Friday, August 07, 2009

Union Intergenerational Preferences

Megan McArdle writes:
In theory, labor organizers shouldn't demand so much that their industries become uncompetitive. In practice, however, as we've seen with Chrysler and GM, they can and do.
I am not very familiar with the details of collective bargaining theory, but I would be surprised if this was really true. McArdle is usually right with her references to theory, so I'm asking what assumptions about industry survival preferences by unions are commonplace?

I would assume that the objective of a labor union would be to maximize the wealth of its current members. The union members of Generation t would probably want their firm during Generation t+1 to remain competitive enough to pay its pensions and liabilities, but why would they care about Generation t+2 and forward?

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