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Reconsidering Union Wage Effects: Surveying New Evidence on an Old Topic

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  • BARRY T. HIRSCH

Abstract

I examine evidence on private sector union wage gaps in the United States. The consensus opinion among labor economists of an average union premium of roughly 15 percent is called into question. Two forms of measurement error bias downward standard wage gap estimates. Match bias results from Census earnings imputation procedures that do not include union status as a match criterion. Downward bias is roughly equal to the proportion of workers with imputed earnings, currently about 30 percent. Misclassification of union status causes additional attenuation in union gap measures. This bias has worsened as private sector density has declined, since an increasing proportion of workers designated as union are instead nonunion workers. Corrections for misclassification and match bias lead to estimated union gaps substantially higher than standard estimates, but with less of a downward trend since the mid 1980s. Private sector union gaps corrected for these biases are estimated from the CPS for 1973-2001. The uncorrected estimate for 2001 is .13 log points. Correction for match bias increases the gap to .18 log points; further correction for misclassification bias, based on an assumed 2 percent error rate, increases the gap to .24. Reexamination of the skill-upgrading hypothesis leads to the conclusion that higher union gap estimates are plausible. The conventional wisdom of a 15 percent union wage premium warrants reexamination.

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Bibliographic Info

Article provided by Transaction Publishers in its journal Journal of Labor Research.

Volume (Year): 25 (2004)
Issue (Month): 2 (April)
Pages: 233-266

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Handle: RePEc:tra:jlabre:v:25:y:2004:i:2:p:233-266

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Web page: http://transactionpub.metapress.com/link.asp?target=journal&id=110581

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Cited by:
  1. Haile, Getinet Astatike & Bryson, Alex & White, Michael, 2012. "Heterogeneity in Union Status and Employee Well-Being," IZA Discussion Papers 7075, Institute for the Study of Labor (IZA).
  2. Arthur Lewbel, 2007. "Estimation of Average Treatment Effects with Misclassification," Econometrica, Econometric Society, vol. 75(2), pages 537-551, 03.
  3. Rudy Fichtenbaum, 2006. "Labour market segmentation and union wage gaps," Review of Social Economy, Taylor and Francis Journals, vol. 64(3), pages 387-420.
  4. Lu, Yi & Tao, Zhigang & Wang, Yijiang, 2010. "Union effects on performance and employment relations: Evidence from China," China Economic Review, Elsevier, vol. 21(1), pages 202-210, March.
  5. David G. Blanchflower & Alex Bryson, 2003. "What Effect do Unions Have on Wages Now and Would 'What Do Unions Do' Be Surprised?," NBER Working Papers 9973, National Bureau of Economic Research, Inc.
  6. Hirsch, Barry T., 2007. "Sluggish Institutions in a Dynamic World: Can Unions and Industrial Competition Coexist?," IZA Discussion Papers 2930, Institute for the Study of Labor (IZA).
  7. Paula Armstrong & Janca Steenkamp, 2008. "South African Trade Unions: an Overview for 1995 to 2005," Working Papers 10/2008, Stellenbosch University, Department of Economics.

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