Union Density and Varieties of Coverage: The Anatomy of Union Wage Effects in Germany

Posted: 22 Feb 2013

See all articles by Bernd Fitzenberger

Bernd Fitzenberger

Humboldt University of Berlin - School of Business and Economics

Karsten Kohn

Kreditanstalt für Wiederaufbau (KfW), KfW Development Bank; IZA Institute of Labor Economics

Alexander Lembcke

London School of Economics & Political Science (LSE)

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Abstract

Collective bargaining in Germany takes place at either industry or firm level. Collective bargaining coverage is much higher than union density. The share of employees covered by collective bargaining in a single firm can vary between 0% and 100%. This institutional setup suggests that researchers should explicitly distinguish union density, coverage rate at the firm level, and coverage at the individual level. Using linked employer-employee data, we estimate OLS and quantile regressions of wages on these dimensions of union influence. A higher share of employees in a firm covered by industry-wide or firm-specific contracts is associated with higher wages, but there is no clear-cut effect on wage dispersion. Yet, holding coverage at the firm level constant, individual bargaining coverage is associated with a lower wage level and less wage dispersion. A higher union density reinforces the effects of coverage, but the effect of union density is negative at all points of the wage distribution for employees who work in firms without coverage by collective bargaining. Higher union density thus compresses the wage distribution while moving the distribution in firms without coverage uniformly leftwards.

Keywords: Union density, collective bargaining coverage, wage structure, quantile regression, linked employer-employee data, Structure of Earnings Survey

JEL Classification: J51, J30

Suggested Citation

Fitzenberger, Bernd and Kohn, Karsten and Lembcke, Alexander, Union Density and Varieties of Coverage: The Anatomy of Union Wage Effects in Germany. Industrial and Labor Relations Review, Vol. 66, No. 1, 2013, Available at SSRN: https://ssrn.com/abstract=2221981

Bernd Fitzenberger (Contact Author)

Humboldt University of Berlin - School of Business and Economics ( email )

Spandauer Str. 1
Berlin, D-10099
Germany

Karsten Kohn

Kreditanstalt für Wiederaufbau (KfW), KfW Development Bank ( email )

Palmengartenstr. 5-9
Frankfurt, 60325
Germany

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Alexander Lembcke

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

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