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The union membership wage-premium puzzle: is there a free rider problem?

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  • Booth, Alison L.
  • Bryan, Mark L.

Abstract

Economists have long suggested that labor unions suffer a free rider problem. The argument is that, since union-set wages are available to all workers covered by unions irrespective of their union status, and union membership entails costs, workers will only join if they are coerced or are offered non-wage goods that they value above membership costs. Yet U.S. and British empirical research has found a substantial union membership wage premium among private-sector union-covered workers, implying that there is no free rider problem. The authors of this study hypothesize that these findings arise due to selectivity problems associated with identifying the union membership effect. Their analysis, which uses rich data from a new linked employer-employee survey for Britain and exploits the within-establishment variation in wages as a function of individual union membership status, demonstrates that the apparent wage premium for members is illusory. Hence, a potential free rider problem remains. (Author's abstract.) (Free full-text download available at http://digitalcommons.ilr.cornell.edu/ilrreview/.)

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Paper provided by Institute for Social and Economic Research in its series ISER Working Paper Series with number 2001-09.

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Date of creation: 01 May 2001
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Publication status: published
Handle: RePEc:ese:iserwp:2001-09

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  1. John Forth & Neil Millward, 2000. "The Determinants of Pay Levels and fringe Benefit Privision in Britain," NIESR Discussion Papers 171, National Institute of Economic and Social Research.
  2. 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.
  3. A L Booth & M Chatterji, . "Union Membership And Wage Bargaining When Membership Is Not Compulsory," Dundee Discussion Papers in Economics 048, Economic Studies, University of Dundee.
  4. Naylor, Robin, 1987. "Strikes, Free Riders and Social Customs," The Warwick Economics Research Paper Series (TWERPS) 275, University of Warwick, Department of Economics.
  5. repec:ese:iserwp:97-06 is not listed on IDEAS
  6. 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.
  7. John Ermisch & Marco Francesconi, 2000. "Educational Choice, Families, and Young People's Earnings," Journal of Human Resources, University of Wisconsin Press, vol. 35(1), pages 143-176.
  8. David Metcalf & Kirstine Hansen & Andy Charlwood, 2000. "Unions and the sword of justice: unions and pay systems, pay inequality, pay discrimination and low pay," LSE Research Online Documents on Economics 20195, London School of Economics and Political Science, LSE Library.
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