Three essays on union wage determination

This dissertation includes three essays that focus on the influence labor unions have on wages. The first essay investigates the recent wage gains made by public school teachers as a result of their dramatic increase in unionization over the last three decades. A national sample of teacher salaries and a complete list of salaries in Pennsylvania indicate that the union wage gain for teachers is, on average, 15 percent of their salary. The data also suggest that union rents are larger for the more highly educated teachers and tend to increase with teacher experience levels. The second two essays concern private-sector unionization. The primary objective of these essays is directed toward expanding conventional bargaining models of labor negotiations which restrict attention to the immediate payoffs from the currently negotiated contract. In the second essay I develop a bargaining model in which the negotiating parties will jointly negotiate several contracts in the future, and moreover, their actions affect their expected payoffs from these future negotiations. The crucial assumptions of the model is that strikes negatively affect the future surplus to be split between the union and firm and that long strikes are more harmful to the future surplus than short strikes. The main prediction of the model is that wage settlements are negatively related to previous strike duration but not necessarily to current strike duration. This is an important prediction, because bargaining models which focus on a single contract predict that wages are negatively related to current strike duration, however, there has been little empirical evidence in support of this. The third essay uses data on union contracts and strikes in Canada from 1964 to 1990 to obtain structural estimates and to test the model. Likelihood ratio tests suggest the model could be generating the data, but previous strike duration is estimated to have no effect on current wage settlements. These estimates, however, are imprecisely estimated due to the small number of negotiations that resulted in a strike.