The Up and Down of Unions

Union membership displayed a ∩-shaped pattern over the 20th century, while the distribution of income sketched a ∪. A model of unions is developed to analyze this phenomena. There is a distribution of firms in economy. Firms hire capital, plus skilled and unskilled labor. Unionization is a costly process. A union decides how many firms to organize and its members' wage rate. The extent of unionization and the union wage rate is governed by the economy's technology, specifically the productivity of skilled versus unskilled labor. Quantitative analysis illustrates how skilled-biased technological change, connected with mass production and computerization, can explain the above phenomena.