Labor Unions and Social Insurance

We study the labor market impacts of unions by accounting for their effects on employers' insurance provision and examine how social insurance policies, in turn, affect unionization and labor market outcomes. We document that unions increase employer-sponsored insurance provision and that expansions in social insurance reduce unionization in the United States. We then develop and estimate an equilibrium labor search model where unionization, wages, and non-wage benefits are endogenously determined. We demonstrate that unionization, as well as the threat of unionization, increases employer-sponsored insurance provision in both unionized and nonunionized firms. We find that social insurance policies can affect labor market inequality through (de)unionization, and inequality may increase or decrease depending on how social insurance is targeted. Social insurance expansions, along with technological changes, contribute to the long-term decline of unions in the U.S. in the last fifty years. Although historical deunionization driven by these forces increased overall welfare, we find that subsidizing unions in the current economy can improve welfare.