Union Wage Premium - Dynamics

Dynamics

One of the characteristics of a union is to try to bargain and negotiate wages and hours. Unions also try to reduce or eliminate pay discrimination and low wages. The wage gap of non-union workers and unionized workers since the 1970s has varied between 21% and 32% in the U.S.

This union premium wage gap can be interpreted as the adaptations to globalization, technological, and demographic changes. Another argument for this gap between union and non-union wages is the competition between the wages including a foreign competitor, different workplace improvements to enhance productivity, safety in the workplace, and other interests of the workers. Thus higher wages paid in the union sector makes it seem like there is a rationing of union jobs and that the average worker would rather work a union job than a non-union job.

Others attribute changes in this premium to changes in business cycles (for example should the unemployment rate go up, it would raise the premium or if the inflation rate were to increase then it should lower the premium). Deregulation also affects premiums by adding competitors that will probably lower the unions bargaining power but it could be argued that it also affects the wages of non-union workers as well. As well cause them to compete with local and foreign wages to keep workers in the jobs and not move to a better paying job. Similarly, import penetration would cause the union to insulate the wages for a period of time.