can reforming labour relations reduce wage inequality? evidence from the canadian provinces

,Can Reforming Labour Relations Reduce WageInequality? Evidence from the Canadian

Provinces

Scott Legree (University of Waterloo)Tammy Schirle (Wilfrid Laurier University)

Mikal Skuterud (University of Waterloo)

February 24, 2014IRPP-CLSRN Inequality in Canada:

Driving Forces, Outcomes and Policy

Legree - Schirle - Skuterud [email protected] 1/ 22

,Can Reforming Labour Relations Reduce Wage Inequality?

1 Context - decline in union density and suggestions for policyreform

2 Data - provinces union density and labour relations index

1981-2012

3 Estimating the effect of labour relations on union density

FGLS

4 Implications for the distribution of wages


,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 uniondensity

Lower-educated men among those least affected by reform

Modest potential for reducing income inequality

Spillover effects?Disemployment effects?


,Fortin, Green, Lemieux, Milligan and Riddell 2012

Unions could reduce earnings inequality, depends onunion wage distribution - compressedunion-non-union wage differentialwhere are union members in the distribution

Card, Lemieux and Riddell 2004 - 1980s-90s growth inCanadian 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 moresupportive of unions is one of the options to be considered.


,Data - Union density

CALURA vs. Household Surveys

CALURA 1976-1995 - no occupation, education, genderHS - 1981 Survey of Work History, 1984 Survey of UnionMembership, 1986-1990 LMAS, 1991 & 1995 Survey of WorkArrangements, 1994 SLID job file, 1993 & 1996 SLID personfile, LFS 1997-2012.

Union density rate = percentage of paid (non-federalgovernment) workers, who are members of a union in theirmain job.


,Data - Labour relations index (R)1 Secret ballot certification 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-off

8 Mandatory strike vote

9 Employer-initiated strike vote

10 Compulsory conciliation

11 Cool-off period

12 Technology re-opener

Index

Supportive = 1,Unsupportive = 0

Simple average


,Union density and labour relations


,Large decline for private goods


,Within Education Groups


,Within Occupation Groups


,By Gender


,Estimating the effect of labour relations legislationUnion density rate in any year t depends on transitions in and outof unions:

Ut = (1 pun)Ut1 + pnu(1 Ut1)= pnu + (1 pun pnu)Ut1

Changes in labour relations environment Rpt affects transitions.

Upt = Up,t1 + Rpt + Up,t1 Rpt + x pt + cp + yt + pt

Feasible Generalized Least Squares - province-specificheteroskedasticity, spatial correlation, province-specificautocorrelation

= 0; x = inflation, unemployment (25+), manufacturingshare, union preferences


,Select results

Baseline CALURA HS Univ.Table 4(4a) Table 5 (5) Table 6 Table 6

Up,t1 0.7256*** 0.8533*** 0.6434*** 0.6221***(0.0377) (0.0236) (0.0409) (0.0404)

Rpt 0.0269*** 0.0171*** 0.0174* 0.0497***(0.0062) (0.0046) (0.0090) (0.0096)

Steady State 0.0597 0.0710 0.0487 0.1315Policy Effect (0.0143) (0.0188) (0.0255) (0.0254)

SE in parentheses, *,**,*** denote 10%, 5%, 1% level of significance.

Steady State Policy Effect

derived by setting Up,t = Up,t1, use estimated coefficientsR R = 1


,Select results

Baseline Male FemaleTable 4(4a) Table 6 Table 6

Up,t1 0.7256*** 0.6701*** 0.6357***(0.0377) (0.0435) (0.0396)

Rpt 0.0269*** 0.0211** 0.0357***(0.0062) (0.0083) (0.0077)

Steady State 0.0597 0.064 0.098Policy Effect (0.0143) (0.0248) (0.0193)

SE in parentheses, *,**,*** denote 10%, 5%, 1% level of significance.


,Steady State Policy Effects by Province


,Steady State Policy Effects

Full effect of policy change takes several years

Largest effect among women, university, white collar

Within industry effects not as clear - primary and privategoods, not significant


,Implications for the Wage Distribution

Estimate steady state policy effects within education-gendergroups

Estimate prevailing wage distribution - 2013 LFS

Estimate counterfactual wage distribution

Suppose each province introduced fully supportive labourrelations environment (R = 1)Raise union density rates within group using Dinardo, Fortinand Lemieux 1996 reweighing procedureNewly-unionized enjoy the wage premiums, etc. associatedwith being unionized

Compare wage inequality statistics - hourly wages and weeklyearnings


,2013 Log Hourly Wage Distribution

2013

Counter.

90-10 1.359

1.343

50-10 .670

.650

Std.Dev. .500

.498


,2013 & Counterfactual Log Hourly Wage Distribution

2013 Counter.

90-10 1.359 1.34350-10 .670 .650Std.Dev. .500 .498


,2013 & Counterfactual Log Weekly Earnings Distribution

2013 Counter.

90-10 1.967 1.94850-10 1.153 1.142Std.Dev. .803 .798


,Lu, Morissette & Schirle 2011


,Concluding Remarks

Labour Relations Reform

Could have large significant effects on union density

Unlikely to affect income inequality

Largest effect on women, university educatedLargest union wage premiums for lower educated men, butthey are less affected by reformSome provinces already quite supportive

Spillover and disemployment effects not accounted for


can reforming labour relations reduce wage inequality? evidence from the canadian provinces

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