Unions and the Economy: What We Know; What We Should Know

Abstract

The wages and working conditions of about one in three Canadian workers are determined by collective bargaining. In this paper, current knowledge about the economic effects of collective bargaining is surveyed. Unions raise wages (by about 15 percent on average) and reduce wage dispersion for their members while also reducing profits. Unions do not seem to reduce employment levels in affected firms or cause nonunion wages to fall. Efficiency losses due to sectoral misallocation of labor and to strikes are small but some evidence suggests lowered investment in unionized firms. Union effects on total factor productivity need more careful study using firm-level data.

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