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

Article Abstract:

The degree of inequality in U.S. earnings has varied considerably over the past 20 years, including a dramatic, much documented rise since 1980. We examine empirically how changes in union density have contributed to these trends, using Current Population Survey data for 1977 and 1992. Inequality is measured as the mean logarithmic deviation of individual earnings from overall average earnings. A decomposition of the change in the inequality index reveals that decreases in private-sector union density have accounted for about 25 percent of the overall rise in earnings inequality during the past 15 years. Decompositions based on public-sector earnings indicate that increases in union density have produced inequality that is 29 percent below what it otherwise would have been. The analysis demonstrates that, among private sector workers, the results are sensitive to the population being studied: Changing union density accounts for 13 percent of the rise among prime aged males (a noticeably smaller fraction than found in existing studies) and only 4 percent among females and non-prime-aged males. The analysis also demonstrates that covariances between the subsamples explain why the union effect is larger in percentage terms for the whole sample than it is in either subsample. (Reprinted by permission of the publisher.)

Pay equity

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A dynamic model of public sector employer response to unionization

Article Abstract:

We model the response of public sector employers in unionization using the response of public school boards to teacher unionization as an example. While it is generally believed that public sector employers pay unionized workers more than nonunion workers, there is less consensus about where the money comes from. We model two cases which are possible employer reactions to unionization: re-allocating resources among types of expenditures and modifying the way in which services are provided. The model contains a political equilibrium that determines the union's preferences and an economic equilibrium that reflects labor market conditions. We compare the predictions of the two cases regarding the effect of unionization on wages, turnover, allocation of expenditures, and productivity. We interpret existing empirical research on public sector unionization in light of these predictions and make recommendations for future empirical work. (Reprinted by permission of the publisher.)

Elementary and secondary schools, Public Schools, Labor relations, Teachers' unions, Public employees, Government employees

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Induced inefficiency as a response to the union threat

Article Abstract:

Milkman and Mitchell (1995) extend Rosen's (1969) threat-effect hypothesis to suggest that the threat of unionization can induce inefficient underutilization of labor by nonunion firms. If firms follow this strategy, the apparent paradox of competitive coexistence in the face of higher union wages reflects induced nonunion firm inefficiency rather than superior union firm efficiency. Furthermore, this strategy decreases demand for nonunion workers in a partially unionized industry. A generalized cost function analysis of data from sawmills in the Pacific Northwest yields evidence that nonunion firms use this strategy. (Reprinted by permission of the publisher.)

Industrial efficiency, Economic efficiency, Labor productivity

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