A Brief Note On Union And Wage Inequality

1527 WordsApr 7, 20157 Pages
Yuan Mingda 1000073127 Eco344 Union and Wage Inequality In the economic literature, there are several macroeconomic studies relating the increase in wage inequality among US male workers to a decline of unionization in the private sector. For example, a paper by Card, Lemieux and Riddell (2004) supports such an opinion with their empirical analysis on the influence of unions on the wage structures of Canada, the US, and the UK. According to the arguments presented in this paper (and other papers that hold the same opinion) and some basic ideas surrounding how unions work that I learn on the course, the supporting evidences are two-fold; one is within-sector impact and between-sector impact, and the other is union’s impact on non-union firms. First of all, it is important to clarify how to measure union’s impacts on wage inequality, or in other words, how to compare the wages now with the wages that would prevail when there were no unions working in the economy. That means a “counterfactual” scenario is needed when all the workers are paid in accordance with the non-union wage structure. In the paper, Card, Lemieux and Riddell (2002) imagine a two-sector model and use V to stand for the overall variance (in mathematics variance is often used to measure the magnitude of dispersion) of wages and VN for the variance of non-union wages (assuming VN =V0). By subtracting VN from V union’s effects on wage inequality is calculated, and it can be decomposed into within-sector and
Open Document