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Title: Deunionization and skills

Citation Type: Miscellaneous

Publication Year: 2022

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Abstract: This paper introduces a structural framework to isolate and examine the role of skill distribution and skill premium changes in US private sector deunionization. The framework is a search and matching model with separate unionized and non-unionized sectors where wages are determined through enterprise-level bargaining in the union sector and through individual bargaining in the non-union sector. Workers differ by human capital the measure of worker skill in the model-and decide which sector to work in based on their prospective wages. The model predicts that workers with a moderate level of human capital will select into the union sector while those with low or high levels will select into the non-union sector. The model is initially calibrated to the 1984 US private sector economy. Counterfactual analysis is performed to isolate the effect of the changing skills distribution and rising skill premium on union coverage in 2007 and 2019. Consistent with the literature, skills are measured using a predicted wage equation on several skill-related characteristics, and non-skill-related controls. Using these equations from different years, a new method is developed to track movements in the skill distribution and premium over time. This method reports skill dispersion, a widening of the skill distribution, in recent decades. The mechanism of deunionization is the same for both skill dispersion and skill premium rises: widening productivity gaps under compressed union wages incentivize high-skill workers to leave the union sector and unionized firms to stop hiring low-skill workers on the margin. The counter-factual estimates suggest that skill dispersion accounted for just under a tenth of US private sector deunionization between 1984 and 2019, with most of its impact coming after 2007. The results also suggest that a skill premium rise accounted for just over a fifth of the decline between 1984 and 2007, and a skill premium decrease actually worked in favor of unionization after 2007, attenuating the overall decline by about a tenth.

Url: https://www.res.org.uk/uploads/assets/a36eea9d-377a-420e-ad12784970bf4037/51.pdf

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Authors: Pickens, Joey

Publisher: University of Minnesota

Data Collections: IPUMS USA, IPUMS CPS

Topics: Population Data Science

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