Closed Shops and Relative Pay: Institutional Arrangements or High Density?

Employees in workplaces with a closed shop get paid more than their counterparts in comparable workplaces without a closed shop. Is this pay differential a consequence of high union density or the institution of the closed ship itself? The authors' results indicate that a post-entry closed shop adds no extra pay differential over and above that achieved by employees in workplaces with high union density but no closed shop. By contrast the preentry closed shop--where the union normally controls the labor supply and has the potential to impose substantial costs on the employer by striking--roughly doubles the premium gained by high density alone. The implications of their results for the likely impact on union wage premia of recent legal changes outlawing the closed shop are discussed. Copyright 1992 by Blackwell Publishing Ltd