Training and Union Wages

48 Pages Posted: 5 Jan 2005

See all articles by Christian Dustmann

Christian Dustmann

University College London; Institute for Fiscal Studies (IFS); Centre for Economic Policy Research (CEPR)

Uta Schönberg

University of Rochester; IZA Institute of Labor Economics

Date Written: December 2004

Abstract

This paper tests the hypothesis that unions, through imposing wage floors that lead to wage compression, increase on-the-job training. Our analysis focuses on Germany which provides an interesting context to test this hypothesis, due to its large scale apprenticeship programme and its collective bargaining system that is based on voluntary union recognition. To guide the empirical analysis, we first develop a model of firm-financed training. A novel feature of our model is that a unionised and non-unionised sector coexist, and only unionized firms are bound by union wages. The model creates a rich set of empirical implications regarding apprenticeship training, layoffs, wage cuts, and wage compression in unionized and non-unionised firms. Our empirical analysis is based on firm panel data matched with administrative employee data, and provides strong support for our model. Our main results are that unionisation increases training, and that wage floors and wage compression play a more important role in unionised than in non-unionised firms.

Keywords: training, unions, wage compression, matched firm-worker data

JEL Classification: J24, J40, J51, I2

Suggested Citation

Dustmann, Christian and Schönberg, Uta, Training and Union Wages (December 2004). IZA Discussion Paper No. 1435. Available at SSRN: https://ssrn.com/abstract=643602

Christian Dustmann (Contact Author)

University College London ( email )

Gower Street
London WC1E 6BT, WC1E 6BT
United Kingdom
+44 20 7679 5832 (Phone)
+44 20 7916 2775 (Fax)

Institute for Fiscal Studies (IFS)

7 Ridgmount Street
London, WC1E 7AE
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Uta Schönberg

University of Rochester ( email )

Rochester, NY 14627
United States

IZA Institute of Labor Economics

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

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