Wage inflation taxes and profit-sharing in economies with majority rule unions

Randall Markee Scheessele, Purdue University

Abstract

The purpose of this dissertation is to investigate the effects of wage inflation taxes and profit-sharing on unemployment in economies with monopolistically competitive firms and majority rule unions. We investigate three types of economies. First, we investigate these policies in an entirely unionized economy. We show that wage inflation taxes and profit-sharing decrease the median union member's wage setting power in this economy. Second, we investigate these policies in an economy with a relatively small union sector so that economic activity in the union sector has negligible effects on the economic activity in the nonunion sector. In this economy, profit-sharing has an added effect on union wages and membership in the union sector by decreasing the seniority of the median union member since a less senior median member is more concerned about his probability of employment than higher wages. Union unemployment, however, may increase or decrease in response to an increase in the share depending upon the percentage increases in membership and employment. Finally, we investigate these policies in an economy where economic activity in the union sector have significant effects on the economic activity in the nonunion sector. We show that economy-wide and union sector profit-sharing have ambiguous effects on unemployment. Profit-sharing in the nonunion sector, however, decreases unemployment.

Degree

Ph.D.

Advisors

Carlson, Purdue University.

Subject Area

Labor economics

COinS