Panel Paper: What Do Unions Do to Shared Ownership? Exploring the Interaction Effect of Shared Capitalism and Union on Employee Outcomes

Friday, March 29, 2019
Mary Graydon Center - Room 247 (American University)

*Names in bold indicate Presenter

Jungook Kim, Rutgers University


Despite the decreasing union presence for the past decades, empirical evidence shows that the U.S. workers still want more participation and involvement in workplace decision making. Worker Representation and Participation Survey by Richard Freeman discovered that the majority of the workers wanted more influence on various issues including decisions on wage and benefits and training, and that they believed increased participation will lead to better performance. Rich empirical evidence supported this belief by showing increased participation by workers—including formal representative participation through union—could lead to better performance.

While the union presence has been diminishing, another type of worker participation—financial participation has grown over time. The coincidental growth of financial participation of workers in their workplaces in the midst of the historic union decline has been significant enough to include almost the half of the US workforce. Broad-based financial participation—in the forms of profit and gain sharing, employee stock ownership plan (ESOP) or stock purchasing plan, broad-based stock options, cooperatives, and so forth—by the workers is shown by accumulated empirical studies to be beneficial both to employers and employees. However, labor union has been skeptical and only partially accepting of the idea, swaying toward or away at different times.

Based on the findings of the previous research discovered positive outcomes of financial participation, and negative outcomes of union membership, this study aims to understand how the broad based financial participation and union separately and in combination affect individual level outcomes related to performance and safety. The study analyzed the General Social Survey of 2002, 2006, 2010, and 2014 and the National Bureau of Economic Research data on financial participation. The results of the analysis of these cross-sectional data found the consistent positive effects of financial participation, inconsistent effects of union, and small effect of their interaction. Union membership negatively predicted eligibility for profit sharing and gain sharing, supporting the argument that financial participation may have substituting effect for unionization. Analysis of the NBER data also revealed that union membership and financial participation interact with each other, and these interactions are associated to employee outcomes that can have performance and safety implications.

Employees can have chances to create wealth and enjoy capital income, and employers can enjoy improved worker motivation and performance though financial participation. Through union presence, workers can enjoy improved working conditions such as better wages, safety and health conditions, formal grievance procedure, etc. Taken altogether, the combination of financial participation and union presence can serve both employees’ and employers’ interests by representing worker rights and interests, and improving workplace safety and worker access to training and education, and motivating workers to perform better. While the historic-low union membership has become one of the major challenges in labor market and labor policy, this study provides public policy implications related to workers’ democratic and financial participation.