First Union Formation in Australia: Actual Constraints or Perceived Uncertainty?

The present study adds to the growing literature on union formation in case of uncertainty by proposing an operational distinction between actual constraints and perceived uncertainty regarding the future. Using longitudinal data from 17 waves of the Household, Income and Labour Dynamics in Australia survey, we examine the effect of the type of contract, by empirically disentangling objective, actual constraints, their subjective perception, and perceived uncertainty about the future on the hazard of entry into the first union. Our results corroborate the notion that, alone, objective measures give only a partial and possibly inaccurate perspective: the specter of the future also matters. Relevant differences in selection into first union are observed according to the level of uncertainty faced by individuals. Moreover, our findings reveal a nonlinear relationship between uncertainty and family formation. Faced by either very low or very high uncertainty, individuals who are employed tend to invest their resources in family formation—a trend which may well be respectively encouraged or discouraged by the state of the labor market. With mid-levels of uncertainty, individuals may instead prefer to invest into the labor market and postpone union formation.