Wage Dispersion and Unionism: Do Unions Protect Low Pay?

Abstract

Existing research concerning the impact of unions on relative wages provides evidence for the existence of significant union/non‐union wage differentials. However, union practices are deemed to have a more pervasive effect on the overall distribution of wages, reducing wage differentials across and within establishments. Attempts to explore union effects on wage dispersion in the context of the Italian labour market. Several indicators of wage dispersion are computed, using both industry and establishment level data, in the attempt to ascertain the different routes through which union presence affects the structure of wages. The empirical evidence shows that Italian trade unions have pursued “egalitarian” objectives and have succeeded in shaping pay policies which, through central and local negotiations, raise low wages and reduce wage differentials both among skill categories and across establishments.