Paying to queue: a theory of locational differences in nonunion wages

Traditional theories of the effect unions have on nonunion wages are difficult to reconcile with firm and worker mobility. We show how differences in nonunion wages can persist in a two-city search model. Nonunion wage differences across cities are driven by transition rates into the union sector. Should union queues form in the nonunion sector, union power decreases nonunion wages as workers are willing to take lower wages to line up for union jobs. However, if queues are formed in the unemployed sector, union power increases nonunion wages as nonunion firms pay premiums to induce workers to leave the queue.