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Do Unions Increase Labor Shares? Evidence from US Industry-Level Data

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The struggle of the labourer against capital […] does exist, whatever the apologists of capital may say to the contrary. […] The very existence of Trades Unions is proof sufficient of the fact; […] The produce of the labour […] has to be divided between both classes, and it is this division about which the struggle is constantly going on. Each class tries to get as large a share as possible[.].

Friedrich Engels [1881].

Abstract

We explore the relationship between union membership rates and labor shares using panel data on 35 industries, spanning the entire US economy, for the years 1983–2005. For the full sample, a standard deviation increase in union membership rates is associated with an increase in an industry’s labor share of about 10%. Starting from the mean labor share in our sample (0.614), this effect amounts to about 6 percentage points. However, the effect is weaker and not statistically significant for manufacturing industries. We control for the capital-to-output ratio in all of our estimations, and the results are consistent with an elasticity of substitution between capital and labor that is less than unity. As such, the positive union effect on labor share is consistent with either the right-to-manage or the efficiency bargaining model of unions.

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Acknowledgements

We thank Brandon Brice for excellent research assistance.

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Authors and Affiliations

  1. Department of Economics, College of Business and Economics, West Virginia University, Morgantown, WV, 26505-6025, USA

    Andrew T. Young

  2. Department of Economics, Universidad de los Andes, Bogotá, Colombia

    Hernando Zuleta

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Correspondence to Andrew T. Young.

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Young, A.T., Zuleta, H. Do Unions Increase Labor Shares? Evidence from US Industry-Level Data. Eastern Econ J 44, 558–575 (2018). https://doi.org/10.1057/s41302-016-0086-6

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