Impact of unions on wages

Downloads This report uses large-scale survey evidence to examine the effects of unions upon the employment levels of workplaces and upon the pay of their employees. Although some of the findings show that trade unions are associated with adverse outcomes, these effects are absent when employers jointly determine pay and employment matters with the unions. The impact of trade unions on work and pay contains findings and policy implications on: Summary Summary Recent legislation has provided trade unions with a right to recognition by employers in certain circumstances.

Impact of unions on wages

The exception here is among private-sector nonunion women who have a high school diploma or less education. For this group, annual median wages for much of the past decades have been relatively flat. And bywomen with only a high school diploma or less education had seen their wages drop below levels that prevailed in Yet these explanations ignore a vital contributing factor: Unions and their effects on wage trends have been studied, but the research focuses on how the shrinking number of private-sector union members reduces the wage gains that accompany membership.

Officially the private-sector unionization rate is 6. The erosion was even larger among men without a college degree, falling from 38 percent to 11 percent.

Union membership was not as high among private-sector women as men injust 16 percent, so the drop by to 6 percent was not as severe the fall among non—college graduate women was the same.

As a large body of work documents, unions raise the wages of their members, especially private-sector members, relative to nonunion workers.

What Are Unions?

Thus deunionization—the erosion of the share of workers who belong to a union—has directly contributed to wage stagnation by reducing the fraction of the workforce receiving the union wage premium. In this report, we take a different approach to the issue of union decline and wages.

We contend that unions, especially in industries and regions where they are strong, have indirect effects on wages, helping to establish pay and benefit standards that many nonunion firms adopt. We begin in for two core reasons.

First, research documents a sharp increase in earnings inequality starting around Globalization, technological advances, and institutional shifts—most notably the dramatic decline of the U. These developments are intertwined in numerous ways.

What Do Unions Do?

For example, union decline reduced resistance to offshoring, and offshoring, or the threat thereof, emboldened employers in union negotiations. We reduce potential sources of bias in various ways, but caution that our interest is in describing population-level trends in wages for various groups of workers.

Thus while we avoid strict causal claims about wage determination, we believe our various analytical approaches lend confidence to our core contention that private-sector union decline has contributed to wage losses among workers who do not belong to a union. This is especially true for men and for men who did not complete college or complete or go beyond high school who, as shown in Appendix Table 1, saw the largest erosion of union membership over the last few decades.

Why would nonunion workers benefit from a strong union presence in their labor market? One is through the threat of unionization: For example, Eastman Kodak, the leading producer of photographic film for much of the 20th century, was committed to keeping unions out of its major plants.

Other major nonunion employers monitored union contracts closely in efforts to forestall organizing campaigns. Research has documented how minimum-wage increases benefit workers who earn more than the minimum, through upward wage adjustments.

Research has found that lower-level managers—who, being managers, cannot unionize—benefit from a strong union presence in their surrounding labor market. Threat effects are one way in which union strength may benefit employees who do not belong to unions. The economic literature on threat effects tends to conceive of unions as an institutional impediment to market pay rates, with employers endeavoring to minimize wages in the absence of unions, and raising them above their market rate only when forced to through collective bargaining or the threat thereof.

These norms can extend beyond the unionized core of the workforce, affecting nonunion workers whose employers follow the standards that unions help establish. This is especially true in those times and places where organized labor is comparatively strong.

Research has tied federal minimum wage increases to union strength.

Impact of unions on wages

Highly unionized states helped lift minimum wages above the levels of states where labor was comparatively weak. Foulkes discovered that even those managers facing little threat of unionization in their plants monitored union contracts closely, and moved to match union scales.

Higher pay in organized establishments increased competition for labor. And in setting wages, new market entrants often looked to what industry leaders were doing in terms of wages and benefit packages.When unions want to increase union member wages or request other concessions from employers, they can do so through collective bargaining.

Collective bargaining is a process in which workers. NBER Program(s):Labor Studies. We explore the various claims made by Freeman and Medoff (FM) in their famous book What do unions do?

Impact of unions on wages

about the impact of unions on wages and update them with new and better data. The main findings are as follows. 1) Private sector union wage premium is lower today than it was in the s. At least for middle-wage men, the impact of the erosion of unions on the wages of both union and nonunion workers is likely the largest single factor underlying wage stagnation and wage inequality.

Nonunion workers benefit from a strong union presence in their labor market in many ways. The most extensive impact of unions was for people being paid between £5 and £10 per hour - at least a quarter of them benefited directly from union bargaining.

the research suggests that the ability of unions to enhance wages and salaries is in long-term decline. Findings The impact of trade unions on jobs and pay ( KB). The Impact of New Unionization on Wages and Working Conditions The Harvard community has made this article openly available.

Please share how the impact of newly organized unions on wages and working conditions can reasonably be expected to differ from that of existing unions. Unions representing garment workers, textile workers, white-collar government workers, and teachers seem to have little impact on wages.

But wages of unionized mine workers, building trades people, airline pilots, merchant seamen, postal workers, teamsters, rail workers, and auto and steel workers exceed wages of similarly skilled nonunion.

Unions: Do They Help Or Hurt Workers?