Everyone's A Winner? Union Effects on Persistence in Private Sector Wage Settlements: Longitudinal Evidence from Britain

Against a background of increased decentralisation in the structure of wage decision making, we analyse the effects of unions on the dispersion and persistence of pay settlements over the medium term using a longitudinal data set covering British private sector establishments over the period 1987-2001. It seems that the union effect of a reduction in wage dispersion in pay levels observed in earlier studies is repeated when we follow wage changes (settlements) over the medium term. Declining union presence seems therefore to account for some of the increase in longer-term wage dispersion over the sample period. The increase in aggregate wage settlement dispersion seems to have been accompanied by an increase in the permanent rather than transitory components of the variance and this stems mostly from the non-union sector.