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The Union Membership Wage Premium: An Analysis Using Propensity Score Matching

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  • Alex Bryson

Abstract

This paper estimates the size of the union membership wage premium by comparing wage outcomes for unionised workers with 'matched' non-unionised workers. The method assumes selection on observables. For this identifying assumption to be plausible, one must be able to control for all characteristics affecting both union status and wages. This requires very informative data. We illustrate the value of the rich data offered by the linked employer-employee Workplace Employee Relations Survey (WERS) 1998 in implementing this methodology. We estimate the union membership premium for the whole private sector, among workers in workplaces where at least some workers are covered by collective bargaining, and in occupations with pay set by collective bargaining. We find a raw 17-25% union premium in gross hourly wages for the private sector in Britain, depending on the sub-group used. However, post-matching this difference falls to between 3% and 6%. This indicates that the higher pay of unionised workers is largely accounted for by their better underlying earnings capacity, which is associated with their individual characteristics, the jobs they do and the workplaces they find themselves in.

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Bibliographic Info

Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0530.

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Date of creation: May 2002
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Handle: RePEc:cep:cepdps:dp0530

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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

Related research

Keywords: trade unions; wage premium; treatment effect; matching; propensity score;

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References

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  1. Budd, J.W. & Na, I.G., 1994. "The Union Membership Wage Premium for Employees Covered by Collective Bargaining Agreements," Papers 94-09, Minnesota - Industrial Relations Center.
  2. repec:fth:coluec:9899-01 is not listed on IDEAS
  3. Rajeev H. Dehejia & Sadek Wahba, 2002. "Propensity Score-Matching Methods For Nonexperimental Causal Studies," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 151-161, February.
  4. David Metcalf & Kirstine Hansen & Andy Charlwood, 2001. "Unions and the Sword of Justice: Unions and Pay Systems, Pay Inequality, Pay Discrimination and Low Pay," National Institute Economic Review, National Institute of Economic and Social Research, vol. 176(1), pages 61-75, April.
  5. Henry S. Farber, 2001. "Notes on the Economics of Labor Unions," Working Papers 831, Princeton University, Department of Economics, Industrial Relations Section..
  6. repec:fth:prinin:452 is not listed on IDEAS
  7. Blakemore, Arthur E & Hunt, Janet C & Kiker, B F, 1986. "Collective Bargaining and Union Membership Effects on the Wages of Male Youths," Journal of Labor Economics, University of Chicago Press, vol. 4(2), pages 193-211, April.
  8. Sue Fernie & Helen Gray, 2002. "Its a Family Affair: the Effect of Union Recognition and Human Resource Management on the Provision of Equal Opportunities in the UK," CEP Discussion Papers dp0525, Centre for Economic Performance, LSE.
  9. Blackaby, D. H. & Murphy, P. D. & Sloane, P. J., 1991. "Union membership, collective bargaining coverage and the trade union mark-up for Britain," Economics Letters, Elsevier, vol. 36(2), pages 203-208, June.
  10. Heckman, James J & Ichimura, Hidehiko & Todd, Petra E, 1997. "Matching as an Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Programme," Review of Economic Studies, Wiley Blackwell, vol. 64(4), pages 605-54, October.
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