Labor Market Institutions and the Distribution of Wages: The Role of Spillover Effects

Abstract

This paper examines the role of spillover effects of minimum wages and threat effects of unionization in changes in wage inequality in the United States between 1979 and 2017. A distribution regression framework is introduced to estimate both types of spillover effects. Threat effects double the contribution of de-unionization to the increase in male wage inequality. Spillover effects magnify the explanatory power of declining minimum wages to two-thirds of the increase in inequality at the bottom end of the female wage distribution.

Unions and Wage Inequality: The Roles of Gender, Skill and Public Sector Employment

“…where W N (c) and W U (c) are the mean nonunion and union log wages for individuals in effect of unions on wage dispersion (in absolute terms) since V N (U)--V N (0)<0. Fortin, Lemieux, and Lloyd (2018) also find that, for U.S. men, general equilibrium effects of unionization V N (U)--V N (0) are about three times as small in 2017 as they were in 1979, and that general equilibrium effects are substantially smaller for women than men. 10 Card, Lemieux and Riddell (2004) discuss how the assumption that union status is independent of unobserved productivity factors can be relaxed.…”

“…Fortin, Lemieux, and Lloyd (2018) find that general equilibrium effects of unionization reduce wage dispersion in the non--union sector, indicating that threat effects are more important than spillover effects in the U.S. labour market. This suggests that our estimates of union effects, V(U)--V N (U), understate the…”

How Labor Market Institutions Matter for Worker Compensation

“…Most estimates suggest that unions raise the wages of their members by about 15 to 20 percent (Card 1996; Farber et al 2018). 9 Since private sector union members were not among the highest-paid workers, unions tended to lower wage inequality (in addition to raising workers’ share of income generally), and consequently, their decline was significant in raising inequality, particularly in the 1980s (Lee and Mas 2012; Card, Lemieux, and Riddell 2004; Fortin, Lemieux, and Lloyd 2021). 10 Unions also improve workers’ voice and secure both improved working conditions and more generous nonwage benefits (Buchmueller, DiNardo, and Valletta 2004; Freeman and Kleiner 1990).…”

The Gap that Survived the Transition: The Gender Wage Gap Over Three Decades in Estonia

“…The gap has closed much more sluggishly in recent decades, especially at the top of the wage distribution (Blau andKahn 2017, Fortin et al 2017). New factors, such as the productivity dispersion of firms (Bruns 2019), the different segregation of men and women between firms (Cardoso et al 2016, Gallen et al 2019) and labour market institutions (Bruns 2019, Fortin et al 2018) have increased in importance as alternative explanations.…”

“…The segregation between firms has become important in explaining the gender wage gap among the top wage earners (Cardoso et al 2016, Bruns 2019, which overlaps with the increase in between-firm productivity dispersion and the rise of superstar firms (Van Reenen 2018, Autor et al 2017. It has been shown that labour market institutions, such as union density and minimum wages, have an important effect on wage dispersion (Fortin et al 2018) and unions have had a role in the sluggish convergence of the wages of men and women (Bruns 2019).…”