Changes in the Union Wage Premium by Industry

What effect do unions have on wages now and would freeman and medoff be surprised?

“…The decline in the wage gap for the whole economy, presented earlier, is due to the fact that the industries experiencing a decline in their wage gap make up a higher percentage of all employees than those experiencing a widening gap. The results are similar to those presented by Bratsberg and Ragan (2002) closed in 16 industries and increased in 16 others. Their analysis is not directly comparable to ours, but where industry-level changes are presented in both studies, they tend to trend in the same direction.…”

“…However, once the regression is weighted by the number of observations in the industry in the first-stage regression, (column (2)) lagged unemployment is positive and signifi- cant, indicating counter-cyclical movement in the premium, while the negative time trend indicates secular decline in the premium. Bratsberg and Ragan (2002) reported that the industry-level premium was influenced by a number of other variables. 24 In particular they found that COLA clauses reduced the cyclicality of the union premium and that increases in import penetration were strongly associated with rising union premiums.…”

“…25 The import penetration variables are calculated as the ratio of imports to industry shipments. Bratsberg and Ragan (2002) in their footnote 19 report that they tabulated shipments through 1994 from Feenstra (1996) and thereafter from the U.S. Bureau of the Census, U.S. Merchandise Trade, series FT900 (December) and Manufactures' Shipments, Inventories and Orders (<http://www.census.gov>).…”

“…In 1998, the observed private sector rate of 9.7 per-23 F&M's smaller sample sizes by industry could account for some of the greater variation in their estimates. 24 Bratsberg and Ragan (2002) also use CPS data. But their analysis differs in several ways.…”

Markup cyclicality and input factor adjustments

“…Bratsberg and Ragan (2002) (see also Wunnava and Honney, 1991), use US data to derive a clear counter-cyclical relationship with the union premium. An explanation for this relationship is that unions use their bargaining power to set wages above opportunity wage but such that wages are more rigid over the business cycle than in less unionised sectors.…”