This paper empirically analyzes the relationship between union presence and firm performance in areas such as productivity and profitability by using data on a large number of Japanese firms, covering both manufacturing and non-manufacturing industries.

Results indicate that the presence of labor unions has large positive effects on productivity level and growth. The effects of union presence on wages are also positive and the magnitude is similar to that of productivity. I find no negative effect for the presence of unions on firm profitability. These results differ from studies in the U.S. The number of employees decreases more for unionized firms than non-unionized firms. Most of the difference in employment is attributable to the change in the number of part-time workers.

In order to enhance the productivity of the service sector, close cooperation between management and unions is required.