Determinants of Trade Union Membership in Finland

Abstract

The purpose of this thesis is to examine the factors that affect the development of trade union density in Finland during 1975–2008. Finnish trade union membership grew rapidly since the beginning of the 1970s. In the mid 1990s trade union density reached about 85 percent of the labour force but has since declined some 5 percentage points. The existing empirical literature on the determinants of union membership on aggregate level using time-series analysis is reviewed. The business cycle approach to membership determination presented in the literature is used as the basis for the empirical analysis conducted in this study. In the cyclical approach trade union density is explained with unemployment, inflation and nominal wage growth or the real wage growth. An annual time-series of these variables is constructed for Finland in the period 1975–2008. The main finding in the empirical study is that change in unemployment rate influences trade union density positively. A one percentage point increase in the unemployment rate is estimated to increase trade union density by about 0.6 percentage points. The finding is in line with evidence from other Ghent-countries where unions administer the unemployment insurance funds. Higher unemployment increases the probability of unemployment for workers. This increases the expected costs of unemployment. Workers then join unions to get access to the earnings-related unemployment benefits.

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