The Effect of Public Sector Labor Laws on Collective Bargaining, Wages, and Employment

60 Pages Posted: 7 Jul 2004 Last revised: 7 Oct 2008

See all articles by Richard B. Freeman

Richard B. Freeman

National Bureau of Economic Research (NBER); University of Edinburgh - School of Social and Political Studies; Harvard University; London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP)

Robert G. Valletta

Federal Reserve Bank of San Francisco; IZA Institute of Labor Economics

Date Written: June 1987

Abstract

This paper examines the effect of the different legal environments for bargaining faced by public employees across the states on wage and employment outcomes for union and nonunion employees, and also on the extent of bargaining, using cross-section, within-city, and longitudinal analyses based on a newly-derived data set on public sector labor laws. We find that: (1) the legal environment is a significant determinant of the probability of collective bargaining coverage; (2) collective bargaining coverage raises wages and employment for covered employees; (3) a more favorable legal environment increases wages for all employees, but substantially reduces employment for employees not covered by a contract, while slightly reducing employment for employees who are covered by a contract. We also find evidence of significant spillovers of union wage effects to non-covered departments. We conclude by focusing on the effects of two specific legal provisions - arbitration and strike permitted clauses - on wages and employment.

Suggested Citation

Freeman, Richard B. and Valletta, Robert G., The Effect of Public Sector Labor Laws on Collective Bargaining, Wages, and Employment (June 1987). NBER Working Paper No. w2284, Available at SSRN: https://ssrn.com/abstract=332241

Richard B. Freeman (Contact Author)

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Robert G. Valletta

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