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Nonunion Wage Rates and the Threat of Unionization

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  • Henrys Farber

Abstract

Using CPS data for 1977–2002, the author investigates the extent to which the threat of union organization increases nonunion wages and reduces the union/nonunion wage differential. The results are mixed. Estimates employing the predicted probability of union membership as a measure of the union threat show no important link between the union threat and either nonunion wages or the union wage gap. Estimates focusing on two states' introduction of right-to-work laws, which arguably affect the threat of union organization independently of changes in labor demand, show that in one state the law was associated with a statistically significant drop in nonunion wages. Finally, an analysis of wage data for three industries that underwent deregulation—another natural experiment in which labor demand changes are unlikely to have been a complicating factor—yields stronger evidence of threat effects on nonunion wages than do either of the other two analyses.

Suggested Citation

  • Henrys Farber, 2005. "Nonunion Wage Rates and the Threat of Unionization," ILR Review, Cornell University, ILR School, vol. 58(3), pages 335-352, April.
    • Handle: RePEc:sae:ilrrev:v:58:y:2005:i:3:p:335-352
    DOI: 10.1177/001979390505800302
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    References listed on IDEAS

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    1. O. C. Ashenfelter & G. E. Johnson & J. H. Pencavel, 1972. "Trade Unions and the Rate of Change of Money Wages in United States Manufacturing Industry," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 39(1), pages 27-54.
    2. repec:eee:labchp:v:2:y:1986:i:c:p:1139-1181 is not listed on IDEAS
    3. Rose, Nancy L, 1987. "Labor Rent Sharing and Regulation: Evidence from the Trucking Industry," Journal of Political Economy, University of Chicago Press, vol. 95(6), pages 1146-1178, December.
    4. S. Rosen, 1969. "Trade Union Power, Threat Effects and the Extent of Organization," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 36(2), pages 185-196.
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    Cited by:

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    2. Freeman, Richard Barry & Han, Eunice & Madland, David & Duke, Brendan, 2016. "How Does Declining Unionism Affect the American Middle Class and Intergenerational Mobility?," Scholarly Articles 27304672, Harvard University Department of Economics.
    3. James Bishop & Iris Chan, 2019. "Is Declining Union Membership Contributing to Low Wages Growth?," RBA Annual Conference Papers acp2019-06, Reserve Bank of Australia.
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    5. Telegdy, Álmos, 2018. "Public wage spillovers: The role of individual characteristics and employer wage policies," Labour Economics, Elsevier, vol. 55(C), pages 116-129.
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    7. Woods, Keegan & Tan, Kelvin Jui Keng & Faff, Robert, 2019. "Labor unions and corporate financial leverage: The bargaining device versus crowding-out hypotheses," Journal of Financial Intermediation, Elsevier, vol. 37(C), pages 28-44.
    8. Alex Bryson, 2014. "Union wage effects," IZA World of Labor, Institute of Labor Economics (IZA), pages 1-35, July.

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