Deunionization and job polarization – a macroeconomic model analysis for a small open economy

Abstract

Declining unionization rates and job polarization are two important labor market developments of recent decades. A large body of literature has analysed these phenomena separately, but little has been done to see whether there is a link between them. We employ a macroeconomic model for a small open economy with a large input-output core to analyse how deunionization may cause job polarization. Our analysis shows that medium-skilled workers are negatively affected by deunionization, mainly as a result of the heterogeneity of the elasticities of substitution between different types of labor. While the elasticities of substitution between highand medium-skilled labor are relatively low, the elasticities of substitution between medium-and low-skilled are relatively high. As a result, when deunionization leads to increased wage dispersion, we find that demand for low-skilled increases at the expense of medium-skilled labor, thus yielding a more polarised labor market. We would like to thank Pål Boug, Ådne Cappelen, Håvard Hungnes and Ingrid Bjartveit Krüger for inspiration and discussions, to Roger Hammersland for technical support in designing an automatic procedure for estimating the system of cost share equations and to Jørgen Ouren for carrying out the calculations. We also benefited from discussions during a presentation at

Workplace gender segregation in standard and non‐standard employment regimes in the US labour market

“…Since the institutionalized practices of work organization (such as internal labour markets, unions, and entitlement and promotion rules) exist to regulate employees’ long‐term involvement with the employer and are absent or much less prominent in non‐standard arrangements (Dencker & Fang, 2016; Osterman, 1999; Rothstein, 2016; Rubery, 2015; Von Brasch et al., 2018), the more fluid and short‐term non‐standard employment may be exempt from some corresponding gender‐biased elements of work organization. In addition, egalitarian beliefs, values and norms emphasizing gender equality that have been on the rise in recent decades (Pedulla & Thébaud, 2015; Ridgeway & Correll, 2004) may be spreading in ways that cover non‐standard employment more than the standard one.…”