How much do unions matter?

Brigham Frandsen, on the job market from MIT, serves up the latest word:

This paper estimates the causal effect of unionization on the distribution of employee earnings using a regression discontinuity design that links administrative records on individual earnings to union certification election results. The results suggest unions raise the lower end of the distribution by around 30 log points, with a much smaller effect on the upper tail, and a modest effect on average earnings. Estimates of average effects by baseline earnings quantile suggest the distributional effects correspond to individual-level earnings effects that vary by skill. Unionization also appears to reduce employment of the lowest skilled workers. These results are consistent with a model of union wage setting in which unions set wages so as to maximize the probability of certification, subject to a minimum profit constraint for the employer. The optimal union wage schedule pays low-skilled union members above marginal product but reduces the return to skill. The estimates suggest that about one quarter of the increase in the variance of log earnings from 1979 to 2009 can be accounted for by falling U.S. private sector unionization rates, a larger fraction than earlier studies have found.


Comments for this post are closed