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The Effect of Public Sector Labor laws on Collective Bargaining, Wages, and Employment

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  • Richard B. Freeman
  • Robert G. Valletta

Abstract

This paper examines the effect of the different legal environments for bargaining faced by public employees across the states on wage and employment outcomes for union and nonunion employees, and also on the extent of bargaining, using cross-section, within-city, and longitudinal analyses based on a newly-derived data set on public sector labor laws. We find that: (1) the legal environment is a significant determinant of the probability of collective bargaining coverage; (2) collective bargaining coverage raises wages and employment for covered employees; (3) a more favorable legal environment increases wages for all employees, but substantially reduces employment for employees not covered by a contract, while slightly reducing employment for employees who are covered by a contract. We also find evidence of significant spillovers of union wage effects to non-covered departments. We conclude by focusing on the effects of two specific legal provisions - arbitration and strike permitted clauses - on wages and employment.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2284.

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Date of creation: Jun 1987
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Publication status: published as Freeman, R. and Valletta, R. "The Effect of Public Sector Labor Laws on Collective Bargaining, Wages, and Employment," in When Public Sector Workers Unionize, ed. by Richard Freeman and Casey Ichniowski, Chicago: UCP, 1988.
Handle: RePEc:nbr:nberwo:2284

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  1. Henry S. Farber, 1981. "Splitting-the-difference in interest arbitration," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 35(1), pages 70-77, October.
  2. Richard B. Freeman, 1987. "How Do Public Sector Wages and Employment Respond to Economic Conditions?," NBER Chapters, in: Public Sector Payrolls, pages 183-216 National Bureau of Economic Research, Inc.
  3. Ronald G. Ehrenberg & Joshua L. Schwarz, 1983. "Public Sector Labor Markets," NBER Working Papers 1179, National Bureau of Economic Research, Inc.
  4. Freeman, Richard B, 1986. "Unionism Comes to the Public Sector," Journal of Economic Literature, American Economic Association, vol. 24(1), pages 41-86, March.
  5. Henry S. Farber & Harry C. Katz, 1979. "Interest arbitration, outcomes, and the incentive to bargain," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 33(1), pages 55-63, October.
  6. Freeman, Richard B & Medoff, James L, 1981. "The Impact of the Percentage Organized on Union and Nonunion Wages," The Review of Economics and Statistics, MIT Press, vol. 63(4), pages 561-72, November.
  7. Ehrenberg, Ronald G, 1973. "The Demand for State and Local Government Employees," American Economic Review, American Economic Association, vol. 63(3), pages 366-79, June.
  8. Courant, Paul N & Gramlich, Edward M & Rubinfeld, Daniel L, 1979. "Public Employee Market Power and the Level of Government Spending," American Economic Review, American Economic Association, vol. 69(5), pages 806-17, December.
  9. Gregory M. Saltzman, 1985. "Bargaining laws as a cause and consequence of the growth of teacher unionism," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 38(3), pages 335-351, April.
  10. Jeffrey S. Zax, 1985. "Labor Relations, Wages and Nonwage Compensation in Municipal Employment," NBER Working Papers 1582, National Bureau of Economic Research, Inc.
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Cited by:
  1. Joseph Tracy, 1988. "Comparisons Between Public and Private Sector Union Wage Differentials: Does the Legal Environment Matter?," NBER Working Papers 2755, National Bureau of Economic Research, Inc.
  2. Janet Currie & Sheena McConnell, 1992. "The Impact of Collective Bargaining Legislation on Disputes in the U.S. Public Sector: No Policy May Be the Worst Policy," NBER Working Papers 3978, National Bureau of Economic Research, Inc.

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