Nonunion Wage Rates and the Threat of Unionization

Henry Farber

NBER Working Paper No. 9705
Issued in May 2003
NBER Program(s):Labor Studies

I investigate how the the threat of union organization affects the wage paid to nonunion workers. I start by outlining the standard model of wage determination by a nonunion employer when faced with the threat of union organization. The model suggests that the nonunion wage will be directly related and the union wage gap will be inversely related to the threat. I use repeated cross-section data from the CPS from 1977-2002 to develop a measure of the threat as the predicted probability of union membership. I use this measure to estimate earnings functions that use several sources of variation in the likelihood of union membership to identify the threat effect in a manner that reduces the likelihood of omitted variable bias. Finally, I investigate two cases where there has arguably been a change in the likelihood of union organization that is not correlated with changes in the demand for labor. These include the wage changes surrounding the introduction of right-to-work (RTW) laws in two states during the period studied and wage changes surrounding deregulation of key industries in the late 1970s and early 1980s. The results are mixed. The preferred estimates from the analysis using predicted probability of unionization as the threat measure, imply very little relationship between either nonunion wages or the union wage gap and the threat. The estimates that rely on the introduction of RTW laws show a significant relationship between nonunion wages and the introduction of RTW laws in one of the two states. Stronger evidence of threat effects is found in the experience of deregulated industries, where regulation was a central factor in union strength.

download in pdf format
   (369 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w9705

Published: Farber, Henry S. "Nonunion Wage Rates And The Threat Of Unionization," Industrial and Labor Relations Review, 2005, v58(3,Apr), 335-352.

Users who downloaded this paper also downloaded* these:
Neumark and Wachter w4046 Union Threat Effects and Nonunion Industry Wage Differentials
Farber w1136 Right-to-Work Laws and the Extent of Unionization
Ellwood and Fine w1116 The Impact of Right-to-Work Laws on Union Organizing
Blanchflower and Bryson w9973 What Effect do Unions Have on Wages Now and Would 'What Do Unions Do' Be Surprised?
Card w4195 The Effect of Unions on the Distribution of Wages: Redistribution or Relabelling?
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us