NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Collective Bargaining Laws and Threat Effects of Unionism in the Determination of Police Compenstation

Richard B. Freeman, Casey Ichniowski, Harrison Lauer

NBER Working Paper No. 1578 (Also Reprint No. r1190)
Issued in May 1989
NBER Program(s):   LS

This study examines the effect of public sector unions on compensation packages. The model of the compensation determination process incorporates distinctive institutional aspects of public sector labor relations, particularly the differences in collective bargaining laws across states. The model is estimated using data on over 800 municipal police departments. Our results indicate that the effect of public sector unions depend critically on these institutional features of the public sector. First, unionism thrives only in those states with protective legislation. Second, in states where unionism has flourished,unionism exerts a strong upward pressure on both union and nonunion compensation packages. Cross section estimates for 1978 indicate that salaries of union and nonunion departments in highly unionized states are some 30% higher than are the salaries in states with low levels of unionism. However, no significant difference between union and nonunion salaries within states is observed. Before-after estimates of the "state-wide union effect" are more modest (9.9% to 18.1%). Finally, this "state-wide union effect" on union and nonunion departments appears to 'be even more pronounced on fringe benefits than it is on salaries. The net result is that in highly unionized states, a greater proportion of the larger compensation packages is paid in fringe benefits.

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Published: "Collective Bargaining Laws, Threat Effects, and the Determination of Police Compensation" From Journal of Labor Economics, Vol. 7, No. 2,pp. 191-209, (April 1989).

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