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Nonunion wage rates and the threat of unionization

  • Henry S. Farber
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    Using CPS data for 1977-2002, the author tests the standard wage determination model's prediction that the threat of union organization increases nonunion wages and reduces the union/nonunion wage differential. The results are mixed. Estimates employing the predicted probability of union membership as a measure of the union threat show no important link between the union threat and either nonunion wages or the union wage gap. Estimates focusing on two states' introduction of right-to-work laws, which arguably affect wages independently of changes in labor demand, show that in one state the law was associated with a statistically significant drop in nonunion wages. Finally, an analysis of wage data for three industries that underwent deregulation--another natural experiment in which labor demand changes are unlikely to have been a complicating factor--yields stronger evidence of threat effects on nonunion wages than do either of the other two analyses. (Free full-text download available at

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    Article provided by ILR Review, Cornell University, ILR School in its journal ILR Review.

    Volume (Year): 58 (2005)
    Issue (Month): 3 (April)
    Pages: 335-352

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    Handle: RePEc:ilr:articl:v:58:y:2005:i:3:p:335-352
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