Do Unions Increase Training to Improve Firm Competitiveness?
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Unions in Korea have had strong impact on improving the life of workers, including wage level, job security, and working conditions. This strong impact, however, also increased labor cost and may have actually hindered companies' competitiveness in the market, particularly in the global market. The question asked in this paper is how do unionized companies with higher labor costs survive in the market? To maintain competitive advantage in the highly competitive global market, highly qualified human resources and continuous upgrading in skills and knowledgethorough active participation in training program, are necessary conditions. The worker's participation, promoted by the union, in training and development may contribute to maintain the competitive advantage of the company. Simple statistics show that unionized companies pay workers more and train them more than nounionized companies do. This may lead to the explanation that unions get more from the company but compensate higher labor cost with more training which may lead to higher productivity. As shown in Korea Investors Service dataset, the absolute levels of per capita sales, ordinary revenue, and net revenue are higher in unionized companies with higher per capita labor cost. However, the effect of unions on training and development cost disappears when some other control variables are included in the model. Furthermore, the union variable was neither statistically significant in the random effect model for company performance on attitudinal measures such as job competency and workers’ motivation nor on financial measures such as per capita value-added, sales, and revenues. Meanwhile, the per capita training cost variable keeps its statistical significance in most of the models analyzed. To survive and prosper under the globalized competition, union may need to bargain not only wages and job security, but also company's competitiveness to help the company survive in the market. One simple but strong way of helping the company to be competitive in the market is upgrading skills and knowledge of union members.
Abstract
Unions in Korea have had strong impact on improving the life of workers, including wage level, job security, and working conditions. This strong impact, however, also increased labor cost and may have actually hindered companies' competitiveness in the market, particularly in the global market. The question asked in this paper is how do unionized companies with higher labor costs survive in the market? To maintain competitive advantage in the highly competitive global market, highly qualified human resources and continuous upgrading in skills and knowledgethorough active participation in training program, are necessary conditions. The worker's participation, promoted by the union, in training and development may contribute to maintain the competitive advantage of the company. Simple statistics show that unionized companies pay workers more and train them more than nounionized companies do. This may lead to the explanation that unions get more from the company but compensate higher labor cost with more training which may lead to higher productivity. As shown in Korea Investors Service dataset, the absolute levels of per capita sales, ordinary revenue, and net revenue are higher in unionized companies with higher per capita labor cost. However, the effect of unions on training and development cost disappears when some other control variables are included in the model. Furthermore, the union variable was neither statistically significant in the random effect model for company performance on attitudinal measures such as job competency and workers’ motivation nor on financial measures such as per capita value-added, sales, and revenues. Meanwhile, the per capita training cost variable keeps its statistical significance in most of the models analyzed. To survive and prosper under the globalized competition, union may need to bargain not only wages and job security, but also company's competitiveness to help the company survive in the market. One simple but strong way of helping the company to be competitive in the market is upgrading skills and knowledge of union members.
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