Union Wage Premium Research Articles

Trade unions and the gender wage gap: evidence from China

ABSTRACT While it is assumed that trade unions may influence the gender wage gap, evidence is scarce on this issue. This study investigates the issue in China using national longitudinal survey data from 2010 to 2020. The results reveal that the union wage premium is greater for women than for men. Furthermore, the union wage premium is more beneficial for women in the public sector compared to the private sector. The gender disparity in endowment return effect among non-union members is the primary factor contributing to the formation of the gender wage gap in both public and private sectors, with the effect being more pronounced in the public sector. Additionally, the gender disparity in unionism reduces the gender wage gap in the public sector while widening the wage gap in the private sector.

Union membership and the wage gap between the public and private sectors: evidence from China

As trade unions are active in corporations worldwide, their effects on the labor market have attracted global attention. However, there is scarce empirical evidence regarding how trade unions’ effects on the wage gap differ between the public and private sectors, especially in the Chinese context. Using national longitudinal survey data from the China Family Panel Studies for the years 2010, 2012, 2014, 2016, and 2018 and the Blinder-Oaxaca decomposition method, this study estimates unions’ effect on the wage gap between the public and private sectors in China. The results from the Ordinary Least Squares (OLS) method indicate the existence of a significant positive union wage premium nationwide. Additionally, the premium in the public sector is greater than that in the private sector. However, this effect becomes insignificant after accounting for individual heterogeneity using the fixed effects model. The decomposition results based on the OLS method indicate that the union coverage difference (the endowment effect) widens the wage gap between the public and private sectors; conversely, the union wage premium difference (the price effect) narrows the wage gap. These results indicate that a policy expanding union coverage in the private sector may effectively narrow the wage gap between both sectors.

The impacts of U.S. right‐to‐work laws on free riding, unionization, and compensation

AbstractRight‐to‐work (RTW) laws are theorized to precipitate union decline by inducing free riding among union‐covered workers; however, this relationship has not been empirically explored. This paper uses recent policy variation and Current Population Survey (CPS) data to identify the impact of state RTW laws on union status (free riding, membership, and coverage), wages, and benefits among private and public sector workers. Doubly robust difference‐in‐difference estimates suggest RTW laws are associated with substantial increases in free riding, decreases in union membership, and decreases in union coverage. Thus, RTW laws weaken unions through combinations of increased free riding and decreased coverage, though effects vary by state and sector. While RTW laws are not associated with changes in wage differentials, state fixed effects estimates suggest that unions provide some excludable advantages to members in the face of RTW legislation, through higher earnings (union wage premium) and fringe benefits (union benefit premium).

노동조합이 임금프리미엄과 임금불평등에 미친 영향

This paper analyzed the effect of labor unions on wage premium and wage inequality using establishment-worker linked panel data which combines workplace panel survey from 2014 to 2019 with employment insurance data.
 First, an unconditional quantile regression methodology was used to estimate how much union wage premiums differed over the entire sample during the period. The result shows that the union raises the wage premiums of the 40th quartile wage group the most and decreases the effect toward the low wage group and especially the high wage group. It seems that union represent the economic interests of the middle and lower wage groups most.
 Estimating the relationship between the inequality index by business establishment and the unionization rate using the fixed effect, the unionization rate showed a statistically significant negative(-) relationship with all inequality indexes such as the Gini coefficient, the Tile index, the Palma ratio, and the p90/p10 quantile.
 The above estimation results imply that labor unions have had a statistically significant impact on inequality reduction in the labor market of at least the sample (business establishment with 30 or more employees), and it is necessary to consider progress in unionization as a way to improve the unequal labor market situation in the future.

Is There a Union Wage Premium in Germany and Which Workers Benefit Most?

Using representative data from the German Socio-Economic Panel (SOEP), this paper finds a statistically significant union wage premium in Germany of almost three percent, which is not simply a collective bargaining premium. Given that the union membership fee is typically about one percent of workers’ gross wages, this finding suggests that it pays off to be a union member. Our results show that the wage premium differs substantially between various occupations and educational groups, but not between men and women. We do not find that union wage premia are higher for those occupations and workers which constitute the core of union membership. Rather, unions seem to care about disadvantaged workers and pursue a wider social agenda.

Is There a Union Wage Premium in Germany and Which Workers Benefit Most?

Is There a Union Wage Premium in Germany and Which Workers Benefit Most?

What did unions do for union workers during the COVID‐19 pandemic?

AbstractThis research examines the impact of the COVID‐19 pandemic on labour market outcomes of union workers, based on nationally representative data. I employ the difference‐in‐difference estimation to identify the effect of the COVID‐19 pandemic on the employment, labour earnings and other labour market outcomes of union workers, relative to non‐union workers. I find that, compared to non‐union workers, union workers experienced greater job security, and the pre‐pandemic union wage premium remained largely unchanged during the pandemic. There exists a large heterogeneity in the union effect on employment and real wages by worker characteristic. I also find that union workers, compared to non‐union workers, were less likely to work remotely but more likely to receive pay for hours not worked due to COVID‐19. The results suggest that unions provided workers with employment stability and an economic buffer during the pandemic‐led recession.

The Cumulative Advantage of a Unionized Career for Lifetime Earnings

Studies on labor union earnings premiums generally investigate their size through point-in-time estimates. This study posits, by contrast, that point-in-time estimates of the union premium overlook the cumulative earnings advantages of long-term, persistent union membership. Using a sample of men from the Panel Study of Income Dynamics from 1969 to 2019, the authors investigate how lifetime union membership contributes to earnings advantages. They find, first, that unionization throughout one’s career is associated with a $1.3 million mean increase in lifetime earnings, larger than the average gains from completing college. Second, the lifetime earnings gains are channeled entirely through higher hourly wages and occur despite earlier-than-average retirement for persistently unionized men. Third, the union wage premium is not constant throughout a worker’s career; instead it increases with more years of union membership. The cumulative advantages of union membership for workers’ economic well-being are far greater than point-in-time estimates suggest.

Corporate taxes and union wages in the United States

This paper evaluates the effect of US state corporate income taxes on union wage premiums. American workers who belong to unions are paid more than their non-union counterparts, and this difference is greater in low-tax locations, possibly reflecting that unions and employers share tax savings associated with low tax rates. In 2000, the difference between average union and non-union hourly wages was $1.88 greater in states with corporate tax rates below four percent than in states with tax rates of nine percent and above. Controlling for observable worker characteristics, a one percent lower state tax rate was associated with a 0.17 percent higher union wage premium, suggesting that workers in a fully unionized firm capture roughly 31 percent of the benefits of low tax rates. By 2019, state tax rates appear to have little effect on the union wage premium, reflecting changes in union power and the opportunity cost of capital.

Public-Sector Unions as Equalizing Institutions: Race, Gender, and Earnings

This research demonstrates that the union wage premium is higher for Black and women workers in the US public sector, what we refer to as “an intersectional union premium.” Union mechanisms reinforce and expand the more equitable practices of the public sector, resulting in this additional boost. Using Current Population Survey data, 1983–2018, this research models intersectional effects on earnings by examining interactions between union membership and race–gender. Relative to White men, union membership boosts average earnings an additional 3% for Black men and Black women, and 2% for White women on top of the direct union premium. Corollary analyses reaffirm these effects in multiple state contexts, including by union density and union coverage. Intersectional union premiums are weaker in states that prohibit collective bargaining. These premiums are present across most types of public work, with the exception of police and fire employees. To conclude, the authors discuss how changing labor policies may impact race and gender equity in the public sector.

The union wage premium in a segmented labor market: new evidence from Korea

Korea’s labor market is highly dualized. Non-regular workers are subject to adverse labor conditions, and unions, controlled by regular workers, usually restrict their entry as allowed by Korean regulations. Our objective is to analyze the union wage gap in Korea considering this institutional setting. In particular, we examine union wage effects using a more recent and richer dataset than previous studies, the Economically Active Population Survey (EAPS) data, that enables us to distinguish union members from voluntary non-members, involuntary non-members, and workers in firms without unions. Our empirical analysis compares the wages of union members to those of different categories of non-unionized workers not only in the mean but also along the wage distribution using quantile regressions. Our results show that voluntary non-members experience a marginal wage penalty while for involuntary non-members it is much higher, a difference that could be reduced by removing regulations limiting non-regular workers from joining unions.

Do local union strategies explain the (unexpected) union pay premium in China?

PurposeThe authors investigate the extent to which differences in provincial union legislation have impacts on the union earnings premium.Design/methodology/approachContent analysis of provincial union regulations of 25 provinces is conducted to create two indices: one reflecting the degree of stringency of the local requirement that unions be established in a timely fashion and the other reflecting requirements for employers to negotiate wages with the union. The authors use individual level data from the China Family Panel Studies (CFPS) of 2010 to estimate the union earnings premium.FindingsThe authors find that unionised workers in China receive an earnings premium ranging from 6.4 to 9.6%, which is in range of other studies (but not all) for China that tend to find a (perhaps surprising) union wage premium in spite of the fact that unions tend to be “company unions” designed to foster stability and growth and to serve as a transmission belt for the wishes of the Party rather than bargaining for the benefit of their members. The authors also find that provincial requirements to establish unions in a timely fashion enhance the impact of unions on the earnings of their members, but provincial requirements to negotiate wages dampen the effect of unions on the earnings of their members. Reasons for these results are discussed.Originality/valueDespite this lack of independence of the Chinese unions, research continuously finds that Chinese unions have effects that are surprisingly similar to those of unions in Western countries. This paper drills deeper into the underlying mechanisms to see if local union strategies, exemplified by provincial union legislation, can explain the unexpected union effects on compensation. To the authors’ knowledge, this is the first paper to do so. Moreover, the authors use individual-level data in contrast to most studies on China that use firm or provincial level aggregate data.

Union wage premia and wage inequality in South Africa

Rising inequality in the developed world over the last 40 years has been accompanied by declining trade union power. Unions have been found to raise the wages of their members but also to reduce overall wage inequality through the standardisation of wages in the union sector. In this paper we examine the extent to which unions raise wages and affect the extremely high levels of wage inequality in South Africa, using comparable household surveys from 1993 to 2019. We find that union wage premia are extremely high, and that union membership has become increasingly concentrated at the top of the wage distribution and in the public sector. As a result, variance decompositions show that unions increased inequality slightly in more recent periods. We also find that earnings imputation from 2010 onwards makes estimating the true impact of unionisation on wages impossible without unimputed earnings data.

Impact of Occupational Licensing on Wages and Wage Inequality: Canadian Evidence 1998–2018

Based on Labour Force Survey data for Canada over the period 1998 to 2018, we find occupational licensing raised average real wages from 6.1% in 1998 to 13.8% by 2018, slightly less for propensity score matching estimates, suggesting the effect is somewhat lower after adjusting for unobservable factors that can affect pay. Unconditional quantile regressions indicate the licensing effects on wages are greater at the higher ends of the wage distribution, with those inequality enhancing effects becoming more pronounced over time. In contrast, the union wage premium declined steadily from 9.2% in 1998 to 5% in 2018, with a substantial premium at the bottom of the wage distribution but a steady decline at the top, becoming negative at higher parts of the wage distribution, with those equality enhancing effects becoming less pronounced over time. Overall, the estimates for Canada indicate that occupational licensing contributes to wage inequality, and the effect is increasing over time, while unions reduce overall wage inequality, but this equalizing effect is decreasing over time.

Revisiting Union Wage and Job Loss Effects Using the Displaced Worker Surveys

Estimates of union wage effects have been challenged by concerns regarding unobserved worker heterogeneity and endogenous job changes. Many economists believe that union wage premiums lead to business failures and other forms of worker displacement. In this article, the authors examine displacement rates and union wage gaps using the 1994–2018 biennial Displaced Worker Survey (DWS) supplements to the monthly Current Population Surveys. For more than two decades, displacement rates among union and non-union workers have been remarkably similar. The authors observe changes in earnings resulting from transitions between union and non-union jobs following exogenous job changes. Consistent with prior evidence from the 1994 and 1996 DWS, findings show longitudinal estimates of average union wage effects close to 15%, which are similar to standard cross-section estimates and suggestive of minimal ability bias. Wage losses moving from union to non-union jobs exceed gains from non-union to union transitions.

Wage and employment determination in a dynamic insider–outsider model

In this paper, I develop a differential insider–outsider game in which a union of corporative incumbents chooses the wage of its members by taking into account the optimal employment policy of a firm that, in turn, is assumed to decide the number of outsiders to hire in a spot labour market. Under the assumption that incumbents cannot be fired and commit themselves to a given path of wages, I demonstrate that such a game displays an open-loop Stackelberg equilibrium in which the initial stock of insiders pins down the trajectories of incumbents, entrants and insider wages. Moreover, resorting to numerical simulations, I show that adjustments towards the steady-state equilibrium occur through asymmetric oscillations that mimic the decline of union membership and union wage premia observed in the US all over the last 20 years. In addition, I show that the model provides a positive relationship between the labour market power of the insider union and the impatience of the firm.

Multi-Unionism and the Performance of Firms

This paper examines the relationship between profitability, proxied by the return on assets, and the number of labor unions within firms. I show that the profitability of firms is lower in firms with multiple labor unions than in firms with a single labor union. The union wage premium increases as the number of labor unions rises while the labor productivity of the firms does not increase enough to compensate for this increasing wage premium, leading to lower profitability. More precisely, I find that this negative marginal effect of multi-unionism on profitability is circumscribed to situations where a strong labor union is competing with other labor unions, which hinders the labor productivity of the firms. The more labor unions there are in a firm, the more likely one of them will be a strong one. Finally, if multi-unionism benefits employees in the form of higher wages, it is, on average, at the expense of shareholders' wealth.

Should Trade Unions Welcome Foreign Investors? First evidence from Danish Matched Employer-Employee Data

While foreign direct investment (FDI) is widely believed to have an adverse effect on the bargaining power of unions and hence on union wages, little empirical research has been done to substantiate this conjecture. The present paper aims at filling this gap by analysing the effect of foreign ownership on the union wage premium in Denmark. Using matched employer-employee data, the positive effect of plant level unionisation on wages is found to vanish in foreignowned firm.

State substitution for the trade union good: the case of paid holiday entitlements

Purpose The literature on the union wage premium is among the most extensive in labour economics but unions’ effects on other aspects of the wage-effort bargain have received much less attention. The purpose of this paper is to contribute to the literature through a study of the union premium in paid holiday entitlements. Design/methodology/approach The authors examine the size of the union premium on paid holidays over time, with a particular focus on how the premium was affected by the introduction of a statutory right to paid holidays. The data come from nationally representative surveys of employees and workplaces. Findings The authors find that the union premium on paid holidays is substantially larger than the union premium on wages. However, the premium fell with the introduction of a statutory minimum entitlement to paid leave. Originality/value This is the first study to examine explicitly the interaction between union representation and the law in this setting. The findings indicate the difficulties that unions have faced in protecting the most vulnerable employees in the UK labour market. The authors argue that the supplanting of voluntary joint regulation with statutory regulation is symptomatic of a wider decrease in the regulatory role of unions in the UK.

Unions and Non-Standard Work: Union Representation and Wage Premiums across Non-Standard Work Arrangements in Canada, 1997–2014

The authors examine the association between unionization and non-standard work in terms of coverage and wages. They use data from the master files of Canada’s Labour Force Survey (LFS) between 1997–98 and 2013–14 to define and measure non-standard work and to provide a continuum of vulnerability across work arrangements. The estimated probability of being employed in some form of non-permanent job increased 2.9 percentage points from 1997 to 2014. During that same period, the estimated probability of being in a non-full-time, non-permanent job—another way of capturing non-standard work—increased 2.5 percentage points. Although estimated union wage premiums declined rather precipitously for all groups, the union wage advantage remained highest among non-standard workers. Further, the authors find the union wage premium is largest for the most vulnerable of non-standard workers. In terms of estimates that look across the earnings distribution, the union wage premium among non-standard workers is larger for workers higher up the earnings profile.