Union membership and the union wage Premium in Ireland Frank Walsh School of Economics University College Dublin Frank.w

1. Union membership and the union wage Premium in Ireland Frank Walsh School of Economics University College Dublin Frank.walsh@ucd.ie

2. 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

3. 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)

4. Quarterly National Household Survey quarter two 2003/11 • 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 • This does not include • Non-employed members • Non-members covered by union contracts but not members • Other agreements: ( JLC’s, REA’s)

5. Quarterly National Household Survey quarter two 2003/11 • Boom and bust cycle much greater for total number employees than for union employment

6. 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

7. Quarterly National Household Survey quarter two 2003/10 • Steady decline in private sector density continues throughout • The density is fairly stable for public sector employees Proxy for Public Sector is Public Administration, Education and Defence. Private sector is all other employees

8. 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

9. Quarterly National Household Survey quarter two 2003/10 When we control for changes in composition there is a steady decline in union density over the period

10. 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

12. Wage premium declining over time for all specifications

13. 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 sectoralbargaining 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)