Ford Motor Company’s Labor Economics

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Table of Contents

Union wage effects
Estimates of the union wage gap
Union wage gap against union wage gain
Unions and wage dispersion
The nonwage effects of unions
Unions, productivity and profits
Public sector unions
Works Cited

Union wage effects

Union wage premium is currently one of the most analyzed issues in labor economics. It is a ratio which compares the earnings of a nonunion worker member to a union worker. Union wage effect can be analyzed as the percentage by use of the wage gain of typical workers when they join a union. According to research findings, a union worker earns 15% more than a typical nonunion worker.

At the Ford Motor company, the union wage effects have pushed the company to its financial limits. In 2007, the company added an additional $1,200 to every vehicle manufactured due to high wage demands. As a result, foreign vehicles gained market share by edging out the expensive Ford vehicles.

Estimates of the union wage gap

The union wage gap is a percentage of the wage differential between union jobs and nonunion jobs. It is countercyclical since it widens in times of high unemployment and narrows during economic expansions. Wage gap is calculated by comparing workers in both union and nonunion jobs having a similar economic and social background such as education, age, industry and region of employment.

Research findings indicate that the union wage gap is slightly lower than nonunion wage gap at a difference of 15% to 25%. In 2008, Ford Motor Company and the workers union agreed to pay new employees $4.50 an hour. This value is much higher when compared to $1.50 per hour earned by the nonunionized workers at Ford’s plant in Mexico.

Union wage gap against union wage gain

Wage gain is the difference between the earnings of a unionized and a nonunionized worker with the same level of skills. This difference in the wage gap cannot be used to measure the union wage gain since a union worker earns 15% more than a nonunion worker.

In the US, Ford pays its workers $8 more per hour than its nonunion counterparts located in other countries. Currently, Ford claims to be paying $58/hour while other automakers pay an average of $50 per hour.

Unions and wage dispersion

The difference in wages among workers at the same workplace level varies differently between unionized and nonunionized workers. Studies indicate that unionized workers are least affected by wage dispersion. Nonunionized workers face 25% higher wage dispersion in comparison to the unionized firms.

Over the past years, Ford Motor Company nonunion employees earned less than their counterparts in foreign motor companies. As a result, foreign automakers are using the pay strategy to discourage its workers from joining unions. Foreign automakers believed that if nonunion worker earns more than union workers, then they will not join the unions.

Apart from the little disparity in their wages, union workers are a uniform group in terms of their education level as well as other related job skills. This is because unions aim at collective bargaining and equity during negotiations which leads to a lack in wage setting depending on productivity of workers.

The nonwage effects of unions

The nonwage effect of unions proves through longitudinal analysis that the impacts of unions in nonwage activities are lower than in wage outcomes. However, as much as unions improve the wage structures for its members they affect other nonwage factors like job satisfaction and worker productivity.

Research indicates that most union workers are dissatisfied with their jobs because of the job quality, industrial relation climate and wages offered by their firms. Most union workers believe their jobs offer little opportunities for promotion and are more complex than nonunion jobs.

Unions, productivity and profits

Unions have a massive influence on the general financial and productive effect of a firm. Firms cannot use theory only to predict the effects of unions since they are inadequate. This means that a firm using theory can either improve or destroy its general performance. It should be noted that factors uplifting or those that destroy productivity occur simultaneously hence; the net effect can only be attained via proper empirical investigation.

Restructuring strategies introduced in 2006 by Ford Motor Company pushed its sales and increased profits in the year 2009 and 2010. This improvement is attributed to increased employee productivity since they wanted to show their commitment to the company. Workers who were not in the upper management positions also got a share of the profits thus enhancing their productivity.

Public sector unions

Public sector unions aim at pushing for the best interests of workers within government owned, supported or regulated organizations. Currently, public sector unions have more influential unions in the world compared to the private sector unions. As a result, the public sector unions have been criticized and branded “black holes” since their workers earn more than what they produce.

This criticism led the conservatives to vouch for the downsizing of these unions claiming they were the cause of the large government deficits (DiLorenzo par. 15).

In support of change, some Ford Motor Company workers argued that public unions need to improve their working standards by using innovative ways of service delivery. Failure to do this, taxpayers as well as consumers will turn elsewhere (“Welcome to the Real World” par. 11).

Works Cited

DiLorenzo, Thomas. The Political Economy of Government Employee Unions, 26 Feb 2011. Web. <https://www.lewrockwell.com/2011/02/thomas-dilorenzo/government-employee-unions/>

“Welcome to the Real World.” Public-Sector Unions. 2009. Web. <https://www.economist.com/united-states/2009/12/10/welcome-to-the-real-world>

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