Unions and the Sword of Justice: Unions and Pay Systems, Pay Inequality, Pay Discrimination and Low Pay
Dispersion in pay is lower among union members than among non-unionists. This reflects two factors. First, union members and jobs are more homogeneous than their non-union counterparts. Second, union wage policies within and across firms lower pay dispersion. Unions' minimum wage targets also truncate the lower tail of the union distribution. There are two major consequences of these egalitarian union wage policies. First, the return to human capital is lower in firms which recognise unions than in the unorganised sector. Second, unions compress the wage structure by gender, race and occupation.
March 2000 Paper Number CEPDP0452