Saturday, March 15, 2014
Congressional B (Omni Shoreham)
With the coming of industrialization, trade unions became established in most industrialized countries. All the while, unions’ degree of centralization, and thus their policy influence, increasingly diverged, with some unions opting for centralism and others for a federal structure. This paper shows that the process of decentralization of authority within trade union federations is a result of increasing heterogeneity in preferences among the organization’s members. As the preferences of members in an organization become more diverse, the ability of the leadership to deliver uniform goods that satisfy all members decreases. To preempt members from leaving the organization, decentralization becomes a way for the organization to credible commit to not deliver uniform goods, such as centrally imposed wage negotiations and social policies, against the preferences of certain members. Decentralization is therefore a systemic response to centralized systems’ inability to deliver uniform goods to members with increasingly dissimilar preferences. Where preferences are diverse at the moment of formation, the organization will stay decentralized unless preferences become more homogenous. If our claim is correct, union federations should become decentralized in response to exogenous changes in labor market heterogeneity, such as diversification of occupations and risks among workers. Using historical trade union membership and occupational data both for 18 OECD countries (1900- 2010) and for a broader sample from Europe, the Americas, and Asia (1960-2010), we find support for our claim that increases in heterogeneity results in decentralization of authority. We thus show that heterogeneity of preferences is a powerful predictor of organizational decentralization.
