ABSTRACT
This chapter analyses the goals, major activities, and overall effects of unions in the context of economic theory. Labor unions are organizations of workers whose primary objectives are to improve the pecuniary and nonpecuniary conditions of employment among their members. In Australia and most European countries, collective bargaining coverage is extended to a very high fraction of workers who are not members of unions. Much of the empirical work on unions has been done in the United States, where bargaining is decentralized and, the majority of workers are nonunion. The National Labor Relations Act (NLRA) of 1935 required employers to bargain with unions that represented the majority of their employees and made it illegal for employers to interfere with their employees' right to organize collectively. Employers are on the other side of the bargaining table, and they must make agreements that permit them to operate successfully both with their workers and within their product markets.
