Labour Markets
German unions

Most studies of trade unions' positive impact on their members' wages relative to those of non-union workers have used data for the US, where union status is almost exclusively linked to the job and the dominant bargaining unit is an establishment-based union that negotiates for its members only. Many have argued that union wage effects therefore cannot arise in Germany, where collective bargaining in the private sector is conducted along industry and regional lines and labour law requires equal treatment of all workers regardless of union status. Empirical support for this reasoning has recently been supplemented by studies finding that union members earn significantly more than non-members, however, even after controlling for other observable characteristics. In Discussion Paper No. 918, Research Affiliate Christoph Schmidt seeks to reconcile these conflicting results using data from four German micro surveys for 1978-88. The shares of employment held by women and by young workers increased significantly during this period, while the proportion of workers with low levels of overall schooling declined steadily, but the wage structure measured by the malefemale wage differential or returns to education proved remarkably stable. There was no major shift away from blue-collar male employment, as found in the UK and US, although the share of female white-collar workers in employment rose steadily.

Schmidt's estimations reveal that the small, positive effect of union membership on wages found by earlier studies reflects a large earnings differential between union and non-union female workers. While union status is largely irrelevant to male earnings, unionized female workers earn more and work more hours than their non-unionized counterparts. Only women who expect to participate in the labour force for a considerable period find it worth while to entail the cost of union membership, and these women work more hours and invest more in their human capital. Schmidt concludes that further research is needed to investigate German workers' motivations for joining unions that offer no immediate boost to their wages. These may include the longer-term effects of unions on wages through tenure rules and unemployment avoidance, and the effect of German unions' role in collective bargaining on the wages and earnings of union and non-union workers alike.

Relative Wage Effects of German Unions
Christoph M Schmidt

Discussion Paper No. 918, February 1994 (HR)