Does Union Membership Matter? The Effect of Establishment Union Density on the Union Wage Differential

What Explains Wage Differences between Union Members and Covered Nonmembers?

“…Freeriders receive about 7.5% lower wages in white collar jobs and 11.5% lower wages in blue collar jobs. Despite previous evidence that there is no differential when measured at the establishment level (Reilly 1996), pooled time-series cross-sectional data reveal a rather substantial differential. This suggests that, while the overall effect of unions on wages is not sensitive to whether membership or coverage is used (since there are relatively few freeriders), there are significant differences between union members and freeriders.…”

“…Freerider status appears to be correlated with the strength of the union. Consistent with the findings of Reilly (1996), when there are few freeriders in a particular occupation/industry sector, the union/nonunion differential is high, and when there is a high proportion of freeriders in a sector, there is only a small difference between union and nonunion wages. In addition, the impact of such factors as un measured ability, the probationary period of joining the union, and measurement error in the data are examined.…”

“…Since unions are required to equally represent covered employees regardless of their membership status, a union member will earn the same wage as an equivalent nonmember covered by the same collective bargaining agreement. Reilly's (1996) establishment level study finds no evidence of a freerider differential, suggesting freerider status must be capturing something other than freeriding per se. To gether, these results suggest that the data are picking up wage effects across contract coverage units and freeriders are clustered in covered jobs where the union power is small.…”

“…One pos-sible explanation is that freeriders proxy the strength of the union in a particular sector. Given the findings of Reilly (1996) that there is no freerider penalty at the establishment level, wage differentials across establishments must be capturing factors other than freeriding per se. Work ers are more likely to join the union when the gains are high and have little incentive to join when benefits are low.…”

Firms' Rents, Workers' Bargaining Power and the Union Wage Premium

“…The proxy variable used here for the unions’ bargaining power is the percentage of unionised workers in the establishment (see Reilly, and Barth et al ., , for other examples). Since workers do not have to be union members to be covered by union bargaining, the percentage of unionised workers provides a direct indicator of the number of workers who support the union(s) recognised in their establishment.…”