The Effect of Unionism on Fringe Benefits

Abstract

This study analyzes the impact of unionism on fringes paid to production workers, using data on individual establishments. It compares fringe expenditures in establishments having the same level of compensation per hour and finds that unionism raises the share of compensation allotted to fringes, particularly to pensions, vacation pay, and life, accident, and health insurance. In addition, since unionism also raises the straight-time wage rate, itself a prime determinant of expenditures on fringes, unionism has a very sizeable impact on total fringe expenditures, as well as on the fringe share of compensation. The union fringe effect exceeds, in percentage terms, the union wage effect and is sufficiently large to suggest that standard union wage studies understate the union effect on total compensation. The study also compares the fringe expenditures of production and non-production workers within the same establishment, controlling for within-establishment pay policies. The findings suggest that the presence of a union among production workers in an establishment may have a sizeable spillover effect on the fringes paid nonproduction workers in that establishment.