Unions, Norms, and Inequality

Read a working paper from Bruce Western and Jake Rosenfeld recently that argues that the decline in union density has been a bigger deal for wage inequality than most economists realize, largely because there's been significant action through the channel of norms. The authors claim the effect can be empirically estimated:

From 1973 to 2007, private sector union membership in the United States declined from 34 to less than 10 percent for men and from 16 to 6 percent among women. Inequality in hourly wages increased by over 40 percent in this same period. We study the effect of deunionization on rising inequality with a variance decomposition that assesses the contribution of the shrinking weight of the union wage distribution to overall wage inequality. We also argue that unions helped institutionalize norms of equity reducing the dispersion of nonunion wages in highly unionized regions and industries. Accounting for the effect of unions on union and nonunion wages suggests that the decline of organized labor explains a fifth to a third of the growth in inequality—an effect comparable to the growing stratification of wages by education.

The impact is much larger for men than for women. Unfortunately, I don't think there's a publicly available copy of the paper yet. In general, I think the impact of norms and conventions on social outcomes is often underrated.