Working Paper: NBER ID: w1578
Authors: Richard B. Freeman; Casey Ichniowski; Harrison Lauer
Abstract: This study examines the effect of public sector unions on compensation packages. The model of the compensation determination process incorporates distinctive institutional aspects of public sector labor relations, particularly the differences in collective bargaining laws across states. The model is estimated using data on over 800 municipal police departments. Our results indicate that the effect of public sector unions depend critically on these institutional features of the public sector. First, unionism thrives only in those states with protective legislation. Second, in states where unionism has flourished,unionism exerts a strong upward pressure on both union and nonunion compensation packages. Cross section estimates for 1978 indicate that salaries of union and nonunion departments in highly unionized states are some 30% higher than are the salaries in states with low levels of unionism. However, no significant difference between union and nonunion salaries within states is observed. Before-after estimates of the "state-wide union effect" are more modest (9.9% to 18.1%). Finally, this "state-wide union effect" on union and nonunion departments appears to 'be even more pronounced on fringe benefits than it is on salaries. The net result is that in highly unionized states, a greater proportion of the larger compensation packages is paid in fringe benefits.
Keywords: collective bargaining; unionism; police compensation; public sector unions
JEL Codes: J51; J52
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Collective bargaining laws (J58) | unionization (J50) |
| unionization (J50) | police compensation (J33) |
| Collective bargaining laws (J58) | police compensation (J33) |
| Union presence (J45) | nonunion wages (J39) |
| Unionization in states with collective bargaining laws (J58) | fringe benefits (J32) |
| Unionization in states without collective bargaining laws (J58) | police compensation (J33) |