What Do (Thousands of) Unions Do? Union-Specific Pay Premia and Inequality

Ellora Derenoncourt, François Gerard, Lorenzo Lagos and Claire Montialoux

No 2558, RFBerlin Discussion Paper Series from ROCKWOOL Foundation Berlin (RFBerlin)

Abstract: We study the role of union heterogeneity in shaping wages and inequality among unionized workers. Using linked employer-employee data from Brazil and job moves across multi-firm unions, we estimate over 4,800 union-specific pay premia. Unions explain 3-4% of earnings variation. While unions raise wages on average, the standard deviation in union effects is large (6-7%). Validating our approach, wages fall in markets with higher vs. lower union premia following a nationwide right-to-work law. Linking premia to detailed data on union attributes, we find that unions with strike activity, collective bargaining agreements, internal competition, and skilled leaders secure higher wages. High-premium unions compress wage gaps by education while the average union exacerbates them. Post right-to-work, however, worker support for high-premium unions falls when between-group bargaining differentials are large. Our findings show that unions are not a monolith - their structure and actions shape their wage effects and, consequently, worker support.

Keywords: Wage Level and Structure, Wage Differentials; Trade Unions: Objectives, Structure, and Effects (search for similar items in EconPapers)
JEL-codes: J31 J51 (search for similar items in EconPapers)
Date: 2025-08
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