Trade unions and the dispersion of earnings in UK establishments

In this paper we examine the relationship between unions and earnings dispersion using data from 1980, 1984 and 1990 Workplace Industrial Relations Surveys. The initial focus is on the cross-section relationship using the 1990 data unionised establishments are seen to have lower earnings dispersion for skilled and semi-skilled workers. Second, within-establishment earnings dispersion is lower in 1990 amongst plants with recognised unions. We then use all three surveys to see to what extent the changing nature of union structure in the UK economy has contributed to the rise in earnings in inequality for semi-skilled workers. Our findings point to an important increase in the gap between dispersion in union and non-union plants between 1980 and 1990. For semi-skilled workers, the decline in the share of plants with recognised unions can account for almost 20 per cent of the coincident rise in earnings inequality. The bulk of the overall rise in earnings inequality is, however, down to a large increase in earnings dispersion across non-union establishments.