The Impact of Regional Difference in Unionism on Employment

Introduction Almost 20 percent of the people in the work force are union members. Just in terms of numbers, trade unions are an important influence in the labor market and in the U.S. economy. Further, unions are widely believed to play a major role in determining workers' standard of living and how work is done and in affecting firms' profitability. Freeman and Medoff (1984) recently presented evidence suggesting that unions affect labor markets in a variety of ways. The beneficial effects of unions include protection for older workers, reduced quit rates, reduced earnings inequality, and increased productivity. Unions might adversely affect profits and stock prices and might increase the number of workers laid off in cyclical downturns, as well. Although the impact of unions on these measures of economic performance has been studied, the majority of research on unions concerns how they affect compensation. Freeman and Medoff (1984) show that unions increase Mnge benefits, and there is a large body of empirical evidence that suggests unions raise the relative wages of their members.' In addition, unions have been found to affect the wages of nonunion members, although the direction and magnitude of this effect is ambiguous. Despite the attention focused on how unions affect wages, little attention has been paid to how this change in the relative cost of unionized labor af-