Regulatory legislation, unions, and labor market earnings

Abstract

Purpose – The purpose of this paper is to show that the effects of industry regulation on worker earnings are reconsidered using a wider array of industries and differentiating between industry‐opposed and industry‐supported legislation. Design/methodology/approach – Primary data from the Current Population Surveys are used in this paper with data on regulatory legislation from Cahan and Kaempfer. A difference‐in‐difference approach is used to compare wage changes pre‐ and post‐legislation, in industries with opposed or supported legislation, with those unaffected by legislation. The relative contribution of union and non‐union wage changes to the overall wage changes are also examined. Findings – The paper finds that regulatory legislation opposed by the industry did not affect earnings growth relative to industries not subject to regulatory legislation. Legislation supported by the industry led to slower relative earnings growth. Union wage differentials increased in industries with legislation regardless of industry opposition or support. Relative earnings declined among non‐union workers in industries that received legislation. The effects vary across industries with the results suggesting that some legislation led to increased product competition, while some legislation affected labor market competition. Research limitations/implications – The paper shows that data on regulatory legislation are limited by the lack of detailed information. For example, it is only known whether legislation was passed that was opposed or supported by the industry. Future research should replicate this analysis with more complete data. Practical implications – Also the paper sees that regulatory legislation does not need to completely regulate or deregulate an industry to affect workers. As such, policy makers should consider the effects of proposed legislation on workers in the affected industries. Originality/value – This paper directly tests whether the wage effects from regulation differ depending on industry opposition or support for the legislation. As such, this paper is innovative because it differentiates between different types of legislation in examining the effect of legislation on wages and the union differentials.

Citation

Robst, J. (2007), "Regulatory legislation, unions, and labor market earnings", International Journal of Manpower, Vol. 28 No. 8, pp. 656-673. https://doi.org/10.1108/01437720710835156