The Union Membership Wage Premium: An Analysis Using Propensity Score Matching
AbstractThis 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 InfoPaper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0530.
Date of creation: May 2002
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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP
trade unions; wage premium; treatment effect; matching; propensity score;
Find related papers by JEL classification:
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
- C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
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