Decomposing Deunionization: A sequential decomposition of the drop in collective bargaining coverage

Union representation is in strong decline in most industrialized countries. What drives this decline? We contribute to answering this question by developing and implementing a detailed decomposition approach based on Fairlie (2005). Using linked employer-employee data from the German Structure of Earnings Survey for 2001 and 2006, we document a sharp drop in collective bargaining coverage that amounts to 17 percentage points for males and 20 percentage points for females. We find that neither changes in employer or employee characteristics nor the effects of these characteristics on collective bargaining coverage can explain this sharp drop. Rather, the unexplained part gains importance, as captured by the constant of the regression. Thus, the decline appears rather uniform over all considered groups of employees and of establishments.