Union Density and Varieties of Coverage: The Anatomy of Union Wage Effects in Germany

Abstract

Collective bargaining in Germany takes place either at the industry level or at the firm level; collective bargaining coverage is much higher than union density; and not all employees in a covered firm are necessarily covered. This institutional setup suggests to distinguish explicitly union power as measured by net union density (NUD) in a labor market segment, coverage at the firm level, and coverage at the individual level. Using linked employer-employee data and applying quantile regressions, this is the first empirical paper which simultaneously analyzes these three dimensions of union influence on the structure of wages. Ceteris paribus, a higher share of employees in a firm covered by industry-wide or firm-level contracts is associated with higher wages. Yet, individual bargaining coverage in a covered firm shows a negative impact both on the wage level and on wage dispersion. A higher union density is negative at all points in the wage distribution for uncovered employees. In line with an insurance motive, higher union density compresses the wage structure and, at the same time, it is associated with a uniform leftward movement of the distribution for uncovered employees.

Who Bears the Burden of Social Security Contributions in Germany? Evidence from 35 Years of Administrative Data

“…Other indicators like union coverage or union membership also point to a weakening of employees bargaining position over time (Fitzenberger et al, 2013). Besides the evolution of bargaining institutions there are a number of other factors that may also affect the sharing of the SSC burden among employers and employees.…”

A Sequential Decomposition of the Drop in Collective Bargaining Coverage

“…For this reason, collective bargaining coverage is much higher and more relevant than union membership in Germany (Fitzenberger et al 2013). The bargaining process can take place at the sectoral or at the firm level, so as to reach more or less centralised results.…”

“…But they may not undercut the collective agreement. 6 In this sense, collective agreements define minimum working standards for all employees working in a covered establishment (also see Fitzenberger et al 2013). For this reason, our measure of collective bargaining coverage will reflect whether or not an employee works in an establishment that is covered by collective bargaining (as in Antonczyk et al 2010).…”

Wage Determination and Imperfect Competition

“…Clearly a lot of French workers are taking a free ride on union membership. Elsewhere I and others have argued that union coverage is arguably a better measure of union influence than density, and that the level at which union bargaining occurs is also important (see for example Booth, 1995;Boeri at al, 2001, andFitzenberger et al, 2013).…”