Union Membership in the United States: The Divergence between the Public and Private Sectors

I document the dramatic divergence between the fortunes of unions in the public and private sectors in the United States since the 1970s. While the union membership rate in the private sector fell from 25 percent in 1975 to 8.2 percent in 2004, the rate in the public sector increased from the same level in 1975 to over 35 percent in 2004. I propose reasons for this divergence, focusing on differences in four factors: 1) employment dynamics, 2) the nature of products produced, 3) the role that unions can play, and 4) incentives faced by employers. I examine the effect of legislation governing collective bargaining in the state and local government sectors on union density and wages of union and nonunion workers. Exploiting within-state variation in laws by type of worker, I find that union density is significantly higher where unions are allowed to negotiate union security provisions (e.g., agency shop) and where employers have a legal duty to bargain with labor unions. I find there is a small positive effect on earnings of legislation allowing union security union security provisions and a surprising negative effect on earnings of a legal duty to bargain. On balance, unions in the public sector have grown relative to unions in the private sector for important structural reasons. Lack of market competition for the products of the public sector and lack of fiscal discipline through the political process makes the value of unions to public sector workers relatively high. Public policy governing labor relations in the public sector, working in conjunction with these structural factors, has provided an environment in which unions can thrive.