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Training and Union Wages

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  • Dustmann, Christian

    ()
    (University College London)

  • Schönberg, Uta

    ()
    (University College London)

Abstract

This paper tests the hypothesis that unions, through imposing wage floors that lead to wage compression, increase on-the-job training. Our analysis focuses on Germany which provides an interesting context to test this hypothesis, due to its large scale apprenticeship programme and its collective bargaining system that is based on voluntary union recognition. To guide the empirical analysis, we first develop a model of firm-financed training. A novel feature of our model is that a unionised and non-unionised sector coexist, and only unionized firms are bound by union wages. The model creates a rich set of empirical implications regarding apprenticeship training, layoffs, wage cuts, and wage compression in unionized and non-unionised firms. Our empirical analysis is based on firm panel data matched with administrative employee data, and provides strong support for our model. Our main results are that unionisation increases training, and that wage floors and wage compression play a more important role in unionised than in non-unionised firms.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1435.

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Length: 48 pages
Date of creation: Dec 2004
Date of revision:
Handle: RePEc:iza:izadps:dp1435

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Keywords: wage compression; unions; training; matched firm-worker data;

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  1. Acemoglu, Daron & Pischke, Jörn-Steffen, 1999. "Minimum Wages and On-the-Job Training," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2177, C.E.P.R. Discussion Papers.
  2. Acemoglu, Daron & Pischke, Jörn-Steffen, 1996. "Why do Firms Train? Theory and Evidence," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1460, C.E.P.R. Discussion Papers.
  3. John DiNardo & David S. Lee, 2002. "The Impact of Unionization on Establishment Closure: A Regression Discontinuity Analysis of Representation Elections," NBER Working Papers 8993, National Bureau of Economic Research, Inc.
  4. Gibbons, Robert & Katz, Lawrence F, 1991. "Layoffs and Lemons," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 9(4), pages 351-80, October.
  5. Acemoglu, D. & Pischke, J.S., 1997. "The Structure of Wages and Investment in General Training," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 97-24, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Booth, Alison L. & Francesconi, Marco & Zoega, Gylfi, 2002. "Oligopsony, Institutions and the Efficiency of General Training," IZA Discussion Papers 618, Institute for the Study of Labor (IZA).
  7. Schnabel, Claus & Wagner, Joachim, 2003. "Trade Union Membership in Eastern and Western Germany: Convergence or Divergence?," IZA Discussion Papers 707, Institute for the Study of Labor (IZA).
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  9. F Green & Stephen Machin & D Wilkinson, 1996. "Trade Unions and Training Practices in British Workplaces," CEP Discussion Papers, Centre for Economic Performance, LSE dp0278, Centre for Economic Performance, LSE.
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  13. Hashimoto, Masanori, 1982. "Minimum Wage Effects on Training on the Job," American Economic Review, American Economic Association, American Economic Association, vol. 72(5), pages 1070-87, December.
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  15. David H. Autor, 2001. "Why Do Temporary Help Firms Provide Free General Skills Training?," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 116(4), pages 1409-1448, November.
  16. David Soskice, 1994. "Reconciling Markets and Institutions: The German Apprenticeship System," NBER Chapters, National Bureau of Economic Research, Inc, in: Training and the Private Sector, pages 25-60 National Bureau of Economic Research, Inc.
  17. Arulampalam, Wiji & Alison L Booth & Mark L Bryan, 2003. "Work-related Training and the New National Minimum Wage in Britain," Royal Economic Society Annual Conference 2003, Royal Economic Society 9, Royal Economic Society.
  18. Adam J. Grossberg & Paul Sicilian, 1999. "Minimum Wages, On-the-Job Training, and Wage Growth," Southern Economic Journal, Southern Economic Association, vol. 65(3), pages 539-556, January.
  19. Stevens, Margaret, 1994. "A Theoretical Model of On-the-Job Training with Imperfect Competition," Oxford Economic Papers, Oxford University Press, vol. 46(4), pages 537-62, October.
  20. Joseph G. Altonji & James R. Spletzer, 1991. "Worker characteristics, job characteristics, and the receipt of on-the-job training," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 45(1), pages 58-79, October.
  21. Malcomson, James M, 1983. "Trade Unions and Economic Efficiency," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 93(369a), pages 51-65, Supplemen.
  22. Wiji Arulampalam & Alison L. Booth & Mark L. Bryan, 2004. "Training and the new minimum wage," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 114(494), pages C87-C94, 03.
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