Words Matter: The Value of Collective Bargaining Agreements
Abstract: This paper proposes novel natural language methods to measure worker rights from collective bargaining agreements (CBAs) for use in empirical economic analysis. Applying unsupervised text-as-data algorithms to a new collection of 30,000 CBAs from Canada in the period 1986-2015, we parse legal obligations (e.g. “the employer shall provide…”) and legal rights (e.g. “workers shall receive…”) from the contract text. We validate that contract clauses provide worker rights, which include both amenities and control over the work environment. Worker-rights clauses increase with firm size, and companies that provide more worker rights score highly on a survey indicating pro-worker management practices. Using time-varying province-level variation in labor income tax rates, we find that higher taxes increase the share of worker-rights clauses while reducing pre-tax wages in unionized firms, consistent with a substitution effect away from taxed compensation (wages) toward untaxed amenities (worker rights). Further, an exogenous increase in the value of outside options (from a Bartik instrument for labor demand) increases the share of worker rights clauses in CBAs. Combining the regression estimates, we infer that a one-standard-deviation increase in worker rights is valued at about 5.4% of wages. We show our results are consistent with a model in which legal rights in union collective bargaining agreements allow firms to commit to amenities that would otherwise be unilaterally chosen by management.
Ben Arold is a postdoctoral researcher at ETH Zurich’s Center for Law & Economics.
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