Unionism and the Dispersion of Wages

Abstract

This study examines the effect of trade unionism on the dispersion of wages among male wage and salary workers in the private sector in the United States. It finds that the application of union wage policies designed to standardize rates within and across establishments significantly reduces wage dispersion among workers covered by union contracts and that unions further reduce wage dispersion by narrowing the white-collar/blue-collar differential within establishments. These effects dominate the more widely studied impact of unionism on the dispersion of average wages across industries, so that on net unionism appears to reduce rather than increase wage dispersion or inequality in the United States.T RADE unionismalters the distribution of wages in several ways. First, by raising the wages of organized workers relative to others, unionism changes the dispersion of wages in the economy, increasing inequality when highly paid workers are organized and reducing inequality when low-paid workers are organized. On the basis of estimates of the wage effect and its correlation with wage levels, Lewis concluded that by raising wages unionism has raised the relative inequality of average wages among industries, as measured by the standard deviation of relative wages, by two to three percentage points.' In addition, simply by creating differentials between otherwise comparable workers (regardless of their level of pay), unionism also increases inequality.Alternately, however, unions also affect the dispersion of wages within the organized sector through the "stanjard rate" policies stressed in the institutional literature.2 While most economists accept the notion that standardization of rates reduces dispersion among union members, quantitative estimates of this effect are lacking. The within-sector effect could be large, offsetting or more than offsetting the increase in inequality due to the impact on dispersion across groups, or it could be small.

Do unions always decrease wage dispersion? The case of Brazilian manufacturing

“…The empirical evidence for developed countries supports this proposition (Freeman, 1980;Blanchflower and Freeman, 1992;Bratsberg and Ragan, 1997). Table 3 presents the regression coefficients from the estimated union and nonunion wage equations (with and without industry dummies).…”

“…To test this proposition, I follow Freeman (1980) and decompose the variance of union wages into its explained and residual components: (2) and (3) and re-arranging, we obtain:…”

The international transferability of human capital in nursing

“…However, empirical evidence to date is mixed. Freeman (1980), Hirsch (1982), Belman and Heywood (1990), and Lemieux (1998) show that unions reduce wage dispersion, while Spetz et al (2011) find little evidence that unions have an effect on the wage structure of nurses. Furthermore, the literature does not discuss the effect of unions on the relative value of foreign education.…”

The impact of changing union density on earnings inequality: Evidence from the private and public sectors

“…1 Unions can affect the distribution of earnings in several conflicting ways (Freeman, 1980(Freeman, , 1993Freeman and Medoff, 1984). 2 However, most empirical work has found that unions have generally reduced inequality (McCabe, 1912;Reynolds and Taft, 1959;Slichter et al, 1960;Hyclak, 1979;Freeman, 1980Freeman, , 1982Pfeffer and Ross, 1981;Hirsch, 1982;Freeman and Medoff, 1984;Quan, 1984). It thus is sensible to examine how the substantial decline in private-sector union density since the mid-1970s contributed to the overall inequality increase.…”