Wage Effects of Increased Union Coverage: Methodological Considerations and New Evidence

Although many studies show a positive relationship between extent of unionization and union members' wages, some analysts suggest that this relationship could reflect a concentration of labor organization in industries with potentially high wage gains, rather than unions' efficacy in raising wages. Consistent with that speculation, studies across occupations or geographic areas generally show a much weaker relationship between unionization and wages than do studies across industries. The authors of this study argue, however, that the weakness of the relationship found in some empirical research is due to the use of data sets mixing local market industries, characterized by local bargaining, with national market industries, characterized by national bargaining. An empirical analysis supports this hypothesis: wages are positively correlated with the extent of unionization in a local market industry (supermarkets), but not in a national market industry (aerospace).