There have been many studies of unions' effects on their members' wages relative to non-members in recent years and there is a large literature on the history of trade unions, but there are few studies of the union wage effect in earlier periods. In Discussion Paper No. 712, Research Fellow Tim Hatton, George Boyer and Roy Bailey estimate this effect for a data set covering nearly 1,000 male manual workers in eight industries in the UK, collected by the US Commissioner of Labor for 1889-90. They estimate the determinants of the individual's wage and his probability of being a union member. The membership equation indicates that industry, skill level and individual preferences (indicated by patterns of consumption expenditure) were significant. (Those whose items of expenditure included books and newspapers and who had life insurance subscriptions were more likely to be union members.) The wage equation includes variables for age, skill level and industry; it allows their impact to differ between members and non-members and corrects for the bias arising from individuals' unmeasured characteristics that influence both wages and probabilities of union membership. The authors' preferred estimate indicates a union wage effect of 25% for unskilled workers, 17% for semi-skilled and 19% for skilled.

These effects are large relative to those for more recent periods, which suggest union wage effects of 12% or less. The authors attribute this to the impact of the exceptionally rapid growth of union membership and formation of new unions during 1888-90. The large effect for the unskilled is particularly notable, since the major change in the industrial relations of the period was the formation of new and more aggressive unions among the unskilled. In the light of the subsequent declines in union membership and strike activity, together with employers' response, these results suggest that the union wage effect peaked in these years.

The Union Wage Effect in Late Nineteenth Century Britain
Tim J Hatton, George R Boyer and Roy E Bailey

Discussion Paper No. 712, September 1992 (HR)