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Union Wage Setting and the Distribution of EmployeesEarnings: Evidence from Certication Elections

This paper estimates the causal e¤ect of unionization on the distribution of employee earnings using a regression discontinuity design based on union certication elections. The results suggest unions raise the lower end of the distribution by around 25 percent, with a much smaller, even negative e¤ect on the upper tail, and little e¤ect on average earnings. Results on worker retention suggest unions decrease turnover among lower-productivity workers, but increase it among higher-productivity workers. The empirical results are consistent with a model of the political economy of union wage setting in which unions pursue a wage schedule to maximize the probability of winning a certication election, subject to a minimum prot constraint for the employer. The optimal union wage schedule pays low-skilled workers above marginal product but reduces the return to skill. The estimates suggest that around 13.5 percent of the increase in the variance of log earnings from 1979 to 2009 can be accounted for by falling U.S. private sector unionization rates. This research uses data from the Census Bureaus Longitudinal Employer Household Dynamics Program, which was partially supported by the following National Science Foundation Grants: SES-9978093, SES-0339191 and ITR0427889; National Institute on Aging Grant AG018854; and grants from the Alfred P. Sloan Foundation. Any opinions and conclusions expressed herein are those of the author(s) and do not necessarily represent the views of the U.S. Census Bureau. All results have been reviewed to ensure that no condential information is disclosed. The author is indebted to JP Ferguson, Jim Davis, Javi Miranda, and Kristin McCue for help with the data. The author also gratefully acknowledges support from NSF Grant SES-0922355.