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IZA Discussion Paper No. 16059
April 2023
Why Do Labor Unions Advocate for Minimum Wage Increases?

Over the past decade, organized labor has played a significant role in advocating for minimum wage increases. Why might this be, given that the minimum wage may act as a substitute for the bargaining power offered by labor unions? In this paper, we study the interplay between minimum wages and union membership. We estimate that each dollar in minimum wage increase predicts a 5 percent increase (0.3 pp) in the union membership rate among individuals ages 16–40. Consistent with a classic "free-riding" hypothesis, however, we find that minimum wage increases predict declines in union membership among the minimum wage's most direct beneficiaries. Instead, increases in union membership occur among much broader groups that are not directly affected by the minimum wage.

Communications
Mark Fallak
mark.fallak@liser.lu
+352 585-855-526
World of Labour
Olga Nottmeyer
olga.nottmeyer@liser.lu
+352 585-855-501
Network Coordination
Christina Gathmann
christina.gathmann@liser.lu

The IZA@LISER Network is a global community of scholars dedicated to excellence in labor economics and related fields, now coordinated at the Luxembourg Institute of Socio-Economic Research (LISER) following its transition from Bonn.

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