Organized Labor, Labor Market Imperfections, and Employer Wage Premia

Sabien Dobbelaere; Boris Hirsch; Steffen Mueller; Georg Neuschaeffer

doi:10.1177/00197939241237757

Organized Labor, Labor Market Imperfections, and Employer Wage Premia

Sabien Dobbelaere, Boris Hirsch^*, Steffen Mueller, Georg Neuschaeffer

^*Corresponding author for this work

Research output: Contribution to Journal › Article › Professional

Abstract

This article examines how collective bargaining through unions and workplace codetermination through works councils relate to labor market imperfections and how labor market imperfections relate to employer wage premia. Based on representative German plant data for the years 1999–2016, the authors document that 70% of employers pay wages below the marginal revenue product of labor and 30% pay wages above that level. Findings further show that the prevalence of wage markdowns is significantly smaller when organized labor is present, and that the ratio of wages to the marginal revenue product of labor is significantly larger. Finally, the authors document a close link between labor market imperfections and mean employer wage premia, that is, wage differences between employers corrected for worker sorting.

Original language	English
Pages (from-to)	396-427
Number of pages	32
Journal	ILR Review
Volume	77
Issue number	3
Early online date	13 Mar 2024
DOIs	https://doi.org/10.1177/00197939241237757
Publication status	Published - May 2024

Bibliographical note

Publisher Copyright:
© The Author(s) 2024.

Funding

We thank Laszlo Goerke, Fabian Lange, and Todd Sorensen for very useful suggestions. We further appreciate comments by participants of the EALE/SOLE/AASLE 2020, the EEA 2020, the Verein für Socialpolitik 2020, the RES 2021, and the IAAE 2022 conferences, of the 21st IZA/SOLE 2022 Transatlantic meeting and the IAB 2023 workshop on “Imperfect Competition in the Labor Market,” and of presentations in Amsterdam, Basel, Halle, and Lüneburg. We also gratefully acknowledge financial support from the Deutsche Forschungsgemeinschaft under the grant title “Firm Wage Differentials in Imperfect Labour Markets: The Role of Market Power and Industrial Relations in Rent Splitting between Workers and Firms.”

Funders	Funder number
Deutsche Forschungsgemeinschaft

Keywords

collective wage agreements
employer monopsony
employer wage premia
labor market power
wage markdowns
wage markups
worker monopoly
works councils

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Organized Labor, Labor Market Imperfections, and Employer Wage Premia

Abstract

Bibliographical note

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Keywords

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