The Language of Contract:promises and Power in Union Collective Bargaining Agreements

Elliott Ash (ETH Zurich)
W. Bentley MacLeod (Columbia University)
Suresh Naidu (Columbia University)

Abstract : Abstract We document determinants of control rights in union contracts using a new corpus of 30,000 collective bargaining agreements from Canada from 1986 through 2015. Using ideas and methods from computational linguistics, we extract measures of rigidity and worker control from the text of the contract clauses. Motivated by a model of efficient contract design, we analyze how rigidity and authority in contracts varies according to firm-level factors and external factors. We document that contracts impose obligations equally on firms and workers but give entitlements mostly to workers. An increase in personal income tax rates is associated with an increase in worker entitlements, consistent with substitution away from taxed compensation (income) and toward untaxed compensation (control rights as amenities). Lower local sectoral unemployment rates and provincial governance by pro-labor parties is associated with increased worker authority, consistent with effects of changed bargaining power for workers. Worker control also reduces labor conflict: while unanticipated real wage shocks from COLA clauses increase the probability of a strike, this effect is attenuated in contracts with a high degree of worker control.

Human Capitalists and the Global Division of Labor

Jan Schymik (University of Mannheim)

Abstract : The widespread practice of equity-based compensation has transformed skilled labor from a labor input into a class of human capitalists that are de facto firm owners. This paper studies how globalization, via access to foreign inputs, affects this development. To study the empirical relation between input imports and compensation contracts for highly skilled labor, I combine data on managerial equity ownership and incomes for public firms in the U.S. and U.K. with international input-output data. I document that managers in more offshorable industries obtain larger levels of compensation and own more equity wealth. Using a shift-share instrumentation strategy based on variation in foreign input supply and trade costs, I find that input imports provoke a reallocation of managerial compensation towards equity ownership. This finding is driven by the largest firms in the economy and suggests that equity wealth inequality becomes more prevalent than income inequality for top earners in an open economy. To rationalize these findings I develop a heterogeneous firm assignment model in which firms choose to compensate managers with equity to alleviate agency frictions. In the model, agency frictions depend on firm size such that globalization provokes a reallocation of compensation towards equity ownership for top earners. Calibrating the model to micro and macro moments in U.S. and U.K. data, I illustrate that globalization accounts for substantial heterogeneity in compensation contracts. Ignoring the ownership of equity results in substantial mismeasurement of the returns of globalization to highly skilled labor and financial incentives.

Gains from Contractualization: Evidence from Labor Regulations on Chinese Workers

Candice J. Yandam (Panthéon-Sorbonne University)
Qin Gao (Columbia University)

Abstract : In China, all employment relationships must be covered by a written labor contract which considerably strengthens employment protection for workers. Using a unique longitudinal dataset, the China Labor Dynamics Survey (2012-2016), this paper estimates the impact of the contractualization of labor relations on workers' welfare, job satisfaction, and labor market outcomes. Our estimations show that getting a labor contract leads to an increase in workers' salary, insurance participation, and income satisfaction. Results are robust to the addition of individual fixed effects to control for potential unobserved heterogeneity