness and labor
real sanction power against the actions by their members. Centralized unions, by contrast, are distinguished by their effective coordination capacity and their possession of sanction power against stray member unions. They tend to be the hubs where decisions concerning the welfare of workers would be collected, compromised, and implemented as well as where the expectations of ordinary labor owners about their future economic interests will converge. In this scenario, the fact that unions are centralized means that they would strive to advance the interest of labor owners in general rather than some subset of labor owners, and they tend to have high capacity for collective political actions. For ease of developing the argument, we make the following stylized assumption: centralized unions strive to improve the welfare for all labor owners; decentralized unions want to improve the welfare only for some specific groups of labor owners. Such assumption echoes those common in the literature that each union tries to maximize its members’ long term utility and that centralized union movement is analytically equivalent to an enlarged union that encompasses the whole labor force (Pontusson 2005; Wallerstein 1990). Well-coordinated unions aided by peak-level enforcement tend to be a critical source of political support to policies that benefit general labor. At the same time, the effectiveness of centralized union is reinforced by labor cohesiveness, because if labor groups have dissimilar economic interests, internal strife will rise and coordination and sanction become more costly. Therefore centralized unions will prefer to have a highly cohesive labor class. Given the positive correlation between labor cohesiveness and labor
mobility as discussed before,we expect that centralized unions always favor high levels of ILM.9 Table 2.1.Predicted levels of ILM along the Left-Right dimension under varying union centralization Left government Right government Decentralized union High Low Centralized union Ambiguous Ambiguous Due to the moderation of union movement,partisan government will strategically pursue their corresponding labor mobility levels,so as to better fulfill their goal of maintaining a supporting constituency.Table 2.1 shows the predicted level of ILM.In the top left cell,when labor unions are decentralized,Left governments are expected to prefer HIGH levels of ILM in order to facilitate the implementation of their preferred labor-benefiting policies.High levels of ILM ensure that the economic interests of labor owners will be determined by general labor market skills and not by their affiliation with specific industries.Through the mechanism of labor mobility,economic implication of policies will spread to all labor owners;hence labor owners will acquire a stake in the implementation of labor-benefiting policies.Since unions are decentralized,coordinated political support for labor-benefiting policies cannot be forthcoming from labor organizations and Left governments will have strong incentives to make up for such a lack of support.Since high degree of labor cohesiveness is conducive to high level of political support from labor owners,we expect Left governments to prefer high ILM levels and,when needed,to engineer increases of ILM levels. In the mean time,unionization and labor mobility levels are largely independent from each other.See section 4 for empirical evidence for this point
mobility as discussed before, we expect that centralized unions always favor high levels of ILM. 9 Table 2.1. Predicted levels of ILM along the Left-Right dimension under varying union centralization Left government Right government Decentralized union High Low Centralized union Ambiguous Ambiguous Due to the moderation of union movement, partisan government will strategically pursue their corresponding labor mobility levels, so as to better fulfill their goal of maintaining a supporting constituency. Table 2.1 shows the predicted level of ILM. In the top left cell, when labor unions are decentralized, Left governments are expected to prefer HIGH levels of ILM in order to facilitate the implementation of their preferred labor- benefiting policies. High levels of ILM ensure that the economic interests of labor owners will be determined by general labor market skills and not by their affiliation with specific industries. Through the mechanism of labor mobility, economic implication of policies will spread to all labor owners; hence labor owners will acquire a stake in the implementation of labor-benefiting policies. Since unions are decentralized, coordinated political support for labor-benefiting policies cannot be forthcoming from labor organizations and Left governments will have strong incentives to make up for such a lack of support. Since high degree of labor cohesiveness is conducive to high level of political support from labor owners, we expect Left governments to prefer high ILM levels and, when needed, to engineer increases of ILM levels. 9 In the mean time, unionization and labor mobility levels are largely independent from each other. See section 4 for empirical evidence for this point
At the same time,in the top right cell,when unions are decentralized,Right governments prefer to have LOW levels of ILM to facilitate implementation of their preferred capital-benefiting policies.We have discussed that with lower ILM levels the capital class solidarity will be higher.10 Capital-benefiting policies benefit general capital owners,and capital owners'political support for capital-benefiting policies tends to increase with the decrease of ILM levels(and the consequent increase of capital class solidarity).Absence of centralized unions means that there would be no effective collective actions among labor owners and a lack of coordination among unions to constrain the policy choices of Right governments.For Right governments whose predisposition was to implement capital-benefiting policies,it becomes rational to prefer low ILM levels and to manage to decrease ILM levels when necessary in order to have higher degrees of support for their policies from their core constituents of capital owners. When unions are centralized,coordination among labor groups will be common and effective,and labor's concerted political support for Left government's labor- benefiting policies tends to be high.As Left governments can secure much of the needed political support for policies from centralized unions,their preferences for high levels of ILM in order to achieve cohesive labor constituency tend to subside.However,such a lack of incentive to actively pursue high levels of ILM need not lead to a decline of labor mobility levels,for two reasons.First,centralized unions will moderate.Centralized o Within the general equilibrium framework,the reason why this happens may be that low ILM levels prevent high productivity workers to respond to intersectoral wage differentials and move across industries,so that some high productivity workers are stuck within industries that would otherwise lose them to other industries.Despite being paid lower than their productivity,these workers continue to have high output so that their employers will have higher than normal rates of return to capital.Parallel to this development,there are workers with low productivity stuck in other industries that pay high wages such that those industries will have lower than normal rates of return to capital.And at equilibrium,lower or higher than normal rates of return to capital tend to cancel each other out such that capital used in different industries will earn similar rates of return when ILM levels are low.It follows that when ILM levels are low, it matters less for capital owners as to which industry they have invested their assets but more about their identity as capital owners,which tends to ensure them a certain rate of return everywhere in the economy
At the same time, in the top right cell, when unions are decentralized, Right governments prefer to have LOW levels of ILM to facilitate implementation of their preferred capital-benefiting policies. We have discussed that with lower ILM levels the capital class solidarity will be higher. 10 Capital-benefiting policies benefit general capital owners, and capital owners’ political support for capital-benefiting policies tends to increase with the decrease of ILM levels (and the consequent increase of capital class solidarity). Absence of centralized unions means that there would be no effective collective actions among labor owners and a lack of coordination among unions to constrain the policy choices of Right governments. For Right governments whose predisposition was to implement capital-benefiting policies, it becomes rational to prefer low ILM levels and to manage to decrease ILM levels when necessary in order to have higher degrees of support for their policies from their core constituents of capital owners. When unions are centralized, coordination among labor groups will be common and effective, and labor’s concerted political support for Left government’s laborbenefiting policies tends to be high. As Left governments can secure much of the needed political support for policies from centralized unions, their preferences for high levels of ILM in order to achieve cohesive labor constituency tend to subside. However, such a lack of incentive to actively pursue high levels of ILM need not lead to a decline of labor mobility levels, for two reasons. First, centralized unions will moderate. Centralized 10 Within the general equilibrium framework, the reason why this happens may be that low ILM levels prevent high productivity workers to respond to intersectoral wage differentials and move across industries, so that some high productivity workers are stuck within industries that would otherwise lose them to other industries. Despite being paid lower than their productivity, these workers continue to have high output so that their employers will have higher than normal rates of return to capital. Parallel to this development, there are workers with low productivity stuck in other industries that pay high wages such that those industries will have lower than normal rates of return to capital. And at equilibrium, lower or higher than normal rates of return to capital tend to cancel each other out such that capital used in different industries will earn similar rates of return when ILM levels are low. It follows that when ILM levels are low, it matters less for capital owners as to which industry they have invested their assets but more about their identity as capital owners, which tends to ensure them a certain rate of return everywhere in the economy