Nonunion Wages Research Articles

Does Trade Liberalization Always Decrease Union Bargaining Power?

The theoretical and empirical literature shows that union wages are more responsive to international import competition than nonunion wages, thus reducing unions bargaining power. In this paper we track the influence of unions on wages in Brazil before and after the trade liberalization in the beginning of the 1990s. We find that union bargaining power increased rather that decreased after economic openness. Our results seem to be related to the bargaining framework prevailing in the Brazilian labor market.

Paying to queue: a theory of locational differences in nonunion wages

Traditional theories of the effect unions have on nonunion wages are difficult to reconcile with firm and worker mobility. We show how differences in nonunion wages can persist in a two-city search model. Nonunion wage differences across cities are driven by transition rates into the union sector. Should union queues form in the nonunion sector, union power decreases nonunion wages as workers are willing to take lower wages to line up for union jobs. However, if queues are formed in the unemployed sector, union power increases nonunion wages as nonunion firms pay premiums to induce workers to leave the queue.

Union density effects in the supermarket industry

Unions provide higher than competitive wages for members, but their effect on non-union wages is not clear. We investigate the effect of union density on supermarket wages from 1986 to 1993, a period of declining real wages and declining union membership. Full-information maximum likelihood techniques are used to estimate log wage equations for both the union and nonunion sectors. Decomposition techniques then separate the union wage premium into the relative effects of densities and union membership. We find a significant, positive effect of union density for both union and nonunion employees. This effect explains approximately one-third of the union-nonunion wage differential.

Measuring Union and Nonunion Wage Growth: Puzzles in Search of Solutions

This paper presents conflicting evidence on trends in private sector union and nonunion wages. The BLS quarterly Employment Cost Index (ECI), constructed from establishment surveys, uses fixed weights applied to wage changes among matched job quotes. The ECI shows a substantial decrease in wage growth for union relative to nonunion workers. The annual Employer Costs for Employee Compensation (ECEC), drawn from the same survey data as the ECI, provides wage level estimates constructed from the full sample of job quotes using current sector weights. Surprisingly, the ECEC shows no trend in relative union-nonunion wages. Household evidence from the Current Population Survey (CPS) can potentially reconcile the conflicting ECI/ECEC evidence, but it is first necessary to account for Census earnings imputation procedures that bias the level and trend in the CPS union gap. CPS wage data absent controls, which should provide results similar to that from the ECEC, instead displays a steep decline in relative union wages, similar to that seen in the ECI. Regression estimates using the CPS, similar in spirit to the ECI, indicate a union premium that declines modestly over time. Union and nonunion wage growth is next calculated from the CPS using methods roughly consistent with the ECI and ECEC. These results shed rather dim light on the sources of ECI/ECEC differences. The contribution of the paper is its unearthing of puzzling and apparently contradictory evidence on union and nonunion wage trends (as well as on economy-wide wage growth). Although our analysis helps account for specific elements of this puzzle, a comprehensive solution remains elusive. We conclude that there has been closing in the union-nonunion wage gap since the mid-1980s, but the magnitude of the closing is anything but clear.

A macroeconomic analysis of the impact of union wage increases on nonunion wages

Based on the augmented Phillips curve and the autoregressive conditional heteroscedasticity model, the author finds that the growth of nonunion wages are positively associated with expected inflation, productivity growth, and the growth of union wages and are negatively correlated with the unemployment rate. The partial adjustment process is confirmed. Error variance can best be modelled by the ARCH(2) process.

Unionization and the Pattern of Nonunion Wages: Evidence for the UK

This paper presents the first examination of the effect of unionisation on the distribution of nonunion wages in the UK. We test a hypothesis that has received considerable attention in the US: that the threat of unionisation leads nonunion firms to increase the earnings of their lowest paid workers, so compressing their internal wage distribution. In aggregate we find little support for this hypothesis in the UK and suggest that the supportive evidence from the US may be a function of the absence of suitable linked employer‐employee data.

A Comparison of the Cyclical Behavior of Union and Nonunion Wages in the United States

This paper presents an extensive analysis of the behavior of union and nonunion wages over the business cycle, using quasi-panels developed from the Current Population Survey, in an attempt to resolve or reconcile competing claims about the cyclical behavior of union and nonunion wages. Union wages were roughly as procyclical as nonunion wages were, prior to the early 1980s. Substantial reductions in union wage procyclicality since then are associated with reductions in the procyclical exercise of bargaining power.

Unionization and nonunion wage patterns:

We argue that a nonunion worker’s support for unionization depends not only on the expected gain in wages, but also on the probability of retaining employment after union-ization. Incorporating this point generates no prediction that low-wage workers will receive the largest threat-induced supplements as they are the ones who are least likely to retain their jobs after unionization. In short, which group of workers will receive the largest union induced wage supplement is ambiguous.

Two-stage bargaining with coverage extension in a dual labour market

This paper studies coverage extension in a simple general equilibrium model with a dual labour market. The union sector is characterized by two-stage bargaining whereas the firms set wages in the non-union sector. In this model firms and unions of the union sector have a commonality of interest in extending coverage of a minimum wage to the non-union sector. Furthermore, the union sector does not seek to increase the non-union wage to a level above the market-clearing wage. In fact, it is optimal for the union sector to impose a market-clearing wage on the non-union sector. Finally, coverage extension increases welfare in this model.

Globalization and the future of central collective bargaining: the example of the German metal industry

The paper deals with the relationship of the German model of capitalism and the role of centralized collective bargaining within it. It is assumed that the system of central wage bargaining - leading to a relatively egalitarian wage structure and the absence of a non-union wage sector - is one of the major pillars of the national institutional framework of the German economy. Pressures towards the decentralization of collective bargaining will therefore not onlyy affect the distribution of wages and the patterns of social equality, but also have a profound impact on the functioning of the German model of capitalism. The first part of Paper links the system of collective bargaining and industrial relations with the wider macro-economic and political features of German capitalism. It defines three major challengers to the institutional framework of the German economy: structural challenges since the early 1970s, the impact of unification since 1989 and the impact of European integration and globalization since the mid-1980s. It concludes that not globalization as such but a complexity of different pressures might lead to drastic institutional changes. The second part of the paper analyses collective bargaining development in the metal industry in the early 1990s. It looks at the conduct of the bargaining rounds, the institutional set-up and the position of the collective bargaining actors respectively. It will be argued that collective bargaining in the German metal industry has become extremely pressurized in the early 1990s. We argue that pressure on collective bargaining stems from two sides: first, from thhe membership problem of trade unions and employers' associations and, second, from the narrowing scope of flexibility within the give system of wage determination. We will define three ways of achieving wage differentiation within and outside centralized bargaining structures and look at their changing role during that period. Finally, the paper presents two scenarios of collective bargaining in the future and discusses their implications for the German ecnomic model

Unions and the Economy: What We Know; What We Should Know

The wages and working conditions of about one in three Canadian workers are determined by collective bargaining. In this paper, current knowledge about the economic effects of collective bargaining is surveyed. Unions raise wages (by about 15 percent on average) and reduce wage dispersion for their members while also reducing profits. Unions do not seem to reduce employment levels in affected firms or cause nonunion wages to fall. Efficiency losses due to sectoral misallocation of labor and to strikes are small but some evidence suggests lowered investment in unionized firms. Union effects on total factor productivity need more careful study using firm-level data.

The pattern of non-union wage supplements: a switching regression approach

This paper estimates whether non-union wage supplements associated with unionization are larger for low wage workers. Switching regression estimates determine low and high wage samples and demonstrate larger supplements for most low wage workers. The pattern varies by occupational group.

Diverging Male Wage Inequality in the United States and Ganada, 1981–1988: Do Institutions Explain the Difference?

The U.S. and Canadian economies have much in common, including similar collective bargaining structures. During the period 1981–88, however, although both countries witnessed a decline in the percentage of workers belonging to unions and an increase in hourly wage inequality, those changes were much more pronounced in the United States than in Canada. Using data on men in Canada and the United States in 1981 and 1988 (from the Labour Force Survey and supplements to the Current Population Survey), the authors study the effect of labor market institutions on changes in wage inequality by computing simple counterfactuals such as the distribution of wages that would prevail if all workers were paid according to the observed nonunion wage schedule. Their results suggest that much more severe declines in the unionization rate in the United States than in Canada account for two-thirds of the differential growth in wage inequality between the two countries.

Diverging Male Wage Inequality in the United States and Canada, 1981-1988: Do Institutions Explain the Difference?

The U.S. and Canadian economies have much in common,including similar collective bargaining structures. During the period 1981-88, however, although both countries witnessed a decline in the percentage of workers belonging to unions and an increase in hourly wage inequality, those changes were much more pronounced in the United States than in Canada. Using micro data on men in the United States and Canada in 1981 and 1988, the authors study the effect of labor market institutions on changes in wage inequality by computing simple counterfactuals such as the distribution of wages that would prevail if all workers were paid according to the observed nonunion wage schedule. Their results suggest that changes in unionization rates and minimum wages account for two-thirds of the differential growth in wage inequality between the two countries.

Union Effects on Nonunion Wages: Evidence from Panel Data on Industries and Cities

The authors test for threat and crowding effects of unions on non-union wages at the industry and city levels, using panel data on the percent organized and nonunion industry and city wage differentials constructed from Current Population Surveys over the period 1973–89. At the industry level, increases in the percent organized were associated with decreases in the nonunion industry wage differential, suggesting that crowding effects were the predominant union effect on nonunion industry wage differentials. In contrast, at the city level increases in the percent organized were associated with increases in the nonunion city wage differential, suggesting that threat effects predominated. The authors also find evidence of negative cross-occupation union effects on nonunion industry wage differentials, supporting their hypothesis that the industry-level results were partly driven by complementarity between union and nonunion labor.

Union Effects on Nonunion Wages: Evidence from Panel Data on Industries and Cities

Union Effects on Nonunion Wages: Evidence from Panel Data on Industries and Cities

The Effect of International Trade on Union and Nonunion Wage Differences

This paper examines (i) the effect of international competition on union wages, union/non-union wage differences, and the real earnings of each type of labor; and (ii) the effect of unionization on the distribution of income. We also consider the effect of tariff protection on each type of labor. It is shown that union and non-union workers may be affected differently by trade and interna tional competition, and intuition based on traditional trade theory is some times contradicted. If tariff protection helps workers (through higher real wages) in the non-unionized sector, it does not follow that the same holds for union workers. The elasticity of factor substitution turns out to be crucial in characterizing how union wages behave.

Collective bargaining and relative earnings in Italy

The most commonly studied aspect of unionism is the relative wage effects that the presence of unions generates. Numerous studies, predominantly for US and UK labour markets, have attempted to measure the extent of the union–nonunion wage gap. Yet, despite the importance of unions in wage determination, no such evidence exists for Italy. Two main reasons can be put forward to explain the lack of studies: firstly, to date, no information on union status was available in any of the existing earnings surveys; secondly, the union-nonunion distinction has a different meaning in the Italian industrial relations system. The purpose of this study is to investigate the impact of unions on relative wages using establishment-level data for the metal-mechanical industry. A positive (statistically statistically) wage differential is found in establishments where unions are recognised for local collective bargaining. The wage gap is shown to be bigger for white-collar workers. After rejecting the hypothesis of a constant wage differential, various differentials according to establishment characteristics are calculated. Union-threat effects show a positive effect on pay in the sector not covered by local bargaining.

Unionization and the Pattern of Nonunion Wage Supplements

Negotiated standard wage policies reduce dispersion in the log earnings of union members when compared to those of otherwise equal nonunion members [5; 6]. As large as these dispersion differences are, they may underestimate the true influence of union wage policy. Kahn and Curme [14] have suggested that high degrees of unionization actually result in reduced nonunion wage dispersion. This follows from a particular model of the union threat effect in which nonunion employers tilt induced wage increases toward low-wage workers. Such tilting makes sense because lower paid workers are assumed to be more likely to support unions, ceteris paribus. This assumption fails to emphasize that low wage workers may be the least likely to be retained by a newly unionized employer and that this also influences their ultimate decision to support unionization. In the face of union avoidance strategies that routinely imply the possibility of job loss, low wage employees may recognize that the employer faces greater costs of bringing them up to a standard union wage and thus their chances for retention are lower.' Including this realization results in ambiguous predictions about the influence of unionization on nonunion dispersion. Not only should the ambiguity of the proper theoretical prediction be highlighted, but it should be recognized that the relevant prediction from theoretical models has not yet been tested. Previous tests are inappropriate because the threat induced wage increases could be tilted toward low-wage workers without a necessary reduction in the typical measures of wage dispersion. Similarly, those measures of wage dispersion may actually decline without a general tilt of wages toward low-wage workers. This possibility exists because of the sensitivity of the usual variance measures to outliers and because of aggregation and endogeneity problems affecting previous methodologies. This paper uses 1983 and 1988 Current Population Survey (CPS) data to directly estimate the impact of unionization on the earnings of lowand high-wage nonunion workers. After controlling for traditional human capital, locational, and occupational variables, unionization increases the log-earnings of low-wage nonunion workers significantly more than those of high-wage nonunion workers. This result is found with the very data Belman and Heywood [2] used to demonstrate that

The Impact of Unionization on Male-Female Earnings Differences in Canada

The impact of unionization on male-female earnings differences in Canada is analyzed using data spanning 1981 to 1988, a period in which the male-female unionization gap narrowed considerably. Gender differences in union density, union wages, and nonunion wages are decomposed into characteristics-related and discriminatory components. We find that the drop in the gender unionization gap prevented an increase of 7 percent in the overall wage differential between men and women. Also, male-female earnings differences in the nonunion sector make a substantially larger contribution to the gender earnings gap than do those in the union sector.