Offshoring and the Decline of Unions

Jakob R. Munch () and William Olney
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Jakob R. Munch: University of Copenhagen

No 17116, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: The prevalence of labor unions have declined post-WWII, and this paper examines whether globalization is a contributing factor. Offshoring jobs abroad may change the composition of domestic firms and employment and thus reduce union density. Alternatively, a firms' ability to offshore may erode the union's bargaining power, decrease the benefits of union membership, and reduce unionization rates. We test these predictions using an employer-employee matched data set covering the universe of workers and firms in Denmark (1999-2017), which allows us to measure the exogenous threat of offshoring at the firm-level and the unionization decisions of individual workers. The findings show that the threat of offshoring reduces unionization rates, even within a job-spell. This is not driven by the changing composition of firms or workers, but instead appears to be due to a decline in the union's bargaining position. Additional results confirm that the union wage premium and the rent-sharing elasticity are both smaller at offshoring firms. These results have important policy implications for the distributional effects of globalization and for the future of organized labor.

Keywords: offshoring; unions; trade; globalization; collective bargaining (search for similar items in EconPapers)
JEL-codes: F16 F66 J50 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2024-07
New Economics Papers: this item is included in nep-int and nep-lab
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