ABSTRACT
Everyone “knows” that unions raise wages. The questions are how much, under what conditions, and with what effects on the overall performance of the economy”. Richard Freeman and James Medoff reported that early work on union wage effects used aggregate data on different industries, occupations, and areas. Much of this work summarizes by Lewis. When inflation is higher than expected, a greater contraction in the premium can occur because nonunion wages respond more to higher inflation. Interestingly, the wage gap appears to have declined most in the smallest statesand declined least in the bigger states. It would not have been a surprise to Richard Freeman and James Medoff that there had been some reduction in the ability of unions over time to raise wages as the proportion of the work force they bargain for has declined. If imports reduce demand for domestic output and, in turn, demand for labor, this should reduce union and nonunion wage.
