THE IMPACT OF CHANGING UNION DENSITY ON EARNINGS INEQUALITY - EVIDENCE FROM THE PRIVATE AND PUBLIC SECTORS

The degree of inequality in U.S. earnings has varied considerably over the past 20 years, including a dramatic much documented rise since 19 80. We examine empirically how changes in union density have contribut ed to these trends, using Current Population Survey data for 1977 and 1992. Inequality is measured as the mean logarithmic deviation of indi vidual earnings from overall average earnings. A decomposition of the change in the inequality index reveals that decreases in private-secto r union density have accounted for about 25 percent of the overall ris e in earnings inequality during the past 15 years. Decompositions base d on public-sector earnings indicate that increases in union density h ave produced inequality that is 29 percent below what it otherwise wou ld have been. The analysis demonstrates that among private sector work ers, the results are sensitive to the population being studied: Changi ng union density accounts for 13 percent of the rise among prime aged males (a noticeably smaller fraction than found in existing studies) a nd only 4 percent among females and non-prime-aged males. The analysis also demonstrates that covariances between the subsamples explain why the union effect is larger in percentage terms for the whole sample t han it is in either subsample.