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Trade Unions and the Dispersion of Earnings in British Establishments, 1980-90

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  • Amanda Gosling
  • Stephen Machin

Abstract

The relationship between unions and earnings dispersion is examined using establishment-level data from the 1980, 1984 and 1990 Workplace Industrial Relations Surveys. Initially the cross-sectional relationship is examined using the 1990 data. The earnings dispersion of skilled and semi-skilled workers is seen to be lower across unionised establishments than across non-union establishments; secondly, within-establishment earnings dispersion is lower in plants which recognise trade unions for collective bargaining purposes than in those that do not. All three surveys are then utilised to ascertain to what extent the decline in unionization in Britain has contributed to the rise in earnings inequality of semi-skilled workers. There was a sizable and important widening of the gap in the dispersion of earnings across union and non-union plants between 1980 and 1990. For semi-skilled earnings, the decline in the share of plants with recognised unions can account for 11-17% of the rise in earnings inequality over this time period. The importance of falling union activity (as measured by union recognition) seemed to accelerate through the 1980s. Between 1980 and 1984 the relatively small falls in aggregate recognition explain less than 10% of the inequality increase, whereas between 1984 and 1990 about one-quarter of the increase can be accounted for by the fall in unionisation. The majority of the rise in earnings inequality is, however, due to a large increase in earnings dispersion across non-union establishments.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4732.

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Date of creation: May 1994
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Publication status: published as Oxford Bulletin of Economics and Statistics, Vol. 57, no. 2 (May 1995): pp. 167-184.
Handle: RePEc:nbr:nberwo:4732

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  1. Steven J. Davis, 1992. "Cross-Country Patterns of Change in Relative Wages," NBER Working Papers 4085, National Bureau of Economic Research, Inc.
  2. Stephen Machin & Alan Manning, 1992. "Minimum Wages," CEP Discussion Papers dp0080, Centre for Economic Performance, LSE.
  3. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June.
  4. Barry T. Hirsch, 1982. "The interindustry structure of unionism, earnings, and earnings dispersion," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 36(1), pages 22-39, October.
  5. Levy, Frank & Murnane, Richard J, 1992. "U.S. Earnings Levels and Earnings Inequality: A Review of Recent Trends and Proposed Explanations," Journal of Economic Literature, American Economic Association, vol. 30(3), pages 1333-81, September.
  6. Stewart, Mark B, 1991. "Union Wage Differentials in the Face of Changes in the Economic and Legal Environment," Economica, London School of Economics and Political Science, vol. 58(230), pages 155-72, May.
  7. Richard B. Freeman, 1991. "How Much Has De-Unionisation Contributed to the Rise in Male Earnings Inequality?," NBER Working Papers 3826, National Bureau of Economic Research, Inc.
  8. Stewart, Mark B, 1986. "Collective Bargaining Arrangements Closed Shops and Relative Pay," The Warwick Economics Research Paper Series (TWERPS) 273, University of Warwick, Department of Economics.
  9. Richard B. Freeman, 1981. "Union Wage Practices and Wage Dispersion within Establishments," NBER Working Papers 0752, National Bureau of Economic Research, Inc.
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  12. Murphy, Kevin M & Welch, Finis, 1992. "The Structure of Wages," The Quarterly Journal of Economics, MIT Press, vol. 107(1), pages 285-326, February.
  13. Stewart, Mark B, 1983. "Relative Earnings and Individual Union Membership in the United Kingdom," Economica, London School of Economics and Political Science, vol. 50(198), pages 111-25, May.
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Cited by:
  1. Barrett, Alan & FitzGerald, John & Nolan, Brian, 2002. "Earnings inequality, returns to education and immigration into Ireland," Labour Economics, Elsevier, vol. 9(5), pages 665-680, November.
  2. Robin Naylor, 1995. "Unions in Decline?," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 22, pages 127-142.
  3. François Rycx & Robert Plasman, 2003. "Industry wage differentials and the bargaining regime in a corporatist country," ULB Institutional Repository 2013/787, ULB -- Universite Libre de Bruxelles.
  4. John Van Reenen, 2001. "The new economy: reality and policy," Fiscal Studies, Institute for Fiscal Studies, vol. 22(3), pages 307-336, September.
  5. Richard Blundell & Hamish Low & Ian Preston, 2013. "Decomposing changes in income risk using consumption data," Quantitative Economics, Econometric Society, vol. 4(1), pages 1-37, 03.
  6. Thierry Lallemand & François Rycx, 2007. "Employer size and the structure of wages: a critical survey," ULB Institutional Repository 2013/8747, ULB -- Universite Libre de Bruxelles.
  7. Jean-Marc Fournier & Isabell Koske, 2012. "Less Income Inequality and More Growth – Are they Compatible? Part 7. The Drivers of Labour Earnings Inequality – An Analysis Based on Conditional and Unconditional Quantile Regressions," OECD Economics Department Working Papers 930, OECD Publishing.
  8. Isabell Koske & Jean-Marc Fournier & Isabelle Wanner, 2012. "Less Income Inequality and More Growth – Are They Compatible? Part 2. The Distribution of Labour Income," OECD Economics Department Working Papers 925, OECD Publishing.
  9. Tom Clark & Jayne Taylor, 1999. "Income inequality: a tale of two cycles?," Fiscal Studies, Institute for Fiscal Studies, vol. 20(4), pages 387-408, December.
  10. Rafal Kierzenkowski & Isabell Koske, 2012. "Less Income Inequality and More Growth – Are they Compatible? Part 8. The Drivers of Labour Income Inequality – A Literature Review," OECD Economics Department Working Papers 931, OECD Publishing.
  11. Machin, Stephen, 1997. "The decline of labour market institutions and the rise in wage inequality in Britain," European Economic Review, Elsevier, vol. 41(3-5), pages 647-657, April.
  12. Aghion, Philippe, 2002. "Schumpeterian Growth Theory and the Dynamics of Income Inequality," Scholarly Articles 3350067, Harvard University Department of Economics.
  13. Rodriguez-Gutierrez, Cesar, 2001. "Wage dispersion within firms and collective bargaining in Spain," Economics Letters, Elsevier, vol. 72(3), pages 381-386, September.
  14. A Charlwood & K Hansen & David Metcalf, 2000. "Unions and the Sword of Justice: Unions and Pay Systems, Pay Inequality, Pay Discrimination and Low Pay," CEP Discussion Papers dp0452, Centre for Economic Performance, LSE.
  15. Aidt, T.S. & Tzannatos, Z., 2005. "The Cost and Benefits of Collective Bargaining," Cambridge Working Papers in Economics 0541, Faculty of Economics, University of Cambridge.
  16. N Millward, 1993. "Uses of the Workplace Industrial Relations Surveys by British Labour Economists," CEP Discussion Papers dp0145, Centre for Economic Performance, LSE.
  17. Jeff Borland, 2000. "Economic Explanations of Earnings Distribution Trends in the International Literature and Application to New Zealand," Treasury Working Paper Series 00/16, New Zealand Treasury.

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