Union wage effects in Australia in a period of declining union power: The role of endowments and returns to endowments

Abstract

This study explores the union-non-union wage differentials in Australia, using a quantile regression model and simulation-based counterfactual decomposition. We find that wages for unionists are higher, and more equally distributed, compared to non-unionists. The decomposition analysis reveals that the main reason for a positive union-non-union wage differential is the possession of better labour market endowments by unionists compared with non-unionists. We find that union wages are more equally distributed because endowments of key employment characteristics are more homogenously distributed among unionists. A corollary of this is that differences in the returns to endowments, the ‘pure’ union-non-union wage differentials, are estimated to be small, approximately 0 to 4 per cent for males and 0 to 2 per cent for females.