Impact of Union Wage Premiums
Union wage premiums show the direct benefits of being a member of a union. Although the union wage premiums have fallen for private sector, it has raised for the public sector in the U.S. Union wage premiums also usually raise the wages of low-skilled workers more than those of high-skilled workers. Thus these low skilled workers usually have less education, lower wages, and in lower paid jobs. This mainly is the result of unions historically representing the working and lower classes. Most economist and labor studies on union wage premiums estimate a difference of about 15%.
Another study reports a much smaller wage difference of 7.7% and 6.0% in workplaces with more than 100 workers. Some studies also argue that as a consequence of unions raising their wages especially if about the market rate wage, it can cause serious firm profitability and eventually jobs could be lost. In some instances union presence in the firm can be associated with 3 to 9 percentage lower net income on assets for the firm but the opposite effect occurs when union density or size is lower.
Lower-wage, middle-wage, blue-collar, and high school educated workers are also more likely than high-wage, white-collar, and college-educated workers to be represented by unions. This is mainly because they raise the wages of the bottom and middle of the wage distribution than that of the top. The explanation that is given for this sector is that it is receiving more than the white collar sector with wage premiums. As well as with larger wages these workers have more purchasing power and their household incomes also increase, thus this wage premium not only affects their budget line but also their household budget line. Another study also backs up the emphasis of importance of wage union premiums among pay structures, especially with the wages of the lowest paid having an effect on pay differentials among gender, ethnicities, health, and different types of occupations. Thus although unions have become smaller in size and participation among the different worker sectors throughout time, those that have survived are more apt and able to negotiate and demand a higher wage premium from their firms and businesses. Union wages also hold up better with increased international competition than those of non-union workers wages although this might mean less union employment in their sector.
There were also changes through time of the union wage premium among different groups in the labor market. The changes could be seen through gender, skill, and the private and public sector of the labor market. Through studies and figures it was shown that the wage premium was largest in the least skilled for both males and females. But for males there is a decline in wage premiums as their skill increases so the wage premium is negative for men with very high skilled jobs. The pattern for the public and private sector was extremely similar especially during the years of 1973 through 1993.
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