The Effect of Unions on Firm Performance in Japanese Manufacturing

Using data on a sample of 979 union and nonunion Japanese manufacturing firms selected from the 1987 issue of the Yearbook of Japanese Unlisted Companies, the author examines the relationship between union status and firm performance in Japan. The findings suggest that Japanese unions in the sample substantially reduced both productivity and profitability, as well as regular wages net of bonuses and fringes. These three union effects were considerably smaller in small and medium-size firms than in large firms, perhaps because many of the small and medium-size firms were subcontractors that were pressed by the firms contracting them to cut costs and increase productivity. THE relationship between unions and firm performance has been the topic of extensive research in the United States and Britain. In a recent survey of the research on this subject, Addison and Hirsch (1989) concluded that unions sub-stantially reduce profitability but their effects on productivity are quite small and just as likely to be positive as negative. Compared to the enormous amount of evidence accumulated for the United States, little has been done in Japan on this important topic. The dearth of empirical work on Japanese unionism can be ex-plained at least in part by the lack of adequate data. MostJapanese governmen