A Joint Theory of Polarization and Deunionization

Tobias Föll and Anna Hartmann

VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy from Verein für Socialpolitik / German Economic Association

Abstract: Over the past 50 years, the U.S. and several European labor markets have undergone two most incisive developments: job market polarization and deunionization. In this paper, we argue that routine-biased technical change is not only the driving force behind polarization, as prevalently assumed, but that routine-biased technical change is the common driving force behind both deunionization and polarization. In a search and matching framework with endogenous occupational and endogenous union membership choices, we show that the shift in employment and income shares in favor of high-skill and low-skill occupations worsens the bargaining position of unions, which crucially depends on the occupational structure inside a firm. This directly affects the membership choice of workers, who base their decision on the potential union wage premium. The ensuing deunionization provides further incentives for middle-wage workers to switch occupations and thus amplifies both job market polarization and the increasing income inequality.

Keywords: Labor markets; Inequality; Search and matching; Unions; Occupational choice (search for similar items in EconPapers)
JEL-codes: E02 E24 J51 J62 J64 O33 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc19:203558

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