Nonunion Wage Rates and the Threat of Unionization

Using CPS data for 1977–2002, the author investigates the extent to which the threat of union organization increases nonunion wages and reduces the union/nonunion wage differential. The results are mixed. Estimates employing the predicted probability of union membership as a measure of the union threat show no important link between the union threat and either nonunion wages or the union wage gap. Estimates focusing on two states' introduction of right-to-work laws, which arguably affect the threat of union organization independently of changes in labor demand, show that in one state the law was associated with a statistically significant drop in nonunion wages. Finally, an analysis of wage data for three industries that underwent deregulation—another natural experiment in which labor demand changes are unlikely to have been a complicating factor—yields stronger evidence of threat effects on nonunion wages than do either of the other two analyses.