May 2024

IZA DP No. 17034: Union Bargaining Power and the Amenity-Wage Tradeoff

This paper studies the relation between the wage and amenity components of compensation under collective bargaining. Using the universe of collective bargaining agreements (CBAs) in Brazil, I augment information on workers' wages with the comprehensive set of amenities codified in the text of these contracts. I then estimate the effects of increasing union bargaining power with a difference-in-difference strategy that leverages 1) a judicial decision that prevented the expiration of existing CBA provisions—a policy known as ultractivity—and 2) gaps in CBA coverage across establishments when the policy was enacted. I find that boosting union power causes an increase in both wages and CBA clauses without a subsequent decrease in employment. A revealed preference approach to estimating the wage-equivalent value of negotiated clauses shows that amenity value also increases, comprising approximately 45% of workers' total gains in compensation. Results are consistent with collective bargaining functioning as a labor market institution that counters monopsony power, but where employers retain the right-to-manage the composition of their workforce.