Abstract
How do takeovers affect workers’ wages and job security in the short-run? What role does the labor union play in mitigating these effects? I answer these two questions by analyzing wage and employment outcomes of over 4,000 public firms that were acquired between 1981 and 2002, using establishment-level data from the U.S. Census Bureau. I find that target establishments exhibit a net contraction in wages and employment, relative to comparable establishments after takeovers. Targets’ establishments in more unionized industries experience worse wage and employment outcomes after takeovers. These adverse effects are exacerbated when the establishment is located in a state with Right-to-work laws where unions face a less favorable bargaining environment. These findings indicate that target firms’ employees are negatively affected by takeovers and that their labor unions do not mitigate these negative effects.
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Notes
The IAM is the airline’s largest union, representing about 12,500 baggage handlers, reservation agents and other ground workers at Northwest Airlines.
Except from Ho, David, (2008, September 26). “Northwest Investors Approve Delta Merger amid Union Unrest.” Cox News Service. Available at http://www.ajc.com/ajccars/content/shared/money/stories/2008/09/NORTHWEST26\_COX\_F6493.html
This approach closely follows Davis et al. (2009) who examine employment outcomes at private equity backed companies.
Essentially, a state with a RTW law prohibits agreements between labor unions and employers making membership or payment of union dues or fees a condition of employment, either before or after hiring.
Currently, the latest year in the LBD is 2005. Therefore, I focus on deals completed by 2002 to show a three-window after a takeover.
See Jarmin and Miranda (2002) for a detailed description of the LBD.
The match success rate is very similar to Maksimovic et al. (2011).
Current Population Survey uses Census Industry Classification (CIC) to classify industries. A CIC corresponds roughly to a 3-digit SIC industry.
For a detailed description of the construction of this database, please refer to Hirsch and Macpherson (2003).
Available at http://www.tmonews.com/2011/11/cwa-union-says-100000-new-jobs-will-be-created-by-att-t-mobile-deal/ as of March, 2012.
Available at http://www.huffingtonpost.com/art-brodsky/labor-leads-netroors-and_b_883131.html as of March 2012.
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Xiaoyang Li, Cheung Kong Graduate School of Business, Beijing, China. Email: xyli@ckgsb.edu.cn. This article is based on various chapters of my Ph.D. dissertation at the University of Michigan. I am indebted to members of my dissertation committee, Jan Svejnar, Amy Dittmar, Charlie Brown, Francine Lafontaine, Amiyatosh Purnanandam, and Uday Rajan for their guidance and support. I also thank seminar participants at the University of Michigan Business Economics Brownbag workshops, the 2010 International Industrial Organization Conference, the 2011 AEA meetings in Denver for helpful comments. The research was conducted when the author was a Special Sworn Status researcher of the U.S. Census Bureau at the Michigan Research Data Center. Any opinions and conclusions expressed herein are those of the author and do not necessarily represent the views of the U.S. Census Bureau. All results have been reviewed to ensure that no confidential information is disclosed. I acknowledge the generous financial support from Ewing Marion Kauffman Foundation. All errors are my own.
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Li, X. Workers, Unions, and Takeovers. J Labor Res 33, 443–460 (2012). https://doi.org/10.1007/s12122-012-9142-0
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DOI: https://doi.org/10.1007/s12122-012-9142-0