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Why Do Union Jobs Pay More? New Evidence from Matched Employer-Employee Data

Author

Listed:
  • Pierre-Loup Beauregard
  • Thomas Lemieux
  • Derek Messacar
  • Raffaele Saggio

Abstract

We use Canadian matched employer-employee data to assess the sources of the union pay premium. After controlling for worker heterogeneity using the Abowd, Kramarz, and Margolis (1999) (AKM) two-way fixed effects approach, we find that unionized firms pay about 15 log points more than non-unionized firms. Forty percent of this gap is linked to productivity differences between unionized and non-unionized firms as measured by value added per worker. The remaining gap reflects unions’ ability to extract more rents for workers. Our estimates imply that unions raise pay among unionized workers by around 9 log points. The union effect grows to about 11 log points in an extension of the AKM approach where unions also affect the returns to unobservable worker characteristics.

Suggested Citation

  • Pierre-Loup Beauregard & Thomas Lemieux & Derek Messacar & Raffaele Saggio, 2025. "Why Do Union Jobs Pay More? New Evidence from Matched Employer-Employee Data," NBER Working Papers 33740, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:33740
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    More about this item

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General

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