10-12 ConsiderTable 632 in the 2008 U.S. Statistical Abstract.
a. Calculate the union wage effect. Calculate the union effect on total benefits. Calculate the union effect on total compensation.
Union wage effect (21.91-17.66)/17.66=24.00
Union effect on total benefits (13.69-6.85)/6.85=99.9%
Union effect on total compensation (35.60-24.52)/24.52=45.20%
b. Note that for nonunion workers, retirement and savings increase total compensation by 75 cent per hour, with 60 percent of this expense coming in defined contribution retirement plans. In contrast, retirement and savings add $2.57 to the hourly compensation of union workers, and over three-fourths of this comes in the form of defined benefits and defined contribution plans. What is the difference between defined benefit and defined contribution plan? Why might a union prefer (and be able to negotiate) more compensation in defined benefits plans than defined contribution plans?