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A Joint Theory of Polarization and Deunionization

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  • Föll, Tobias
  • Hartmann, Anna
Abstract
Over the past 50 years, the U.S. and several European labor markets have undergone two most incisive developments: job market polarization and deunionization. In this paper, we argue that routine-biased technical change is not only the driving force behind polarization, as prevalently assumed, but that routine-biased technical change is the common driving force behind both deunionization and polarization. In a search and matching framework with endogenous occupational and endogenous union membership choices, we show that the shift in employment and income shares in favor of high-skill and low-skill occupations worsens the bargaining position of unions, which crucially depends on the occupational structure inside a firm. This directly affects the membership choice of workers, who base their decision on the potential union wage premium. The ensuing deunionization provides further incentives for middle-wage workers to switch occupations and thus amplifies both job market polarization and the increasing income inequality.

Suggested Citation

  • Föll, Tobias & Hartmann, Anna, 2019. "A Joint Theory of Polarization and Deunionization," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203558, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc19:203558
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    References listed on IDEAS

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    More about this item

    Keywords

    Labor markets; Inequality; Search and matching; Unions; Occupational choice;
    All these keywords.

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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