,

Can Reforming Labour Relations Reduce Wage

Inequality? Evidence from the Canadian
Provinces
Scott Legree (University of Waterloo)
Tammy Schirle (Wilfrid Laurier University)
Mikal Skuterud (University of Waterloo)
February 24, 2014
IRPP-CLSRN Inequality in Canada:
Driving Forces, Outcomes and Policy
Legree - Schirle - Skuterud tschirle@wlu.ca 1/ 22
,
Can Reforming Labour Relations Reduce Wage Inequality?
1
Context - decline in union density and suggestions for policy
reform
2
Data - provinces union density and labour relations index
1981-2012
3
Estimating the eect of labour relations on union density
FGLS
4
Implications for the distribution of wages
Legree - Schirle - Skuterud tschirle@wlu.ca 2/ 22
,
Can Reforming Labour Relations Reduce Wage Inequality?
Looking back
Lower-educated men faced largest declines in union density
Looking forward
Labour relations reform could substantially increase union
density
Lower-educated men among those least aected by reform
Modest potential for reducing income inequality
Spillover eects?
Disemployment eects?
Legree - Schirle - Skuterud tschirle@wlu.ca 3/ 22
,
Fortin, Green, Lemieux, Milligan and Riddell 2012
Unions could reduce earnings inequality, depends on
union wage distribution - compressed
union-non-union wage dierential
where are union members in the distribution
Card, Lemieux and Riddell 2004 - 1980s-90s growth in
Canadian inequality attributed to decline in unionziation.
Policy environment has become less supportive
Secret ballot elections vs. card check - Johnson 2002,
Riddell 2004
First contract arbitration - Johnson 2010
Fortin et al 2012:
if Canada wishes to reduce pressures toward increasing inequality,
moving in the direction of a policy environment that is more
supportive of unions is one of the options to be considered.
Legree - Schirle - Skuterud tschirle@wlu.ca 4/ 22
,
Fortin, Green, Lemieux, Milligan and Riddell 2012
Unions could reduce earnings inequality, depends on
union wage distribution - compressed
union-non-union wage dierential
where are union members in the distribution
Card, Lemieux and Riddell 2004 - 1980s-90s growth in
Canadian inequality attributed to decline in unionziation.
Policy environment has become less supportive
Secret ballot elections vs. card check - Johnson 2002,
Riddell 2004
First contract arbitration - Johnson 2010
Fortin et al 2012:
if Canada wishes to reduce pressures toward increasing inequality,
moving in the direction of a policy environment that is more
supportive of unions is one of the options to be considered.
Legree - Schirle - Skuterud tschirle@wlu.ca 4/ 22
,
Fortin, Green, Lemieux, Milligan and Riddell 2012
Unions could reduce earnings inequality, depends on
union wage distribution - compressed
union-non-union wage dierential
where are union members in the distribution
Card, Lemieux and Riddell 2004 - 1980s-90s growth in
Canadian inequality attributed to decline in unionziation.
Policy environment has become less supportive
Secret ballot elections vs. card check - Johnson 2002,
Riddell 2004
First contract arbitration - Johnson 2010
Fortin et al 2012:
if Canada wishes to reduce pressures toward increasing inequality,
moving in the direction of a policy environment that is more
supportive of unions is one of the options to be considered.
Legree - Schirle - Skuterud tschirle@wlu.ca 4/ 22
,
Data - Union density
CALURA vs. Household Surveys
CALURA 1976-1995 - no occupation, education, gender
HS - 1981 Survey of Work History, 1984 Survey of Union
Membership, 1986-1990 LMAS, 1991 & 1995 Survey of Work
Arrangements, 1994 SLID job le, 1993 & 1996 SLID person
le, LFS 1997-2012.
Union density rate = percentage of paid (non-federal
government) workers, who are members of a union in their
main job.
Legree - Schirle - Skuterud tschirle@wlu.ca 5/ 22
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Data - Labour relations index (R)
1
Secret ballot certication vote
2
First contract arbitration
3
Anti-temporary replacement laws
4
Ban on permanent replacements
5
Ban on strike-breakers
6
Re-instatement rights
7
Mandatory dues check-o
8
Mandatory strike vote
9
Employer-initiated strike vote
10
Compulsory conciliation
11
Cool-o period
12
Technology re-opener
Index
Supportive = 1,
Unsupportive = 0
Simple average
Legree - Schirle - Skuterud tschirle@wlu.ca 6/ 22
,
Data - Labour relations index (R)
1
Secret ballot certication vote
2
First contract arbitration
3
Anti-temporary replacement laws
4
Ban on permanent replacements
5
Ban on strike-breakers
6
Re-instatement rights
7
Mandatory dues check-o
8
Mandatory strike vote
9
Employer-initiated strike vote
10
Compulsory conciliation
11
Cool-o period
12
Technology re-opener
Index
Supportive = 1,
Unsupportive = 0
Simple average
Legree - Schirle - Skuterud tschirle@wlu.ca 6/ 22
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Union density and labour relations
Legree - Schirle - Skuterud tschirle@wlu.ca 7/ 22
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Large decline for private goods
Legree - Schirle - Skuterud tschirle@wlu.ca 8/ 22
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Within Education Groups
Legree - Schirle - Skuterud tschirle@wlu.ca 9/ 22
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Within Occupation Groups
Legree - Schirle - Skuterud tschirle@wlu.ca 10/ 22
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By Gender
Legree - Schirle - Skuterud tschirle@wlu.ca 11/ 22
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Estimating the eect of labour relations legislation
Union density rate in any year t depends on transitions in and out
of unions:
U
t
= (1 p
un
)U
t1
+ p
nu
(1 U
t1
)
= p
nu
+ (1 p
un
p
nu
)U
t1
Changes in labour relations environment R
pt
aects transitions.
U
pt
= U
p,t1
+ R
pt
+ U
p,t1
R
pt
+ x

pt
+ c
p
+ y
t
+
pt
Feasible Generalized Least Squares - province-specic
heteroskedasticity, spatial correlation, province-specic
autocorrelation
= 0; x = ination, unemployment (25+), manufacturing
share, union preferences
Legree - Schirle - Skuterud tschirle@wlu.ca 12/ 22
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Select results
Baseline CALURA HS Univ.
Table 4(4a) Table 5 (5) Table 6 Table 6
U
p,t1
0.7256*** 0.8533*** 0.6434*** 0.6221***
(0.0377) (0.0236) (0.0409) (0.0404)
R
pt
0.0269*** 0.0171*** 0.0174* 0.0497***
(0.0062) (0.0046) (0.0090) (0.0096)
Steady State 0.0597 0.0710 0.0487 0.1315
Policy Eect (0.0143) (0.0188) (0.0255) (0.0254)
SE in parentheses, *,**,*** denote 10%, 5%, 1% level of signicance.
Steady State Policy Eect
derived by setting U
p,t
= U
p,t1
, use estimated coecients
R R = 1
Legree - Schirle - Skuterud tschirle@wlu.ca 13/ 22
,
Select results
Baseline Male Female
Table 4(4a) Table 6 Table 6
U
p,t1
0.7256*** 0.6701*** 0.6357***
(0.0377) (0.0435) (0.0396)
R
pt
0.0269*** 0.0211** 0.0357***
(0.0062) (0.0083) (0.0077)
Steady State 0.0597 0.064 0.098
Policy Eect (0.0143) (0.0248) (0.0193)
SE in parentheses, *,**,*** denote 10%, 5%, 1% level of signicance.
Legree - Schirle - Skuterud tschirle@wlu.ca 14/ 22
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Steady State Policy Eects by Province
Legree - Schirle - Skuterud tschirle@wlu.ca 15/ 22
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Steady State Policy Eects
Full eect of policy change takes several years
Largest eect among women, university, white collar
Within industry eects not as clear - primary and private
goods, not signicant
Legree - Schirle - Skuterud tschirle@wlu.ca 16/ 22
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Implications for the Wage Distribution
Estimate steady state policy eects within education-gender
groups
Estimate prevailing wage distribution - 2013 LFS
Estimate counterfactual wage distribution
Suppose each province introduced fully supportive labour
relations environment (R = 1)
Raise union density rates within group using Dinardo, Fortin
and Lemieux 1996 reweighing procedure
Newly-unionized enjoy the wage premiums, etc. associated
with being unionized
Compare wage inequality statistics - hourly wages and weekly
earnings
Legree - Schirle - Skuterud tschirle@wlu.ca 17/ 22
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2013 Log Hourly Wage Distribution
2013
Counter.
90-10 1.359
1.343
50-10 .670
.650
Std.Dev. .500
.498
Legree - Schirle - Skuterud tschirle@wlu.ca 18/ 22
,
2013 & Counterfactual Log Hourly Wage Distribution
2013 Counter.
90-10 1.359 1.343
50-10 .670 .650
Std.Dev. .500 .498
Legree - Schirle - Skuterud tschirle@wlu.ca 19/ 22
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2013 & Counterfactual Log Weekly Earnings Distribution
2013 Counter.
90-10 1.967 1.948
50-10 1.153 1.142
Std.Dev. .803 .798
Legree - Schirle - Skuterud tschirle@wlu.ca 20/ 22
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Lu, Morissette & Schirle 2011
Legree - Schirle - Skuterud tschirle@wlu.ca 21/ 22
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Concluding Remarks
Labour Relations Reform
Could have large signicant eects on union density
Unlikely to aect income inequality
Largest eect on women, university educated
Largest union wage premiums for lower educated men, but
they are less aected by reform
Some provinces already quite supportive
Spillover and disemployment eects not accounted for
Legree - Schirle - Skuterud tschirle@wlu.ca 22/ 22