A new econometric model of union threat effects.

The union threat effect is the propensity of non-union employers to resist union organization by raising wages. This study introduces an empirical model of the non-union employer's optimal wage in the presence of threat effects. Estimates of an equation of a firm's unionization probability provide key variables. Unlike previous models, this specification derives directly from a theoretical model, separates threat effects from the influence of other union-non-union spillovers and efficiency wages and includes many factors affecting the probability of unionization. Wage equation estimates reveal that the predicted threat of unionization did not significantly raise non-union wages in the United States in 1980.
This study models the optimum wage strategy for a non-union employer in an environment of threat effects. Optimal wage rates are shown to depend on the union wage rate, the probability that the firm will be organized by a union and the ability of the firm to buy off the threat by raising wages. The last two factors are predicted from estimates of a model of the probability of firm unionism. Since the threat effect variables are specifically modelled in the wage equation, the threat effect can be isolated from other effects avoiding the ambiguous results of earlier studies. [ABSTRACT FROM AUTHOR]