What Do (Thousands of) Union Do? Union-Specific Pay Premia and Inequality

Abstract

We estimate over 4,700 union-specific pay premia to study what unions do and how they shape inequality. We use job moves across multi-firm unions in linked employer-employee data from Brazil and find that unions raise pay by 2.7 log pts on average, with substantial heterogeneity (standard deviation of 6.7 log pts) that accounts for 10% of the variance in AKM establishment effects. Because workers sort positively into higher-premium unions, this heterogeneity does not compress pay. Instead, compression arises within unions through differential bargaining, which reduces the earnings gap between high- and low-education workers by 2.3 log pts. Higher-premium unions also compress pay more and raise amenity take-up. These effective unions stand out in what else they do: they strike, bargain at the firm level, hold competitive elections, and have skilled and representative leadership. After a nationwide right-to-work reform, union premia fall by 42% on average and nearly vanish in some sectors. Workers contribute to unions that raise their pay, but unequal rent-sharing erodes the broad support that voluntary financing requires.