Working Paper: NBER ID: w2284
Authors: Richard B. Freeman; Robert G. Valletta
Abstract: This paper examines the effect of the different legal environments for bargaining faced by public employees across the states on wage and employment outcomes for union and nonunion employees, and also on the extent of bargaining, using cross-section, within-city, and longitudinal analyses based on a newly-derived data set on public sector labor laws. We find that: (1) the legal environment is a significant determinant of the probability of collective bargaining coverage; (2) collective bargaining coverage raises wages and employment for covered employees; (3) a more favorable legal environment increases wages for all employees, but substantially reduces employment for employees not covered by a contract, while slightly reducing employment for employees who are covered by a contract. We also find evidence of significant spillovers of union wage effects to non-covered departments. We conclude by focusing on the effects of two specific legal provisions - arbitration and strike permitted clauses - on wages and employment.
Keywords: public sector; labor laws; collective bargaining; wages; employment
JEL Codes: J51; J52; J53
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Legal environment (K20) | Probability of collective bargaining coverage (J50) |
| Collective bargaining coverage (J50) | Wages for covered employees (J31) |
| Collective bargaining coverage (J50) | Employment for covered employees (J68) |
| Legal environment (K20) | Wages for all employees (J31) |
| Legal environment (K20) | Employment for non-covered employees (J32) |
| Legal environment (K20) | Employment for covered employees (J68) |
| Union wage effects (J31) | Wages for non-covered departments (J38) |