Key Concepts and Summary

15.1 Unions

A labor union is an organization of workers that negotiates as a group with employers over compensation and work conditions. Union workers in the United States are paid more on average than other workers with comparable education and experience. Thus, either union workers must be more productive to match this higher pay or the higher pay will lead employers to find ways of hiring fewer union workers than they otherwise would hire. American union membership has been falling for decades. Some possible reasons include the shift of jobs to service industries, greater competition from globalization, the passage of worker-friendly legislation, and U.S. laws that are less favorable to organizing unions.

15.2 Employment Discrimination

Discrimination occurs in a labor market when workers with the same economic characteristics, such as education, experience, and skill, are paid different amounts because of race, gender, religion, age, or disability status. In the United States, female workers on average earn less than male workers, and black workers on average earn less than white workers. There is controversy over the extent to which these earnings gaps can be explained by discrimination or by differences in other factors, such as education and job experience. Free markets can allow discrimination to occur, but the threat of a loss of sales or a loss of productive workers can also create incentives for a firm not to discriminate. A range of public policies can be used to reduce earnings gaps between men and women or between white and other racial/ethnic groups—requiring equal pay for equal work, and attaining more equal educational outcomes.

15.3 Immigration

The recent level of U.S. immigration is at a historically high level if measured in absolute numbers, but not if measured as a share of the total population. The overall gains to the U.S. economy from immigration are real but relatively small. However, immigration also causes effects such as slightly lower wages for low-skill workers and budget problems for certain state and local governments.