Organized Labor, Labor Market Imperfections, and Employer Wage Premia

Sabien Dobbelaere, Boris Hirsch, Steffen Mueller and Georg Neuschaeffer

ILR Review, 2024, vol. 77, issue 3, 396-427

Abstract: This article examines how collective bargaining through unions and workplace codetermination through works councils relate to labor market imperfections and how labor market imperfections relate to employer wage premia. Based on representative German plant data for the years 1999–2016, the authors document that 70% of employers pay wages below the marginal revenue product of labor and 30% pay wages above that level. Findings further show that the prevalence of wage markdowns is significantly smaller when organized labor is present, and that the ratio of wages to the marginal revenue product of labor is significantly larger. Finally, the authors document a close link between labor market imperfections and mean employer wage premia, that is, wage differences between employers corrected for worker sorting.

Keywords: employer monopsony; worker monopoly; wage markdowns; wage markups; labor market power; collective wage agreements; works councils; employer wage premia (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:ilrrev:v:77:y:2024:i:3:p:396-427

DOI: 10.1177/00197939241237757

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