The Union Membership Wage Premium Puzzle: Is There a Free-Rider Problem?
39 Pages Posted: 1 Aug 2001
There are 2 versions of this paper
The Union Membership Wage Premium Puzzle: Is There a Free-Rider Problem?
Date Written: July 2001
Abstract
Economists have, at least since Olson (1965), suggested that there is a free rider problem associated with labour union membership. The reason is that union-set wages are available to all workers covered by unions irrespective of whether or not they are union members, and - given that there are costs to membership - workers will only join if they are coerced or offered incentive excludable goods. Yet empirical research for both the US and for Great Britain has shown that there is a substantial union membership wage premium amongst private sector union-covered workers. An implication is that the free rider hypothesis is therefore irrelevant, since these studies reveal significant economic gains in the form of higher wages for union members. Using rich data from a new linked employer-employee survey for Britain, we show that this is not the case. While estimates assuming exogenous membership do indeed suggest there is a union membership wage premium of a similar order of magnitude to that found in other studies, we demonstrate that - with appropriate instruments based on theory and with additional controls - this wage premium vanishes.
Keywords: Member/non-member covered wage premium, employer-employee data
JEL Classification: J51, J52
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
The Union Membership Wage Premium for Employees Covered by Collective Bargaining Agreements
By John W. Budd and In-gang Na
-
The Impact of Right-to-Work Laws on Union Organizing
By David T. Ellwood and Glenn A. Fine
-
The Endogeneity of Union Status: An Empirical Test
By Gregory M. Duncan and Duane E. Leigh
-
The Effect of Public Sector Labor Laws on Collective Bargaining, Wages, and Employment
-
Union Membership Effect on Wage Premiums: Evidence from Organized Manufacturing Industries in India
-
By Janet Currie and Sheena Mcconnell