The Roles and Tasks of Labor Unions for Workers' Vocational Education and Training 1
2. Theory and Preceding Research
1) Trade unions and vocational education and training
Becker divided training into general training and specific one. General training, which dealt with general skills, would be paid for by the employee (in other words, with less wages); specific training, which handled specific skills, would be paid for partially by the employer and by the employee on the premise that the employee works for long service (Becker, 1993).
However, his argument generally did not match with actual situations in that it contained inflexible wages and firms provided general training with workers without paying for expenses. After then, there were theoretical arguments about the reasons why training was conducted in companies.
This explained that firms provided training with workers because the labor market was basically unstable. First of all, Katz and Ziderman (1990) argued that there might be asymmetric information concerning the ability of workers. If the training firm knows how much and what type of general training a worker received, that would impose substantial information-based costs on external firms. Stevens (1996) suggested training generally produced transferable skills, but there were limitations on labor turnover, so that firms provided training to workers. Acemoglu and Pischke (1998a, b) suggested the employer provided training because a compressed wage structure made it possible for him/her to pay less than the value of marginal product of skills. In addition to theoretical analysis on training investment and costs, in competitive labor markets where there were rapid changes in technology and preferences, Mcduffie and Kochan (1995) remarkably showed that the employer decided the investment of education and training because he/she regarded it as its business strategy and selection, rather than as externalities such as macroscopic circumstances or cultural labor-management system, and technical factors. In other words, since the 1980s, in an environment where advanced countries found it hard to compete with low-wage nations, they were forced to pursue the quality of goods, flexibility, innovation, and the differentiate approach to products. Under the circumstances, all measures required a highly skilled workforce (Crouch et al., 1999, p. 1). As a result, the investment of training was somewhat inevitable, and training was provided to workers regardless of its expenses.
Trade unions, which have the monopoly power, may have a moderating influence on training as do businesses. Theoretically, this explains that trade unions have both negative and positive effects on training.
First, let us discussions on the negative effects of trade unions on vocational education and training. The monopoly role of trade unions over labor supply brought about higher wages than the labor market, so employers had no room for investment in education and training (Frazis et al., 2000). It is also argued that due to a reduction in wage disparities, there is no incentive for training (Duncan and Stafford, 1980; Barron, Fuess and Lowenstein, 1987). Also, when there are trade unions, and wage systems such as union membership’s seniority rule and seniority-based pay are put in place, there is no incentive for training (Mincer, 1981). Trade unions stick to job-based pay and argue against training on the basis that the employer intends to instill ideology into workers through training (Osterman, 1995). Trade unions cling to job boundaries, allowing the employer to be reluctant to invest in training (Green et al., 1996).
There is also a discussion about positive effects of trade unions on the investment of education and training. Employers provide education and training to make up for higher wages due to trade unions by means of higher productivity (Boheim and Booth, 2004). Compressed wages arising from trade unions induce employers to provide training because they are not obliged to provide extra wages for an increase in productivity to highly skilled workers completing training (Acemouglu and Pischke, 1999). Moreover, as trade unions have the impact of a collective voice, this could discourage workers from changing their jobs. And higher pay in itself serves as a function to prevent workers from voluntarily changing jobs, therefore allowing employers to provide incentives for training (Crouch et al., 1999; Booth and Chaterji, 1998; Green et al., 1999).
In that regard, it is hard to theoretically come to conclusion whether the effects of trade unions on training is positive or negative.
As well as the impact of the presence of trade unions on incumbent workers’ training, the function of trade unions is also important. If trade unions pursue both wages and job security, they could request training for union members in order to maintain the maximum of their members’ skills (Ryan, 1996). Additionally, trade unions are helpful to seek the needed education and training for employers and find procedures and measures for education and training (Metcalf, 2003; 161).
Policies related to workers’ skills will determine the effect of trade unions on training. Since skills improve workers’ employability as well as the source of businesses’ competitiveness, they can be consistent with the interests of trade unions. If so, trade unions could force employers to increase the investment in the development of human resources by means of education and training (Osterman, 1995).
2) The impact of trade unions on enterprise-supported vocational education and training - analysis of preceding empirical study
The impact of trade unions on enterprise-sponsored vocational education and training is found at different period and place. Studies conducted in the 1980s found negative effects of trade unions on training (Duncan and Stafford, 1980; Mincer, 1983; Barron et al., 1987). However, empirical studies conducted after the 1990s were inconsistent. According to Boheim and Booth (2004), studies from the United Kingdom found positive effects of unions on enterprise-sponsored training (Booth, 1991; Green, 1993; Arulampalam and Booth, 1998; Heyes and Stuart, 1998; Green, Machin and Wilkinson, 1999; Boheim and Booth, 2004). On the other hand, studies from the United States found there was inconsistent in terms of the impact of trade unions on training. Lynch (1992), Veum (1995), Osterman (1995), Frazis et al.(1995) presented union workers had more opportunities and the amount of training than non-union workers, while Lynch and Black(1998) found that there was no statistical relevance between unions and the frequency of training based on a survey at the workplace. Using data sources such as Adult Education and Training Survey (AETS), Green and Lemieux (2007) also found trade unions had no impact on training. Dustmann and Schonberg (2004), using data sources from Germany, indicated that unions had an impact on the amount of training, and particularly a reduction in wage differences by trade unions led to the improvement of training.
The mixed results for the effects of trade unions on training can be attributable to labor management relations and changes in social-economic circumstances. In other words, a global competitive environment was not created until the 1980s. Accordingly, trade unions are highly likely to take little attention on workers’ skills. In the United States, the Taylorism and Fordism principles emerged against skilled labor, and trade unions also made strategies desirable for higher wages and working conditions, so it can be inferred that in many cases, trade unions refused training. Conversely, in Europe like Germany and the United Kingdom, trade unions had an outstanding strategy for skills serving as workers’ powerful bargaining power alongside with wages. This could lead to the positive effects of unions on training.
In Korea, studies on the impact of trade unions on training were conducted in comparatively later times. Ryu Jang-su (1997), Kim Dong-bae (2000), Kim Ahn-kook (2001) found there was a significant relation between trade unions and training. Kim Dong-bae•No Yong-jin (2003) and No Yong-jin et al., (2003) found that trade unions in itself had a negative impact on training.
Jeong Seung-Guk (2006) also presented trade unions and training had negative effects in the
manufacturing sector, indicating trade unions and the amount of training had positive effects in the service industry. In contrast, Lee Byung-hee•Kim Dong-bae (2003) and Lee Young-myeon•Na In- kang (2006) found that unions had meaningful positive effects on training, but if there was more control, statistical significance disappeared. No Young-jin (2007), using Workplace Panel Survey, found that the negative effects of trade unions on training, but favorable labor-management relations had a positive effect on training. Na, In-kang (2011) used Human Capital Corporate Panel to show a similar result. Lee Young-myeon•Na In-kang (2012) used Human Capital Corporate Panel to indicate that there was no supporting evidence of the impact of unions on training.
In Korea, it is shown that trade unions have no effects on training or have negative ones. However, further studies are needed based on the above-mentioned theoretical discussion. In other words, the effects of unions on training may directly influence training due to higher wages or request for training by trade unions, but they indirectly influence enterprise-sponsored training through the effects of compressed wages or of the prevention of changing jobs. In that regard, Kim, Ahn-kook (2001, pp. 76-77) conducted regression analysis by including variables such as the union dummy and wage compression, indicated that wage compression had a significant influence on training but the union dummy had no effect on training. Although the study has limitations, it is shown that trade unions may indirectly influence training by means of wage compress or measures of the prevention of changing jobs. Accordingly, this can suggest the effect of trade unions on training is required to assume structural model. The next chapter 4 will explore the impact of trade unions on training through structural model.