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Reconsidering Union Wage Effects: Surveying New Evidence on an Old Topic

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  • BARRY T. HIRSCH

Abstract

I examine evidence on private sector union wage gaps in the United States. The consensus opinion among labor economists of an average union premium of roughly 15 percent is called into question. Two forms of measurement error bias downward standard wage gap estimates. Match bias results from Census earnings imputation procedures that do not include union status as a match criterion. Downward bias is roughly equal to the proportion of workers with imputed earnings, currently about 30 percent. Misclassification of union status causes additional attenuation in union gap measures. This bias has worsened as private sector density has declined, since an increasing proportion of workers designated as union are instead nonunion workers. Corrections for misclassification and match bias lead to estimated union gaps substantially higher than standard estimates, but with less of a downward trend since the mid 1980s. Private sector union gaps corrected for these biases are estimated from the CPS for 1973-2001. The uncorrected estimate for 2001 is .13 log points. Correction for match bias increases the gap to .18 log points; further correction for misclassification bias, based on an assumed 2 percent error rate, increases the gap to .24. Reexamination of the skill-upgrading hypothesis leads to the conclusion that higher union gap estimates are plausible. The conventional wisdom of a 15 percent union wage premium warrants reexamination.

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  • Barry T. Hirsch, 2004. "Reconsidering Union Wage Effects: Surveying New Evidence on an Old Topic," Journal of Labor Research, Transaction Publishers, vol. 25(2), pages 233-266, April.
  • Handle: RePEc:tra:jlabre:v:25:y:2004:i:2:p:233-266
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    Cited by:

    1. Walsh, Frank, 2013. "The union wage effect and ability bias: Evidence from Ireland," Economics Letters, Elsevier, vol. 119(3), pages 296-298.
    2. Ryan Finnigan & Jo Mhairi Hale, 2017. "Working 9 to 5? Unionization and work variability, 2004-2013," MPIDR Working Papers WP-2017-002, Max Planck Institute for Demographic Research, Rostock, Germany.
    3. John, Kose & Knyazeva, Anzhela & Knyazeva, Diana, 2015. "Employee rights and acquisitions," Journal of Financial Economics, Elsevier, vol. 118(1), pages 49-69.
    4. Haile, Getinet Astatike & Bryson, Alex & White, Michael, 2012. "Heterogeneity in Union Status and Employee Well-Being," IZA Discussion Papers 7075, Institute for the Study of Labor (IZA).
    5. Arthur Lewbel, 2007. "Estimation of Average Treatment Effects with Misclassification," Econometrica, Econometric Society, vol. 75(2), pages 537-551, March.
    6. Rudy Fichtenbaum, 2006. "Labour market segmentation and union wage gaps," Review of Social Economy, Taylor & Francis Journals, vol. 64(3), pages 387-420.
    7. Ying Ge, 2014. "Do Chinese Unions Have “Real” Effects On Employee Compensation?," Contemporary Economic Policy, Western Economic Association International, vol. 32(1), pages 187-202, January.
    8. Haile, Getinet & Bryson, Alex & White, Michael, 2015. "Spillover effects of unionisation on non-members' wellbeing," Labour Economics, Elsevier, vol. 35(C), pages 108-122.
    9. Maury Gittleman & Morris M. Kleiner, 2016. "Wage Effects of Unionization and Occupational Licensing Coverage in the United States," ILR Review, Cornell University, ILR School, vol. 69(1), pages 142-172, January.
    10. Lu, Yi & Tao, Zhigang & Wang, Yijiang, 2010. "Union effects on performance and employment relations: Evidence from China," China Economic Review, Elsevier, vol. 21(1), pages 202-210, March.
    11. David G. Blanchflower & Alex Bryson, 2003. "What Effect do Unions Have on Wages Now and Would 'What Do Unions Do' Be Surprised?," NBER Working Papers 9973, National Bureau of Economic Research, Inc.
    12. John Addison & Paulino Teixeira & Katalin Evers & Lutz Bellmann, 2014. "Indicative and Updated Estimates of the Collective Bargaining Premium in Germany," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 53(1), pages 125-156, January.
    13. John T. Addison & Arnd Kölling & Paulino Teixeira, 2014. "Changes in Bargaining Status and Intra-Plant Wage Dispersion in Germany. A Case of (Almost) Plus Ça Change?," GEMF Working Papers 2014-15, GEMF, Faculty of Economics, University of Coimbra.
    14. Barry T. Hirsch, 2008. "Sluggish Institutions in a Dynamic World: Can Unions and Industrial Competition Coexist?," Journal of Economic Perspectives, American Economic Association, vol. 22(1), pages 153-176, Winter.
    15. Brantly Callaway & William J. Collins, 2017. "Unions, Workers, and Wages at the Peak of the American Labor Movement," NBER Working Papers 23516, National Bureau of Economic Research, Inc.
    16. Jan Kluge & Michael Weber, 2015. "Decomposing the German East-West wage gap," ifo Working Paper Series 205, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    17. Janelle Jones & John Schmitt, 2014. "Union Advantage for Black Workers," CEPR Reports and Issue Briefs 2014-04, Center for Economic and Policy Research (CEPR).
    18. John T. Addison, 2016. "Collective bargaining systems and macroeconomic and microeconomic flexibility: the quest for appropriate institutional forms in advanced economies," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-53, December.
    19. Addison, John T. & Teixeira, Paulino & Stephani, Jens & Bellmann, Lutz, 2014. "Union Decline and the Coverage Wage Gap in Germany," IZA Discussion Papers 8257, Institute for the Study of Labor (IZA).
    20. Cherrie Bucknor, 2016. "Black Workers, Unions, and Inequality," CEPR Reports and Issue Briefs 2016-14, Center for Economic and Policy Research (CEPR).
    21. Paula Armstrong & Janca Steenkamp, 2008. "South African Trade Unions: an Overview for 1995 to 2005," Working Papers 10/2008, Stellenbosch University, Department of Economics.
    22. Ensar Yilmaz & Sayin San, 2017. "Wage gap and dispersion in a partially unionized structure in Turkey," Empirical Economics, Springer, vol. 52(2), pages 577-597, March.
    23. repec:bla:indres:v:56:y:2017:i:4:p:605-639 is not listed on IDEAS

    More about this item

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access

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