The Wage Impact of Trade Unions in the UK Public and Private.pdfVIP

Economica (2010) 77, 92–109 doi:10.1111/j.1468-0335.2008.00726.x The Wage Impact of Trade Unions in the UK Public and Private Sectors By DAVID G. BLANCHFLOWERw and ALEX BRYSONz wDartmouth College, University of Stirling, IZA, CESifo, NBER and Bank of England zPolicy Studies Institute and Centre for Economic Performance Final version received 25 February 2008. There is a growing gap in the union membership wage premium between public and private-sector workers in the United Kingdom. Using the Labour Force Surveys of 1993–2006, the gap between the membership premium in the public and private sectors closes with the addition of three-digit occupational controls, although significant wage premia remain in both sectors. However, using the Workplace Employment Relations Survey of 2004, the public-sector union membership wage premium remains roughly twice the size of the private-sector membership premium, having accounted for workplace fixed effects and workers’ occupations, job characteristics, qualifications and demographics. INTRODUCTION This paper draws attention to a trend hitherto unnoticed, namely an increase in the size of the union membership wage premium in the UK public sector relative to the private sector. This finding is surprising because it implies that union bargaining power has held up reasonably well in the public sector, despite the fact that union density has declined at a similar rate to the decline in the private sector. It is also surprising because it seems implausible that there should be a substantial union wage premium in the public sector. Unlike in the private sector, the majority of public-sector workers have pay set directly through collective bargaining or through pay review bodies, whether or not they are unio