Unemployment, union density, and wages

Abstract

We investigate, both theoretically and empirically, whether long-run industry unemployment rates modify the wage impact of union density on the earnings of members. Our theory suggests that the density effect increases as unemployment increases. Our empirical estimates use wage equations exclusive and inclusive of unemployment and of the interactive effect of unemployment and density in influencing wages. Based on a 1985 sample of manufacturing production workers, our findings indicate that the wage effect of union density for union workers as usually measured is only 41 percent as large as the effect when unemployment is in the model.