Wirtschaft un.d Gesellschaft 19. Jahrgang (1993), flejt 4 2.2. Heterogeneaus Workers A second way in which the simple model is unrealistic is in the as­ sumptiun that cach product is made with the labor of a single union. Fi­ nal products, in general, depend on many different types of labor that arc often represented by different unions. In many countries, firms may ne­ gotiate with morc than one union. This is particularly true in industries and countries where blue-collar workers are organized in craft unians or in competing industrial unions. In large metalworking firms in Britain, for example, it is not unusual for the labor force to be represented by 15-20 unians (8). Even in countries like Norway and Sweden where non­ competing industrial unians are the rule, there are separate unians for blue-collar, white-collar and professional workers. In addition, firms depend on the labor of workcrs thcy do not dircctly cmploy. Paymcnts for goods and sciViccs bought from other domestic producers may comprise n substantial part of a firm's production costs. The manufacturing sector depends on the outputs of workers in utilities and transportation. The cost of new investment depends on the price of capital goods and new construction. The cost of government services de­ pends on wages in the public sector. According to the comment by Nickell (9), labor costs average only 20 per cent of revenues at the firm level in Great Britain yet wages and salaries constitute 70 per cent of value added at the national level. When products are produced by workers divided into multiple unions, one union's wage affects other unions' wage and employment possibili­ ties (10). In this case, the unions' wage demands depend on the level of centralization even when final product prices are fixed in world mar­ kets. Suppose, for example, that there are k unians whose labor is used in the production of a final good. The interdependence of the k unions can be represented by letting the demand for labor for each union be a function of aJl k wages ( 11 ): L, = L, (w1, • • • w,J. We will assume that the unions have identical preferences and face identical demand curves for their Iabor. If the k unians act independently, each union will choose the wage given by the condition du/dw. __ CJL. du.J()L, - dW; . [4] In contrast, a union confederat.ion that maximized some welfare func­ tion V (u1, • • • , u,J and treated its affiliates equally in the sense that dV/du, = oV/dU; would choose the wage given by the condition that (12) [5] 430