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Training and Union Wages

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Author Info
Dustmann; Christian () (University College London, CEPR, IFS London and IZA Bonn)
Schönberg, Uta (University of Rochester and IZA Bonn)

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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 nonunionised 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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Publisher 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
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Handle: RePEc:iza:izadps:dp1435

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

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Find related papers by JEL classification:
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General
J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
I2 - Health, Education, and Welfare - - Education

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. 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 9, Royal Economic Society. [Downloadable!]
    Other versions:
  2. Booth, Alison L & Chatterji, Monojit, 1998. "Unions and Efficient Training," Economic Journal, Royal Economic Society, vol. 108(447), pages 328-43, March. [Downloadable!] (restricted)
  3. Gibbons, Robert & Katz, Lawrence F, 1991. "Layoffs and Lemons," Journal of Labor Economics, University of Chicago Press, vol. 9(4), pages 351-80, October. [Downloadable!] (restricted)
    Other versions:
  4. Neumark, David & Wascher, William, 2001. "Minimum Wages and Training Revisited," Journal of Labor Economics, University of Chicago Press, vol. 19(3), pages 563-95, July. [Downloadable!] (restricted)
    Other versions:
  5. 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.
  6. Acemoglu, Daron & Pischke, Jorn-Steffen, 1999. "Beyond Becker: Training in Imperfect Labour Markets," Economic Journal, Royal Economic Society, vol. 109(453), pages F112-42, February. [Downloadable!] (restricted)
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  7. 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. [Downloadable!] (restricted)
  8. David Soskice, 1994. "Reconciling Markets and Institutions: The German Apprenticeship System," NBER Chapters, in: Training and the Private Sector, pages 25-60 National Bureau of Economic Research, Inc. [Downloadable!]
  9. Hashimoto, Masanori, 1982. "Minimum Wage Effects on Training on the Job," American Economic Review, American Economic Association, vol. 72(5), pages 1070-87, December. [Downloadable!] (restricted)
  10. 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). [Downloadable!]
  11. Alison L. Booth & Marco Francesconi & Gylfi Zoega, 2003. "Unions, work-related training, and wages: Evidence for British men," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 57(1), pages 68-91, October. [Downloadable!] (restricted)
    Other versions:
  12. 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). [Downloadable!]
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  13. Acemoglu, Daron & Pischke, Jörn-Steffen, 2001. "Minimum Wages and On-the-Job Training," IZA Discussion Papers 384, Institute for the Study of Labor (IZA). [Downloadable!]
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  14. Daron Acemoglu & Jorn-Steffen Pischke, 1999. "The Structure of Wages and Investment in General Training," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 539-572, June. [Downloadable!] (restricted)
    Other versions:
  15. 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, ILR School, Cornell University, vol. 45(1), pages 58-79, October.
  16. Malcomson, James M, 1983. "Trade Unions and Economic Efficiency," Economic Journal, Royal Economic Society, vol. 93(369a), pages 51-65, Supplemen. [Downloadable!] (restricted)
  17. Daron Acemoglu & Jörn-Steffen Pischke, 1998. "Why Do Firms Train? Theory And Evidence," The Quarterly Journal of Economics, MIT Press, vol. 113(1), pages 78-118, February. [Downloadable!] (restricted)
    Other versions:
  18. F Green & Stephen Machin & D Wilkinson, 1996. "Trade Unions and Training Practices in British Workplaces," CEP Discussion Papers dp0278, Centre for Economic Performance, LSE. [Downloadable!]
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  19. David H. Autor, 2001. "Why Do Temporary Help Firms Provide Free General Skills Training?," The Quarterly Journal of Economics, MIT Press, vol. 116(4), pages 1409-1448, November. [Downloadable!] (restricted)
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Mohrenweiser, Jens & Zwick, Thomas, 2008. "Why Do Firms Train Apprentices? The Net Cost Puzzle Reconsidered," ZEW Discussion Papers 08-019, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
    Other versions:
  2. Karsten Kohn & Alexander Lembcke, 2007. "Wage distributions by bargaining regime," AStA Wirtschafts- und Sozialstatistisches Archiv, Springer, vol. 1(3), pages 247-261, December. [Downloadable!] (restricted)
  3. David Green & Thomas Lemieux, 2007. "The impact of unionization on the incidence of and sources of payment for training in Canada," Empirical Economics, Springer, vol. 32(2), pages 465-489, May. [Downloadable!] (restricted)
  4. Wolf Dieter Heinbach & Markus Spindler, 2007. "To Bind or Not to Bind Collectively? Decomposition of Bargained Wage Differences Using Counterfactual Distributions," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 294/2007, Department of Economics, University of Hohenheim, Germany. [Downloadable!]
    Other versions:
  5. Addison, John T. & Belfield, Clive R., 2008. "Unions, Training, and Firm Performance," IZA Discussion Papers 3294, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  6. Christian Dustmann & Uta Schönberg, 2007. "Apprenticeship Training and Commitment to Training Provision," Economics of Education Working Paper Series 0032, University of Zurich, Institute for Strategy and Business Economics (ISU). [Downloadable!]
  7. Gürtzgen, Nicole, 2005. "Rent-Sharing and Collective Bargaining Coverage ? Evidence from Linked Employer-Employee Data," ZEW Discussion Papers 05-90, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  8. O'Connell, Philip J. & Byrne, Delma, 2009. "The Determinants and Effects of Training at Work: Bringing the Workplace Back In," Papers WP289, Economic and Social Research Institute (ESRI). [Downloadable!]
  9. Kuan Xu & Zhengxi Lin, 2007. "Participation in Employer-sponsored Training in Canada: Role of Firm Characteristics and Worker Attributes," Department of Economics at Dalhousie University working papers archive paperb1_7_ic_workingpaper, Dalhousie, Department of Economics. [Downloadable!]
  10. Thomas Zwick, 2007. "Apprenticeship Training in Germany ? Investment or Productivity Driven?," ZEW Discussion Papers 07-023, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
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  11. McGuinness, Seamus & Kelly, Elish & O'Connell, Philip J., 2008. "The Impact of Wage Bargaining Regime on Firm-Level Competitiveness and Wage Inequality: The Case of Ireland," Papers WP266, Economic and Social Research Institute (ESRI). [Downloadable!]
  12. Katja Goerlitz, 2009. "The Development of Employers’ Training Investments Over Time – A Decomposition Analysis Using German Establishment Data," Ruhr Economic Papers 0087, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen. [Downloadable!]
  13. Christian Dustmann & Johannes Ludsteck & Uta Schönberg, 2007. "Revisiting the German Wage Structure," IZA Discussion Papers 2685, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
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