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The Effect of Public Sector Labor laws on Collective Bargaining, Wages, and Employment

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  • Richard B. Freeman
  • Robert G. Valletta

Abstract

This paper examines the effect of the different legal environments for bargaining faced by public employees across the states on wage and employment outcomes for union and nonunion employees, and also on the extent of bargaining, using cross-section, within-city, and longitudinal analyses based on a newly-derived data set on public sector labor laws. We find that: (1) the legal environment is a significant determinant of the probability of collective bargaining coverage; (2) collective bargaining coverage raises wages and employment for covered employees; (3) a more favorable legal environment increases wages for all employees, but substantially reduces employment for employees not covered by a contract, while slightly reducing employment for employees who are covered by a contract. We also find evidence of significant spillovers of union wage effects to non-covered departments. We conclude by focusing on the effects of two specific legal provisions - arbitration and strike permitted clauses - on wages and employment.

Suggested Citation

  • Richard B. Freeman & Robert G. Valletta, 1987. "The Effect of Public Sector Labor laws on Collective Bargaining, Wages, and Employment," NBER Working Papers 2284, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:2284
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    1. Steven G. Allen, 1983. "Unionization and Productivity in Office Building and School Construction," NBER Working Papers 1139, National Bureau of Economic Research, Inc.
    2. Richard B. Freeman, 1987. "How Do Public Sector Wages and Employment Respond to Economic Conditions?," NBER Chapters, in: Public Sector Payrolls, pages 183-216, National Bureau of Economic Research, Inc.
    3. Ehrenberg, Ronald G, 1973. "The Demand for State and Local Government Employees," American Economic Review, American Economic Association, vol. 63(3), pages 366-379, June.
    4. Courant, Paul N & Gramlich, Edward M & Rubinfeld, Daniel L, 1979. "Public Employee Market Power and the Level of Government Spending," American Economic Review, American Economic Association, vol. 69(5), pages 806-817, December.
    5. Richard B. Freeman, 1981. "The Effect of Unionism on Fringe Benefits," ILR Review, Cornell University, ILR School, vol. 34(4), pages 489-509, July.
    6. Freeman, Richard B, 1986. "Unionism Comes to the Public Sector," Journal of Economic Literature, American Economic Association, vol. 24(1), pages 41-86, March.
    7. Ehrenberg, Ronald G. & Schwarz, Joshua L., 1987. "Public-sector labor markets," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 2, chapter 22, pages 1219-1260, Elsevier.
    8. Jeffrey S. Zax, 1985. "Labor Relations, Wages and Nonwage Compensation in Municipal Employment," NBER Working Papers 1582, National Bureau of Economic Research, Inc.
    9. 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.
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    1. Richard B. Freeman & Robert Valletta, 1988. "The Effects of Public Sector Labor Laws on Labor Market Institutions and Outcomes," NBER Chapters, in: When Public Sector Workers Unionize, pages 81-106, National Bureau of Economic Research, Inc.
    2. Joseph Tracy, 1988. "Comparisons Between Public and Private Sector Union Wage Differentials: Does the Legal Environment Matter?," NBER Working Papers 2755, National Bureau of Economic Research, Inc.
    3. Janet Currie & Sheena McConnell, 1992. "The Impact of Collective Bargaining Legislation on Disputes in the U.S. Public Sector: No Policy May Be the Worst Policy," NBER Working Papers 3978, National Bureau of Economic Research, Inc.

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