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The Impact of Unions on Labor's Share of Income: A Time-Series Analysis

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  • Rudy Fichtenbaum

Abstract

Early time-series studies that examined the impact of unions on labor's share of income were primarily descriptive. They generally found that unions did not impact labor's share of income. In contrast, later studies, using either panel data or cross-section data, have produced mixed results. This study adds to our understanding of this topic by first developing an analytical model based on imperfect competition and then testing the model using time-series data for the US manufacturing sector from 1949-2006. The results demonstrate that unions have a positive impact on labor's share of income. They show that for each one percentage point reduction in union density, the proportion of income received by production workers declines by about 0.2 percentage points, holding other factors constant. From 1949 to 2006, labor's share of income declined approximately 25 percentage points; around 28% of that decline is explained by the decline in unionization. This paper is distinctive in estimating the proportion of the decline in labor's share attributable to declining unionization. It also has important implications for the Employee Free Choice Act and sheds light on whether social or institutional forces can affect the distribution of income.

Suggested Citation

  • Rudy Fichtenbaum, 2009. "The Impact of Unions on Labor's Share of Income: A Time-Series Analysis," Review of Political Economy, Taylor & Francis Journals, vol. 21(4), pages 567-588.
    • Handle: RePEc:taf:revpoe:v:21:y:2009:i:4:p:567-588
    DOI: 10.1080/09538250903214859
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    References listed on IDEAS

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    1. DiNardo, John & Fortin, Nicole M & Lemieux, Thomas, 1996. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Econometrica, Econometric Society, vol. 64(5), pages 1001-1044, September.
    2. Barry T. Hirsch, 2004. "Reconsidering Union Wage Effects: Surveying New Evidence on an Old Topic," Journal of Labor Research, Transaction Publishers, vol. 25(2), pages 233-266, April.
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    4. Conyon, Martin J., 1994. "Labour's share, market structure and trade unionism," International Journal of Industrial Organization, Elsevier, vol. 12(1), pages 117-131, March.
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    6. repec:eee:labchp:v:2:y:1986:i:c:p:1139-1181 is not listed on IDEAS
    7. John Pencavel, 2005. "Unionism Viewed Internationally," Journal of Labor Research, Transaction Publishers, vol. 26(1), pages 65-97, January.
    8. Barry T. Hirsch, 2008. "Sluggish Institutions in a Dynamic World: Can Unions and Industrial Competition Coexist?," Journal of Economic Perspectives, American Economic Association, vol. 22(1), pages 153-176, Winter.
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    Cited by:

    1. Ziyu Liu & Yanlin Yang, 2020. "Impact of Development Zone Construction on Labor Share in China," Sustainability, MDPI, vol. 12(9), pages 1-22, May.
    2. Pedro R. D. Bom & Aitor Goti, 2018. "Public Capital and the Labor Income Share," Sustainability, MDPI, vol. 10(11), pages 1-17, October.
    3. Young, Andrew T. & Tackett, Maria Y., 2018. "Globalization and the decline in labor shares: Exploring the relationship beyond trade and financial flows," European Journal of Political Economy, Elsevier, vol. 52(C), pages 18-35.
    4. Michel Freyssenet & Bruno Jetin, 2019. "The deregulation of employment and finance: the Big Three in crisis," Working Papers halshs-02020051, HAL.
    5. repec:wvu:wpaper:11-06 is not listed on IDEAS
    6. Andrew T. Young & Hernando Zuleta, 2018. "Do Unions Increase Labor Shares? Evidence from US Industry-Level Data," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 44(4), pages 558-575, September.
    7. Dario JUDZIK & Hector SALA, 2013. "Productivity, deunionization and trade: Wage effects and labour share implications," International Labour Review, International Labour Organization, vol. 152(2), pages 205-236, June.
    8. Giorgos Gouzoulis, 2021. "Finance, Discipline and the Labour Share in the Long‐Run: France (1911–2010) and Sweden (1891–2000)," British Journal of Industrial Relations, London School of Economics, vol. 59(2), pages 568-594, June.

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