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Labor Unions and Social Insurance

Author

Listed:
  • Naoki Aizawa

    (University of Wisconsin-Madison and NBER)

  • Hanming Fang

    (University of Pennsylvania and NBER)

  • Katsuhiro Komatsu

    (Tsinghua University)

  • Zibo Zhao

    (University of Wisconsin-Madison)

Abstract
The United States has experienced a significant decline in labor unions over the past half-century. We examine the aggregate labor market impact of labor unions, the causes of their decline, and their welfare and distributional consequences, accounting for unions’ effects on wages and employers’ insurance provisions. We first provide descriptive evidence that social insurance expansions contribute to the union’s decline. We then develop and estimate an equilibrium labor search model where unionization, wages, employers’ insurance provisions, and job security are endogenously determined. We find that, while skill-biased technological changes and Right-to-Work laws respectively explain 32% and 7% of the union decline from 1955 to 2019, social insurance expansions account for 15%. Our analysis also indicates that social insurance expansion can affect inequality through (de)unionization, and inequality may increase or decrease depending on how social insurance is targeted. Subsidizing unions lowers overall social welfare but increases the welfare of low-skilled workers.

Suggested Citation

  • Naoki Aizawa & Hanming Fang & Katsuhiro Komatsu & Zibo Zhao, 2024. "Labor Unions and Social Insurance," PIER Working Paper Archive 24-018, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    • Handle: RePEc:pen:papers:24-018
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    File URL: https://economics.sas.upenn.edu/system/files/working-papers/24-018%20PIER%20Paper%20Submission.pdf
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    More about this item

    Keywords

    Labor unions; Social insurance; Employer-provided insurance; Technological change;
    All these keywords.

    JEL classification:

    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private

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