Academic journal article
By Waddoups, C. Jeffrey
Journal of Economic Issues , Vol. 36, No. 3
A bulk of the research on rising wage inequality has focused on the national or international levels and has demonstrated that weakening wage-setting institutions such as collective bargaining play a significant role in explaining the growth in wage dispersion in the United States (e.g., Freeman 1996; Freeman and Katz 1994; Gottschalk and Smeeding 1997; Ryscavage 1999; Thurow 1998). (1) An estimate by R. B. Freeman and L. F. Katz (1994), for example, suggested that declining unionization in the United States accounted for about one-fifth of the increase in earnings inequality between 1980 and 1992 (for similar findings see Smeeding 1997).
In the spirit of the wage inequality literature that takes institutions such as collective bargaining seriously, the present study provides additional evidence on how increased bargaining power afforded workers through unions can reduce wage inequality. (2) In particular, it focuses on wage disparity between managers and front-line, nonmanagerial workers in Nevada's hotel-casino industry. The industry in Nevada is characterized by two large concentrations of employment, one in Las Vegas (Clark County) and the other in Reno (Washoe County). (3) Although both regions have relatively large hotel-casino sectors with identical occupations and similar occupational structures, many nonmanagerial occupations in Las Vegas are highly unionized while the identical occupations in Reno have been virtually union-free for more than two decades. (4) Using state occupational wage survey data from 1996, substantial differences in wages and wage inequality between the two regions are highlighted, suggesting that bargaining powe r afforded hotel-casino workers by a robust union movement reduces wage inequality between the hotel-casino sector's managers and front-line workers, especially in occupations that tend to be covered under union contracts.
The narrow focus of the present study, which is confined to two regions and primarily to one industry, is somewhat unusual in that it allows more institutional detail to be incorporated into the analysis; however, it also raises the question of relevance and applicability to other regions and industries. At least two considerations present themselves as potential avenues along which one may apply the findings more generally. First, the research focuses on wage inequality and collective bargaining in a service sector environment. It is widely recognized that the industrial and employment composition of developed economies is changing from goods to services production. The changing composition suggests that research on characteristics of service sector employment in general, and the impacts of collective bargaining more specifically, is becoming increasingly relevant.
Second, other studies have explored the relationship between lower real wages and increased inequality resulting from industrial restructuring and declining employment in highly unionized heavy industries and accompanying increased employment in less unionized light manufacturing, services, and retail industries (e.g., Craypo and Cormier 2000). In contrast, the present study approaches the connection between unionism and wage inequality from a somewhat different perspective by examining outcomes in an environment where collective bargaining exists in a service sector industry in one location but is absent in the same industry in another. Unlike other research, the impact of deindustrialization and resulting changes in industrial composition are not factors in this case. To the extent that similar industrial configurations exist elsewhere, the study has the potential to inform additional research and policy analysis.
Collective Bargaining and Wage Inequality in Previous Research
Economists are largely in agreement that inequality in the United States earnings distribution began to grow in the 1970s, accelerated during the 1980s, and continued to grow more modestly until the mid 1990s. …