Earnings Inequality and Unions in Canada
| Author | George A. Slotsve,Richard P. Chaykowski |
| Published date | 01 September 2002 |
| DOI | http://doi.org/10.1111/1467-8543.00244 |
| Date | 01 September 2002 |
Earnings Inequalit y and Unions in Canada
Richard P. Chaykowski and George A. Slotsve
Abstract
This paper reports research examining differences in the earnings distributions
of unionized and non-unionized workers and the impact of union status on
the likelihood of a worker being in each region of the earnings distribution.
Average earnings of unionized workers are shown to be higher than those of
non-union workers in the first four quintiles, but lower than average earnings of
non-unionized workers in the top quintile. Union effects are greatest among
workers situated in the lower and middle regions of the distribution, and benefit
workers who are typically disadvantaged in the labour market.
1. Introduction
Concern among Canadians over increased economic inequality has arisen
on several grounds. There is fear that deterioration in societal equity may
arise from increasingly unequal economic advantage, or that increased
economic polarization may translate into a larger class of working poor with
limited opportunity for advancement (Beach and Slotsve 1996: 120–1). Over
the period from the 1950s through the mid-1970s, there has been variation in
the magnitude and direction of the particular effects of the various supply-
side and demand-side factors that affected earnings inequality in Canada.
Even so, overall earnings inequality among individuals remained remark-
ably stable over that period (Wolfson 1986: 337). However, there is evidence
of some increase in overall wage and earnings inequality in the 1980s,
although analyses that extend into the 1990s suggest that there has been
little change in inequality from the late 1980s into the mid-1990s.
1
Any
increase in earnings inequality experienced in Canada in the 1980s has been
considerably affected by changes in the distribution of hours worked
(Morissette et al. 1994: 13–14).
Many of the same factors underlying the changes in the distribution of
earnings in the USA are also operating, albeit in a different fashion, in
Richard Chaykowski is in the School of Industrial Relations, Queen’s University. George
Slotsve is in the Department of Economics, Northern Illinois University.
British Journal of Industrial Relations
40:3 September 2002 0007–1080 pp. 493–519
#Blackwell Publishers Ltd/London School of Economics 2002. Published by Blackwell Publishers Ltd,
108 Cowley Road, Oxford OX4 1JF, UK and 350 Main Street, Malden, MA 02148, USA.
various OECD countries, including Canada, but evidently with a lesser
effect on inequality (Gottschalk and Smeeding 1997: 652–3). Perhaps fore-
most among the institutional factors that have been found to have an
important effect on earnings inequality are unions. In their landmark study,
Freeman and Medoff (1984: 93) found that, on net, unions decreased overall
earnings inequality in the US economy. While creating a wage differential
between unionized and non-unionized workers that are otherwise compar-
able (i.e. in terms of characteristics that determine earnings) may increase
inequality, numerous studies (e.g. Freeman and Medoff 1984: 7 9–85; Freeman
1982: 19–20) suggest that unions are also associated with lower wage dis-
persion, primarily because of their pursuit of ‘standard rate’ pay policies
within establishments and the reduction of pay differences among union-
ized workers across firms. While the evidence on this is less developed for
Canada, unions tend to reduce wage dispersion and inequality in Canada
for essentially the same reasons as in the USA (Lemieux 1993: 95–8; Meng
1990: 401).
Not surprisingly, studies have also identified changes in economic insti-
tutions, such as the decline in union density in the USA, as a significant
institutional factor that has contributed to the considerable rise in wage
inequality (especially male) in that country (Card 2001: 313; Fortin and
Lemieux 1997: 89–90; DiNardo et al. 1996: 1039; Freeman 1993: 159; 1996:
163–5). In the US private sector the decline in unionization has been
precipitous — by 2000 only 9 per cent of the work-force was unionized
(Reinhold 2000). While the manner in which unions impact inequality is
similar in Canada, Canadian unioniz ation rates have, until recently,
remained far higher than in the United States, which might help explain
the more muted changes in inequality in Canada. Consequently, this asso-
ciation between declining unionism and inequality has not tended to assume
the same degree of gravity in Canada as in the USA (Riddell 1993: 111,
figure 4.1).
Although overall union density in Canada has remained fairly stable in
the range of around 30–35 per cent over the 1980s and most of the 1990s,
this stability has been underpinned by the high union density levels in the
public sector. The overall union density level began to decline in Canada
towards the end of the 1990s. While public-sector union density levels
remain high, Canadian private-sector union density has begun to decrease
significantly, from 21.9 per cent in 1997 to 18.2 per cent in 1999 (Akyeampong
1997: 48, table 2; 1999: 48, table 1).
This development raises the issue of whether or not private-sector union
density in Canada will decline even further, essentially following the trend
in the United States with a lag, and if so, given the effect of unions on
inequality, whether this will have a deleterious impact on inequality in
Canada (DiNardo and Lemieux 1997: 646–8; Troy 2000: 695–6). In a country
that has traditionally embraced values and labour policy associated with
preserving a degree of equity in the distribution of earnings, the evolution
of industrial relations policy in some key Canadian jurisdictions towards
494 British Journal of Industrial Relations
#Blackwell Publishers Ltd/London School of Economics 2002.
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