The idea of the efficiency wage theory is that increasing wages
can lead to increased labour productivity because workers feel more
motivated to work with higher pay.
Therefore if firms increase wages – some or all of the higher
wage costs will be recouped through increased staff retention and
higher labour productivity.
In theory, higher wages could cause increased labour
productivity (MRP). In this case, the wage increases can pay for
themselves.
Unions have a substantial impact on the compensation and work
lives of both unionized and non-unionized workers. This report
presents current data on unions’ effect on wages, fringe benefits,
total compensation, pay inequality, and workplace protections.
Some of the conclusions are:
- Unions raise wages of unionized workers by roughly 20% and
raise compensation, including both wages and benefits, by about
28%.
- Unions reduce wage inequality because they raise wages more for
low- and middle-wage workers than for higher-wage workers, more for
blue-collar than for white-collar workers, and more for workers who
do not have a college degree.
- Strong unions set a pay standard that nonunion employers
follow. For example, a high school graduate whose workplace is not
unionized but whose industry is 25% unionized is paid 5% more than
similar workers in less unionized industries.
- The impact of unions on total nonunion wages is almost as large
as the impact on total union wages.
- The most sweeping advantage for unionized workers is in fringe
benefits. Unionized workers are more likely than their nonunionized
counterparts to receive paid leave, are approximately 18% to 28%
more likely to have employer-provided health insurance, and are 23%
to 54% more likely to be in employer-provided pension plans.
- Unionized workers receive more generous health benefits than
nonunionized workers. They also pay 18% lower health care
deductibles and a smaller share of the costs for family coverage.
In retirement, unionized workers are 24% more likely to be covered
by health insurance paid for by their employer.
- Unionized workers receive better pension plans. Not only are
they more likely to have a guaranteed benefit in retirement, their
employers contribute 28% more toward pensions.
- Unionized workers receive 26% more vacation time and 14% more
total paid leave (vacations and holidays).