Measuring Union and Nonunion Wage Growth: Puzzles in Search of Solutions

35 Pages Posted: 31 Jul 2002

See all articles by Barry T. Hirsch

Barry T. Hirsch

IZA Institute of Labor Economics; Georgia State University

David A. MacPherson

Trinity University; IZA Institute of Labor Economics

Edward J. Schumacher

Trinity University - Department of Health Care Administration

Date Written: July 2002

Abstract

This paper presents conflicting evidence on trends in private sector union and nonunion wages. The BLS quarterly Employment Cost Index (ECI), constructed from establishment surveys, uses fixed weights applied to wage changes among matched job quotes. The ECI shows a substantial decrease in wage growth for union relative to nonunion workers. The annual Employer Costs for Employee Compensation (ECEC), drawn from the same survey data as the ECI, provides wage level estimates constructed from the full sample of job quotes using current sector weights. Surprisingly, the ECEC shows no trend in relative union-nonunion wages. Household evidence from the Current Population Survey (CPS) can potentially reconcile the conflicting ECI/ECEC evidence, but it is first necessary to account for Census earnings imputation procedures that bias the level and trend in the CPS union gap. CPS wage data absent controls, which should provide results similar to that from the ECEC, instead displays a steep decline in relative union wages, similar to that seen in the ECI. Regression estimates using the CPS, similar in spirit to the ECI, indicate a union premium that declines modestly over time. Union and nonunion wage growth is next calculated from the CPS using methods roughly consistent with the ECI and ECEC. These results shed rather dim light on the sources of ECI/ECEC differences. The contribution of the paper is its unearthing of puzzling and apparently contradictory evidence on union and nonunion wage trends (as well as on economy-wide wage growth). Although our analysis helps account for specific elements of this puzzle, a comprehensive solution remains elusive. We conclude that there has been closing in the union-nonunion wage gap since the mid-1980s, but the magnitude of the closing is anything but clear.

Keywords: Wage growth, union wage differential, Current Population Survey, Employment Cost Index, Employer Costs for Employee Compensation

JEL Classification: J3, J5, O4, C8

Suggested Citation

Hirsch, Barry T. and Hirsch, Barry T. and MacPherson, David A. and Schumacher, Edward J., Measuring Union and Nonunion Wage Growth: Puzzles in Search of Solutions (July 2002). Available at SSRN: https://ssrn.com/abstract=318823 or http://dx.doi.org/10.2139/ssrn.318823

Barry T. Hirsch (Contact Author)

IZA Institute of Labor Economics

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

Georgia State University ( email )

Department of Economics
Andrew Young School of Policy Studies
Atlanta, GA 30302-3992
United States
404-413-0880 (Phone)
404-413-0145 (Fax)

HOME PAGE: http://unionstats.gsu.edu/bhirsch

David A. MacPherson

Trinity University ( email )

San Antonio, TX 78212
United States
210-999-8112 (Phone)
210-999-7255 (Fax)

HOME PAGE: http://www.davemacpherson.com

IZA Institute of Labor Economics

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

Edward J. Schumacher

Trinity University - Department of Health Care Administration ( email )

715 Stadium Drive
San Antonio, TX 78212-7200
United States
210-999-8137 (Phone)
210-999-8108 (Fax)

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