The trade union wage-gap, ‘mark-up’, or ‘differential’ is the average increase in earnings received by trade union members compared with non-union workers in equivalent employment. Estimates of the wage-gap produced by labour economists based on individual and establishment cross-sectional surveys suggest that coverage by collective bargaining produces an average increase in pay of 8 per cent in the UK and 15 per cent in the USA. The wage-gap appears to be greater for manual workers and women. Not all unionized workers enjoy a wage premium, however, and it seems that for the wage-gap to appear two primary conditions have to be in place. First, union membership and organization have to be relatively high and the employer has to enjoy market power, that is, relatively beneficial product market conditions which allow economic rents to be shared with trade union members. There is evidence from both the UK and the USA that the wage-gap has declined in recent years as a result of the overall decline in union bargaining power. Indeed, according to some estimates, it has disappeared altogether for some categories of union worker in the UK.
Subjects: Human Resource Management.