Unions and involuntary job separations

• Published date: 01 November 2015
• Date: 01 November 2015
• DOI: http://doi.org/10.1111/1748-8583.12076

Unions and involuntary job separations

Tom Pierse and John McHale, Department of Economics, NUI Galway

Human Resource Management Journal, Vol 25, no 4, 2015, pages 496–515

In contrast to the extensive literature on the effects of unions on wages, productivity and voluntary job

endings, the effect of unions on involuntary job endings has received relatively little attention. This

article demonstrates how unions alter involuntary job separation (redundancies, temporary job endings

and dismissals) rates at different tenure levels using the British Household Panel Survey data from 1991

to 2008. A novel finding is that being a union member reduces a person’s redundancy probability at

low-tenure levels, relative to an employee of a non-unionised firm, but has no significant effect at high

tenure levels. Union membership and union recognition are not related to different rates of temporary

job endings.

Contact: Mr Tom Pierse, Department of Economics, NUI Galway, Newcastle Road, Galway,

Ireland. Email: tom.pierse@yahoo.com

Keywords: unions; redundancies; seniority

INTRODUCTION

The effects of unions on wages, productivity and voluntary job endings have been

extensively explored. How unions affect involuntary job endings is not evident from the

existing literature. While unionised firms have been shown to have lower employment

growth rates (Blanchflower et al., 1991; Addison and Belfield, 2004; Bryson, 2004), this does not

necessarily mean higher rates of involuntary job endings (White and Bryson, 2013). However, job

security is an important attribute of a job for employees (Heery and Abbott, 2000; Bryson et al.,

2009) and is one of the potential benefits of union membership. We approach the issue from the

perspective of the individual worker. We ask whether unions reduce involuntary job separations

and what forms of separation unions are most effective in providing protection against.

A total of 17 years of the British Household Panel Survey (BHPS) are used to show the

individual effects of unions on involuntary job separations (dismissals, temporary job endings

and redundancies). This allows the effects of unions to be disentangled fromother covariates such

as tenure and type of employment contract. It has been previously shown that the determinants

of voluntary and involuntary job endings differ significantly (Booth and Francesconi, 1999). We

develop this idea by showing the differences between dismissals, temporary job endings and

redundancies. Welook at all three types of involuntary separation, which are closely related, with

a view to capturing the overall effect of unions on involuntary job separations. The data are based

on individual surveys, so job separations are based on how the person interpreted his or her job

separation. In addition, while we define dismissals, temporary job endings and redundancies as

involuntary job separations, this is mainly to distinguish them from quits. In reality, both

temporary job endings and redundancies can be voluntary.

The first contribution of this article is to show how unions alter the redundancy decisions

of firms. We find weak indication that unions change how many people get made redundant,

and stronger evidence that they alter who gets made redundant. Unions reduce the redundancy

probability of low-tenure staff while having no effect on long-tenure staff. This is the opposite

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doi: 10.1111/1748-8583.12076

HUMAN RESOURCE MANAGEMENT JOURNAL, VOL 25 NO 4, 2015496

© 2015 John Wiley & Sons Ltd.

Please cite this article in press as: Pierse, T. and McHale, J. (2015) ‘Unions and involuntary job separations’. Human Resource Management Journal

25: 4, 496–515.

of what we expected at the outset, which was that unions would seek to enforce seniority rules.

The results can potentially be explained by unions generally reducing the amount of

redundancies and inducing firms to adjust employment with voluntary redundancy packages,

which favour long-tenure staff, rather than through a ‘last-in-first-out’ method. This would be

a return to seniority, but of a different kind to what is normally described. The second

contribution is to show that temporary employees who work in unionised firms do not face

higher separation rates compared with temporary employees in non-unionised firms. That is,

firms do not compensate for the presence of a union by using temporary employees as a buffer.

The third contribution is to demonstrate that dismissals are rare and predominantly happen to

low-tenure staff. While we find that there is no relationship between union membership and

dismissal rates, care must be taken in interpreting these results due to the relatively small

number of dismissals. Overall, the article highlights the commonalities and differences between

the different modes of involuntary job separation by examining the characteristics of the

individuals who are separated.

RELATED LITERATURE AND HYPOTHESES

Involuntary job endings occur in a range of situations, from a single staff member to a plant

or firm closure. Employers have a range of options available to them to reduce staffing levels

(Cully et al., 1999; Cascio, 2009). How firms adjust and who they select to exit the firm will

depend on the scale and type of the adjustment required. Many firms only require small

adjustments, which can be achieved by natural attrition, temporary job endings or dismissal in

the case of individual specific issues.

The well-established negative relationship between union membership and quits (Wooden

and Baker, 1994; Delery et al., 2000; Booth and Francesconi, 1999; Batt et al., 2002) means that

unionised firms who wish to make a small employment adjustment will not be able to rely on

natural attrition to the same extent as non-unionised firms.

Unions and redundancies

Unions and the wage–employment bargain. Unions face a trade-off when bargaining over

wages and employment (Clark and Oswald, 1993; Gahan, 2002). Unionisation could result in

increasing the probability of firm closure through higher wages resulting in a smaller buffer in

the event of unexpected shocks. In the UK and other countries, a union wage premium for

private sector employees has been well documented (Freeman and Medoff, 1979; Booth, 1995;

Andrews et al., 1998; Bratsberg and Ragan, 2002; Goerke and Pannenberg, 2004; Blanchflower

and Bryson, 2010). Higher wages in a competitive market with no productivity difference

would result in unionised firms being more vulnerable to external shocks. The wage premium

has fallen in recent years (Bryson and Forth, 2010), but is still at an economically significant

level (5% higher). The effects of unions on firm closures have been difficult to establish

empirically. A number of studies show no effect of unions on firm closures (Machin, 1995;

Bryson and Dale-Olsen, 2008), whereas other researchers have found that unionised plants had

increased closure rates (Addison et al., 2003; Bryson, 2004).

The main mechanism through which unions are expected to alter firm decisions is through

collective bargaining at the firm level (Bryson and Forth, 2010). Unions could increase the cost

of removing staff through threats of industrial action or facilitate adjustment in line with

theories of union voice (Freeman and Medoff, 1984). The ability of unions to bargain with firms

depends on the union density in the firm (Bryson and Forth, 2010). There is a mechanistic,

albeit imprecise, positive relationship between individual union membership and union density

Tom Pierse and John McHale

HUMAN RESOURCE MANAGEMENT JOURNAL, VOL 25 NO 4, 2015 497

© 2015 John Wiley & Sons Ltd.