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Is Declining Union Membership Contributing to Low Wages Growth?

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Listed:
  • James Bishop

    (Reserve Bank of Australia)

  • Iris Chan

    (Reserve Bank of Australia)

Abstract

The union membership rate has declined steadily in Australia since the 1950s. Some have suggested that this decline has caused a fall in the bargaining power of workers, which in turn has contributed to low wages growth in recent years. We test this hypothesis using a newly available source of micro data, covering all enterprise agreements federally registered between 1991 and 2017. We find that changing unionisation patterns are unlikely to account for much of the recent low wages growth. This conclusion reflects three key results. First, there has been no decline in the share of employees covered by enterprise agreements negotiated with union involvement even as union membership has declined. Second, the 'union wage growth premium' in the private sector has been stable over time. Third, spillover effects from union involvement in enterprise agreement negotiations onto wage outcomes in other enterprise agreements exist, but have not changed materially over time.

Suggested Citation

  • James Bishop & Iris Chan, 2019. "Is Declining Union Membership Contributing to Low Wages Growth?," RBA Research Discussion Papers rdp2019-02, Reserve Bank of Australia.
    • Handle: RePEc:rba:rbardp:rdp2019-02
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    References listed on IDEAS

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    Cited by:

    1. van Rens, Thijs, 2019. "Is Declining Union Membership Contributing to Low Wages Growth? Discussion," MPRA Paper 95413, University Library of Munich, Germany.
    2. Rod Tyers & Yixiao Zhou, 2023. "Automation and inequality with taxes and transfers," Scottish Journal of Political Economy, Scottish Economic Society, vol. 70(1), pages 68-100, February.
    3. Fisher, Lance A. & Kingston, Geoffrey, 2022. "Medium-run determinants of real wages in Australia," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 1098-1107.
    4. Stephen Bell & Michael Keating, 2019. "Low Wage Growth: Why It Matters and How to Fix It," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 52(4), pages 377-392, December.
    5. Andrew Leigh, 2023. "How uncompetitive markets hurt workers," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 26(1), pages 1-21.
    6. Jonathan Hambur, 2023. "Did Labour Market Concentration Lower Wages Growth Pre-COVID?," RBA Research Discussion Papers rdp2023-02, Reserve Bank of Australia.

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    More about this item

    Keywords

    wages; trade unions; collective bargaining; wage differentials;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation

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