Union membership and the union wage
Premium in Ireland
Frank Walsh
School of Economics
University College Dublin
Frank.walsh@ucd.ie
Conference on Irish Economic Policy
Are Trade Unions good or bad for employment and efficiency
Theory suggests it depends on:
• The objective of unions
• The level and degree of co-ordination in bargaining
• The legal/institutional framework and how competitive labour and
product markets are
Empirical literature
• Impact of unions on firm performance and productivity is mixed
• Across countries evidence that unions increase unemployment
unless there is co-ordination across firms and sectors
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• Arguably if unions are un-representative or if membership is
unbalanced co-ordination across sectors is more difficult
• Walsh 2009 looked at trends in Trade Union membership 2001 2006
• No matter how you looked at the data there seemed to be a decline
in the percentage of employees who were members
• Changes in composition of job and worker type could not explain
this decline
• The exception is Public Administration
• This is consistent with international evidence of decline in
membership across a wide range of countries (concentrated in the
private sector)
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Quarterly National Household Survey quarter two 2003/11
0.40
0.38
0.37
0.36
0.35
0.34
0.34
0.34 0.33
0.33
0.32
0.32
0.32
0.32
0.30
% Employees who are
union members
0.29
0.28
0.28
% Labour force who
are union members
0.27
0.26
0.26
0.25 0.25
0.24
0.24 0.24
• Density recovers during
recession as a share of
employees but continues
to decline as a share of
labour force
• Indicates decline in union
number of employees
less than in non-union
0.22
2011
2010
2009
2008
2007
2006
2005
2004
2003
0.20
This does not include
• Non-employed members
• Non-members covered by union contracts but
not members
• Other agreements: ( JLC’s, REA’s)
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Quarterly National Household Survey quarter two 2003/11
• Boom and bust cycle
much greater for total
number employees than
for union employment
135
130
125
120
118
115
118
Index of number of employees
115
Index of number of union
members
110
108
Index of number of non-union
employees
107
105
103
102
100
100
99
97
98
100
102
101
97
95
93
90
91
2003 2004 2005 2006 2007 2008 2009 2010 2011
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Percentage members in Public vs. Private sector
• International literature shows a decline in membership
across most countries over time
• Very of often the decline greater for private sector
workers
• This trend is pronounced in the Irish case
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Quarterly National Household Survey quarter two 2003/10
0.7
0.6
0.62 0.61 0.62
0.59 0.59 0.6
• Steady decline in private
sector density continues
throughout
0.61 0.61
0.5
0.4
0.3
0.2
% Public sector who are
union members
0.29
0.27
• The density is fairly stable
for public sector
employees
% Private sector who
are union members
0.25
0.23 0.23 0.22 0.22
0.21
0.1
0
2003 2004 2005 2006 2007 2008 2009 2010
Proxy for Public Sector is Public Administration, Education and Defence.
Private sector is all other employees
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Changes in the composition of jobs/workers
• Is the pattern in membership reflecting a change in the
composition of the workforce/jobs or is there an underlying
trend?
• We can look at the probability that an employee is a union
member in each year and control for worker and job
characteristics
• Controls are for: age, gender, education, nationality, region, urban
status, industry, occupation and firm size
• Create an index starting at 100 and compare the raw density with
the change in probability of membership when control for worker
and job characteristics
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Quarterly National Household Survey quarter two 2003/10
101.0
100.0
When we control for changes
in composition there is a
steady decline in union density
over the period
100.0
99.0
98.0
98.1
97.9
97.0
96.6
96.0
96.3
96.1
96.1
95.6 95.5 95.6
95.0
94.0
95.0
Index of membership
(No Controls)
94.8
94.3
Index of membership
(With Controls)
94.4
93.0
92.0
91.0
2003 2004 2005 2006 2007 2008 2009 2010
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• What if follow the same workers over time and observe those who
switch union status. Does their wage rise or fall? Ability is fixed
• A problem with this is that a small % of workers randomly miscode
in all surveys. These will almost always look like they change union
status from one period to the next
• A high percentage of the fraction of the sample who appear to be
moving may be just miscodes
• The union premium will be biased downwards since wages will not
change for the workers with miscodes
• SILC data for Ireland asks workers if paid a union sub on last wage
packet. Separate question asks how much it is. For over 60% of
sample the payslip is observed
• Arguably for this sub-sample measurement error in the union
variable will be very low. You would have to incorrectly report
paying a sub or not, then report an incorrect amount that is
consistent with this and the interviewer would observe your payslip
and fail to resolve this inconsistency
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Coefficient on Union dummy from log wage regressions SILC data 2006/10
ALL
IF PAYSLIP SEEN
Worker characteristics: Weekly wage (Private sector only)
Cross-section Fixed Effects
Cross-section
Fixed Effects
0.137
0.058
0.125
0.109
Union
(0.000)**
(0.087)
(0.000)**
(0.029)*
0.579
0.970
0.602
0.979
R-squared
Worker and job characteristics: Weekly wage (Private sector only)
0.074
0.061
0.071
0.100
Union
(0.000)**
(0.076)
(0.000)**
(0.048)*
0.642
0.970
0.672
0.979
R-squared
Worker characteristics: Weekly wage (Private and public sector)
0.144
0.039
0.136
0.079
Union
(0.000)**
(0.149)
(0.000)**
(0.039)*
0.141
0.013
0.147
0.034
Public sector
(0.000)**
(0.607)
(0.000)**
(0.293)
0.027
-0.022
0.019
-0.044
Union*public
(0.228)
(0.459)
(0.479)
(0.247)
0.574
0.964
0.583
0.971
R-squared
Worker and job characteristics: Weekly wage (Private and public sector)
0.088
0.049
0.087
0.076
Union
(0.000)**
(0.074)
(0.000)**
(0.049)*
0.105
0.020
0.128
0.028
Public sector
(0.000)**
(0.426)
(0.000)**
(0.382)
0.020
-0.026
0.004
-0.036
Union*public
(0.355)
(0.381)
(0.872)
(0.349)
0.638
0.964
0.658
0.971
R-squared
We cluster over the individual identifier in the cross-section regressions. Robust p values are in parentheses. *
denotes significant at 5% and ** significant at 1%. All regressions also include month and year dummies, eight
region dummies, five health dummies, an urban dummy, age, age square weekly hours worked, weekly hours
squared, weekly hours cubed, a born in Ireland dummy, a male dummy, thirteen education dummies, a marital
status dummy years of employment experience and years of employment experience squared. Additional
controls for job characteristics are one digit industry and occupation dummies, five firm size dummies, job
tenure and tenure squared.
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Wage premium declining over time for all specifications
0.2
0.18
0.172
0.17
0.16
0.157
0.145
0.14
Private sector worker & firm
characateristics
0.12
0.1
0.104
0.106
0.094
0.096
0.114
0.107
0.112
Private sector worker characateristics
0.098
0.089
0.084
0.08
Private & publicsector worker & firm
characateristics
Private & public sector worker
characteristics
0.073
0.063
0.06
0.05
0.042
0.04
0.049
0.042
0.02
0
2006
2007
2008
2009
2010
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Discussion/Conclusion
• Union density on a downward trend especially in private sector
• Union wage premium at around 8-10% from 2006-10 but seems
to have fallen substantially during recent recession
• A labour market with co-ordinated sectoral bargaining does not
seem feasible without representative employer groups
• A key difference between countries with low and high rates of
representation is the degree to which worker representative
bodies are involved in the provision of other services
(pensions/social security)
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Table 1: Summary statistics
Private sector
Mean Weekly wage
Standard Deviation
Weekly wage
Mean Union member
ship
Standard deviation
Union membership
Observations
Number of individuals
Switchers per thousand
Public and Private sector
Mean Weekly wage
Standard Deviation
Weekly wage
Mean Union member
ship
Standard deviation
Union membership
Observations
Number of individuals
Switchers per thousand
ALL
WORKERS
PAYSLIP
SEEN
PAYSLIP
NOT SEEN
739
774
696
626
593
662
0.22
0.24
0.19
0.41
0.43
0.39
7,905
5,867
9.36
4,338
3,329
5.76
3,567
2,538
14.01
802
846
731
620
593
655
0.38
0.44
0.28
0.48
0.50
0.45
11,793
8,265
14.92
7,234
5,223
11.33
4,559
3,042
20.6
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