We examine the relationship between the employment and compensation of managers and CEOs and the presence of a unionized workforce. We develop a simple efficiency wage model, with a tradeoff between higher wages for workers and more monitoring, which requires more managers. The model also...

Standard economic models suggest that adverse demand shocks will lead to bigger employment losses if institutional factors like minimum wages or trade unions prevent real wages from declining. Some analysts have argued that this insight explains the dichotomy between the United States, where...