The Coverage of Collective Pay-setting Institutions in Britain, 1895–1990

Fewer than 50% of British employees now have their pay and conditions affected by collective pay-setting institutions — collective bargaining or wages councils. This paper charts the historical context for the current picture of a decollectivized Britain, constructing a time series on coverage from 1895 to 1990. Extant estimates and sources of coverage data are presented and discussed alongside estimates drawn from a source used only sparingly before now — the number of workers affected by changes in wage rates of national agreements or wage orders. The recent decline in collective bargaining coverage is the most prolonged ever recorded and has been noticeably steeper than the fall in union density, such that the proportion of British workers covered is lower now than in the 1940s. With the abolition of wages councils in 1993, collective pay-setting machinery now affects the pay and conditions of fewer workers than it did in the 1930s.     

Indicative and Updated Estimates of the Collective Bargaining Premium in Germany

This study provides updated evidence on the union contract differential in Germany using establishment‐wide wage data and two estimation strategies. It provides pairwise estimates of the union differential based on separate samples of collective bargaining leavers and joiners vis‐à‐vis the corresponding counterfactual groups. We report that average wages increase by 3 to 3.5 percent after entering into a collective agreement and decrease by 3 to 4 percent after abandoning a collective agreement. Excluding establishments that experience mass layoffs does not significantly influence these net findings, although such establishments record wage losses—statistically insignificant for joiners but up to 10 percent in the case of leavers, as compared with the counterfactuals. The backdrop to these new indicative estimates, which are properly conditioned on establishment size and industry affiliation, inter alia, is one of wage stagnation and continuing union decline.     

Are There Gains to Joining a Union? Evidence from Mexico

Union density in Mexico has been in decline since the 1980s. This article provides evidence on the worker compensation gains (losses) made by males upon joining (leaving) a union. These are estimated using a nationally representative labour market survey covering 2005q1–2016q1. The transitions between non‐union and union status are investigated using a difference‐in‐difference estimator. The findings suggest that joining a union is associated with modest wage gains, contrary to what the literature has shown for most industrialized nations. However, in contrast to this, some union leavers are found to experience a decrease in wages. This article also contributes to the wider literature by providing the first estimates of the longitudinal gain (loss) associated with joining (leaving) a union with respect to non‐wage benefits. The findings show joining (leaving) a union increases (decreases) the probability of being in receipt of legally guaranteed benefits such as bonuses and paid holidays. This suggests that although union density may be in decline, unions still have an important role to play in voicing worker's preferences with respect to compensation and ensuring that employers comply with the law.     

We Want Them All Covered! Collective Bargaining and Firm Heterogeneity: Theory and Evidence from Germany

This article establishes a link between the degree of productivity dispersion within an industry and collective bargaining coverage of the firms in the industry. In a stylized unionized oligopoly model, we show that differences in productivity levels can affect the design of collective wage contracts a sector‐union offers to heterogeneous firms. Using German linked employer–employee data, we test a range of our theoretical hypotheses and find empirical support for them. The dispersion of sector‐level labour productivity decreases the likelihood of firms being covered by a collective bargaining agreement on the industry level, but increases the likelihood of firms being covered by firm‐level agreements. The results hold for different subsamples and (panel) estimation techniques.     

Estimating the Wage Premium of Collective Wage Contracts: Evidence from Longitudinal Linked Employer–Employee Data

Using a large‐scale linked employer–employee dataset from western Germany, this paper presents new evidence on the wage premium of collective bargaining contracts. In contrast to previous studies, we seek to assess the extent to which differences in wages between workers in covered and uncovered firms arise from the nonrandom selection of workers and firms into collective bargaining coverage. By measuring the relative wage changes of workers employed in firms that change contract status, we obtain estimates that depart considerably from previous results relying on cross‐sectional data. Results from analyzing separate transitions show that leaving industry‐level contracts is associated with subsequent wage losses. However, the results from a trend‐adjusted difference‐in‐difference approach indicate that particularly the transitions to no coverage appear to be associated with negative shocks. Overall, our findings provide no evidence of a “true” wage effect of leaving wage bargaining, once we account for differences in pretransition wage growth.     

Social Partnership Agreements in Britain: Labor Cooperation and Compliance

This article reviews evidence on the outcomes of British social partnership agreements using matched comparisons. It concludes that in industries marked by employment decline, partnership firms often have shed jobs at a faster rate than nonpartnership firms. However, in expanding sectors, partnership firms have created jobs at a faster rate than nonpartnership rivals. There is no discernible impact of partnership on either wage settlements or union density. It is argued that we need evidence on information sharing, trust, and power and suggested that partnership agreements are unlikely to contribute significantly to union revitalization.     

Decentralized Wage Formation in Sweden

Recent Swedish collective bargaining agreements have incorporated provisions for local pay review talks and opportunities for individuals to negotiate their own wages. Using trade union data, we show that members who participate in local pay review talks and members who negotiate their own wages have significantly higher monthly wages than those who do not. Pay decentralization either improves an individual's bargaining position or attracts more productive trade union members. Either way, trade union wage policies to increase individual‐level wage variance are achieving their intended effects.     

Public- and Private-Sector Occupational Pay Structures

Data from a representative sample of wage and salary workers are used to estimate wage equations that provide for direct estimates of the differences between public and private occupational pay structures. The results show that at the state and local levels of government in particular, the public/private wage differential tends to decline as occupational skill requirements increase. Public employees who work on jobs unique to the public sector are paid a wage premium. There is little support for the idea that degree of union coverage in the private sector affects public wages for an occupation.     

Changes in Wage-setting Arrangements and Trade Union Presence in the 1980s

In this paper we detail the results of a retrospective survey of changes in trade union and wage-setting arrangements in the 1980s for a sample of 558 UK companies. Our key findings are as follows. (1) Complete derecognition of unions in a firm was rare even in firms with low trade union density. (2) Partial derecognition in multi-plant firms was more common. Some 13 per cent of companies with recognized unions in 1984 had had at least partial derecognition by 1990. (3) Large falls in trade union density within a firm have also been rare, though small but observable declines have been commonplace. (4) The coverage of the closed shop has substantially declined, and this decline has been most marked in the last five years. Around one-quarter of firms with recognized unions in 1990, however, still had closed-shop arrangement for at least part of their work-force. (5) There has been no clear decline in the prevalence of multi-unionism or multiple bargaining units. (6) There has been a significant move away from national/industry-wide bargaining, towards negotiations at the individual company or more often the establishment level. (7) In the absence of collective bargaining there have been clear moves away from wage-setting by formal external links, such as wages councils and multi-employer agreements, and even away from worker consultation towards more managerial discretion. (8) In deciding wage settlements, managers are increasingly influenced by company performance and less by multi-employer wage settlements.     

Sharp Teeth or Empty Mouths? European Institutional Diversity and the Sector‐Level Minimum Wage Bite

The article explores the link between different institutional features of minimum wage systems and the minimum wage bite. We notably address the striking absence of studies on sectoral‐level minima and exploit unique data covering 17 European countries and information from more than 1,100 collective bargaining agreements. Results provide evidence for a neglected trade‐off: systems with bargained sectoral‐level minima are associated with higher Kaitz indices than systems with statutory floors, but also with more individuals actually paid below prevailing minima. Higher collective bargaining coverage can, to some extent, reduce this trade‐off between sharp teeth (high wage floors) and empty mouths (non‐compliance/non‐coverage).     

Decentralization of Collective Agreements and Rising Wage Inequality in Israel

This paper presents a systematic analysis of the decentralization of the Israeli system of collective bargaining and its contribution to the rise in earnings inequality. We quantitatively analyze all collective agreements that were signed between 1957 and 2003, and present the scale, scope, and timing of five dimensions of decentralization. The findings suggest that decentralization started in the mid‐1970s when national agreements were less likely to be extended to nonunion employees; it was intensified in 1975–1980 when nationwide industrial agreements were supplanted by occupational and local agreements. Decentralization became fully consolidated by 1987 when peak‐level agreements covering the entire private sector were no longer signed. We then present evidence (including time‐series analyses that control for union density and macroeconomic indicators) that the process of decentralization, especially the decline in the use of extension orders and the proliferation of local agreements, explains a significant part of the sharp rise in earnings inequality in Israel during 1970–2003.     

Menu Costs, Nominal Wage Revisions, and Intracontract Wage Behavior

We use data from indexed and nonindexed Canadian wage agreements to study the intracontract profile of nominal and real wages. Allowing for endogenous switching between the two indexation categories, we conclude that the number of nominal wage revisions depends on contract duration, expected inflation, and the cost of adjusting wages. Our results have implications for the menu cost, overlapping contracts, dynamic monopoly union, and efficient bargain literatures.     

Matching and Inverse Propensity Weighting Estimates of the Union Wage Premium: Evidence from Canada, 1997–2014

I estimate the union wage premium for private‐sector workers using Canadian data from Statistics Canada's Labour Force Survey from 1997 to 2014, examining the trend and gender differences in the premium. I obtain my estimates using matching and inverse propensity weighting estimators, which form counterfactuals for union workers. These estimators create better covariate balance and can also be used to address the bias that arises from the log transformation of wages.     

The Institutional Context of an ‘Empirical Law’: The Wage Curve under Different Regimes of Collective Bargaining

The wage curve postulates that the wage level is a decreasing function of the regional unemployment rate. In testing this hypothesis, most studies have not taken into account that differences in the institutional framework may have an impact on the existence (or the slope) of a wage curve. Using a large‐scale linked employer–employee dataset for Western Germany, this article provides a first direct test of the relevance of different bargaining regimes (and of works councils) for the existence of a wage curve. In pooled regressions for the period 1998 to 2006, as well as in worker‐level or plant‐level fixed‐effects estimations, we obtain evidence for a wage curve for plants with a collective bargaining agreement at firm level. The point estimates for this group of plants are close to the ?0.1 elasticity of wages with respect to unemployment postulated by Blanchflower and Oswald. In this regime, we also find that works councils dampen the adjustment of wages to the regional unemployment situation. In the other regimes of plants that either do not make use of collective contracts or apply sectoral agreements, we do not find a wage curve.     

Trade Union Decline and Union Wage Effects in Australia

Union density in Australia fell precipitously in the 1990s. This study investigates how union wage effects may have changed as a result. The findings from 1993 data suggest that union/nonunion wage differentials were very small, especially among workers in high-density industries. By 2001 the overall union wage effect had increased significantly; however, the union/nonunion wage differential was no longer correlated with union density at the industry level.     

Market Structure, Strike Activity, and Union Wage Settlements

We attempt a synthesis of the industrial relations market structure hypothesis with the modern asymmetric information theory of wage and strike outcomes. The industrial relations literature contains arguments indicating that wage settlements should be positively related to the degree of product market sales concentration and the degree of product market coverage by the union. In our empirical analysis of the periods 1970–1980 (strikes) and 1976–1980 (wages), we find that the relation between trade-adjusted sales concentration and wage settlements is positive at low and intermediate levels of concentration but negative at the highest levels of concentration. The relation is always negative for strike probabilities. We also find that the trade-adjusted per cent of the product market covered by the same union and the percentage covered by other unions are positively related to both wage settlements and strike probabilities.     

Unionization,Inequality and Redistribution

This article explores the implications of the OECD‐wide decline of union density for earnings inequality and income redistribution by looking at aggregate (country‐level) data. Over the period 1975–95, countries that experienced relatively large declines in union density also experienced relatively large increases in earnings inequality. In addition, governments apparently became less willing to engage in ‘compensatory redistribution’ in these countries. Since the early 1990s, however, union decline has become less closely associated with rising earnings inequality and redistributive policy changes. I argue that the declining relevance of unionization has to do with changes in the position of union members in the income distribution. In most OECD countries, the average union member has become relatively better off as union density has declined and union members have probably become less supportive of wage solidarity and redistributive government policies.     

Effects of Occupational Licensing and Unions on Labour Market Earnings in Canada

Using longitudinal data from the Canadian Survey of Labour and Income Dynamics from 1999 to 2011, the article compares the pay and benefits of licensed and unionized workers. In a cross section of respondents and using ordinary least squares estimates, it finds a pay premium of 0.155 log points for those with an occupational licence compared to those without one; the comparable union wage premium is slightly more than half, that is 0.085 log points. Fixed‐effects estimates go in the opposite direction (0.028 and 0.046 log points for licensing and unionization, respectively), suggesting the existence of unobservable factors correlated with licensing and union status. Unionized workers are more likely to access standard benefits, such as medical insurance and pension plans, but licensed workers benefit little from their licensing status in access to benefits. Finally, union workers are significantly less likely to receive incentive pay, such as profit sharing, while the association between occupational licensing and incentive pay is close to zero and statistically insignificant.