The Rise and Fall of Unions in the U.S.

Source: Emin Dinlersoz and Jeremy Greenwood, Population Studies Center, University of Pennsylvania, PSC Working Paper Series, PSC 12-02, June 6, 2013

Union membership in U.S. displayed a ∩-shaped pattern over the 20th century, while income inequality sketched a ∪. A model of unions is developed to analyze this phenomenon. There is a distribution of productivity across firms in the economy. Firms hire capital, plus skilled and unskilled labor. Unionization is a costly process. A union chooses how many firms to organize and the union wage. Simulation of the model establishes that skill-biased technological change, which affects the productivity of skilled labor relative to unskilled labor, can potentially explain the above facts. Statistical analysis suggests that skill-biased technological change is an important factor in deunionization.