Working Papers in Economics
Why Unions Reduce Wage Inequality, II: The Relation between Solidarity and Unity
Abstract: This paper demonstrates that the decisions by workers of
different skills to unite to form industry unions is closely linked to the
egalitarian wage policies that such unions pursue. These results help
interpret the stylized facts about unions: that they not only increase
wages but also reduce wage inequality. I also demonstrate that political
caps on collectively negotiated minimum wages may reduce the wages of all
blue-collar workers (cf. “internal devaluation”), but that they may also
cause unions to disintegrate in the long run.
Keywords: inequality; wage differences; minimum wages; trade unions; collective negotiations; strategic commitment; (follow links to similar papers)
JEL-Codes: J31; J51; (follow links to similar papers)
33 pages, September 2015
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