Reconsidering Union Wage Effects: Surveying New Evidence on an Old Topic
I examine evidence on private sector union wage gaps in the U.S. The consensus opinion among labor economists of an average union premium of roughly 15 percent is called into question. Two forms of measurement error create a downward bias in 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.
|Date of creation:||Jun 2003|
|Publication status:||published in: Journal of Labor Research, 2004, 25 (2), 233-266|
|Contact details of provider:|| Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany|
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org
|Order Information:|| Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Barry T. Hirsch, 1982. "The Interindustry Structure of Unionism, Earnings, and Earnings Dispersion," ILR Review, Cornell University, ILR School, vol. 36(1), pages 22-39, October.
- Budd, John W & Na, In-Gang, 2000.
"The Union Membership Wage Premium for Employees Covered by Collective Bargaining Agreements,"
Journal of Labor Economics,
University of Chicago Press, vol. 18(4), pages 783-807, October.
- Budd, J.W. & Na, I.G., 1994. "The Union Membership Wage Premium for Employees Covered by Collective Bargaining Agreements," Papers 94-09, Minnesota - Industrial Relations Center.
- Christopher R. Bollinger, 2001. "Response Error and the Union Wage Differential," Southern Economic Journal, Southern Economic Association, vol. 68(1), pages 60-76, July.
- Duncan, Greg J & Stafford, Frank P, 1980. "Do Union Members Receive Compensating Wage Differentials?," American Economic Review, American Economic Association, vol. 70(3), pages 355-371, June.
- Richard B. Freeman, 1980. "The Exit-Voice Tradeoff in the Labor Market: Unionism, Job Tenure, Quits, and Separations," The Quarterly Journal of Economics, Oxford University Press, vol. 94(4), pages 643-673.
- Bernt Bratsberg & James F. Ragan Jr., 2002. "Changes in the Union Wage Premium by Industry," ILR Review, Cornell University, ILR School, vol. 56(1), pages 65-83, October.
- Edward J. Schumacher, 1999. "What Explains Wage Differences Between Union Members and Covered Nonmembers?," Southern Economic Journal, Southern Economic Association, vol. 65(3), pages 493-512, January.
- Darren Grant, 2001. "A Comparison of the Cyclical Behavior of Union and Nonunion Wages in the United States," Journal of Human Resources, University of Wisconsin Press, vol. 36(1), pages 31-57.
- Barry T. Hirsch & David A. MacPherson, 2003. "Union Membership and Coverage Database from the Current Population Survey: Note," ILR Review, Cornell University, ILR School, vol. 56(2), pages 349-354, January.
- Victor R. Fuchs & Alan B. Krueger & James M. Poterba, 1998. "Economists' Views about Parameters, Values, and Policies: Survey Results in Labor and Public Economics," Journal of Economic Literature, American Economic Association, vol. 36(3), pages 1387-1425, September.
- Brown, Charles & Medoff, James, 1989. "The Employer Size-Wage Effect," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1027-1059, October.
- Lee, Lung-Fei, 1978. "Unionism and Wage Rates: A Simultaneous Equations Model with Qualitative and Limited Dependent Variables," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 19(2), pages 415-433, June.
- John H. Pencavel, 1971. "The Demand for Union Services: An Exercise," ILR Review, Cornell University, ILR School, vol. 24(2), pages 180-190, January.
- Mellow, Wesley S, 1981. "Unionism and Wages: A Longitudinal Analysis," The Review of Economics and Statistics, MIT Press, vol. 63(1), pages 43-52, February.
- Clark, Kim B, 1984. "Unionization and Firm Performance: The Impact on Profits, Growth, and Productivity," American Economic Review, American Economic Association, vol. 74(5), pages 893-919, December.
- Mellow, Wesley & Sider, Hal, 1983. "Accuracy of Response in Labor Market Surveys: Evidence and Implications," Journal of Labor Economics, University of Chicago Press, vol. 1(4), pages 331-344, October.
- Farber, Henry S, 1983. "The Determination of the Union Status of Workers," Econometrica, Econometric Society, vol. 51(5), pages 1417-1437, September.
- Wessels, Walter J, 1994. "Do Unionized Firms Hire Better Workers?," Economic Inquiry, Western Economic Association International, vol. 32(4), pages 616-629, October.
- Gregory M. Duncan & Duane E. Leigh, 1980. "Wage Determination in the Union and Nonunion Sectors: A Sample Selectivity Approach," ILR Review, Cornell University, ILR School, vol. 34(1), pages 24-34, October.
- Giles, David E. A., 1982. "The interpretation of dummy variables in semilogarithmic equations : Unbiased estimation," Economics Letters, Elsevier, vol. 10(1-2), pages 77-79.
- Hwang, Hae-shin & Reed, W Robert & Hubbard, Carlton, 1992. "Compensating Wage Differentials and Unobserved Productivity," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 835-858, August.
- Barry T. Hirsch & Edward J. Schumacher, 2004.
"Match Bias in Wage Gap Estimates Due to Earnings Imputation,"
Journal of Labor Economics,
University of Chicago Press, vol. 22(3), pages 689-722, July.
- Hirsch, Barry & Schumacher, Edward J., 2003. "Match Bias in Wage Gap Estimates Due to Earnings Imputation," IZA Discussion Papers 783, Institute for the Study of Labor (IZA).
- Card, David, 1996. "The Effect of Unions on the Structure of Wages: A Longitudinal Analysis," Econometrica, Econometric Society, vol. 64(4), pages 957-979, July.
- Richard B. Freeman, 1980. "The Exit-Voice Tradeoff in the Labor Market: Unionism, Job Tenure, Quits," NBER Working Papers 0242, National Bureau of Economic Research, Inc.
- John M. Abowd & Henry S. Farber, 1982. "Job Queues and the Union Status of Workers," ILR Review, Cornell University, ILR School, vol. 35(3), pages 354-367, April.
- Robinson, Chris, 1989. "The Joint Determination of Union Status and Union Wage Effects: Some Tests of Alternative Models," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 639-667, June.
- Addison, John T & Hirsch, Barry T, 1989. "Union Effects on Productivity, Profits, and Growth: Has the Long Run Arrived?," Journal of Labor Economics, University of Chicago Press, vol. 7(1), pages 72-105, January.
- Freeman, Richard B & Medoff, James L, 1981. "The Impact of the Percentage Organized on Union and Nonunion Wages," The Review of Economics and Statistics, MIT Press, vol. 63(4), pages 561-572, November.
When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp795. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak)
If references are entirely missing, you can add them using this form.