Paper presentation: Labour unions and social insurance

• Department of Economics

This seminar features a paper presentation by Hanming Fang (University of Pennsylvania).

This paper studies the impact of unions on the labour market by accounting for their effects on employers’ insurance provisions, and explores the implications for the design of social insurance programs. The authors first provide descriptive evidence that social insurance expansions may crowd out unionisation in the United States. They then develop and estimate an equilibrium labour search model where unionisation, wages, insurance provisions, and job security are endogenously determined. The paper demonstrates that unionisation, along with the threat of unionisation, increases employer-sponsored insurance provisions in both unionised and nonunionised firms. The paper finds that social insurance expansions can affect inequality through (de)unionisation, and inequality may increase or decrease depending on how social insurance is targeted. Social insurance expansions, along with technological changes, contribute to the long-term decline of unions in the U.S. Despite their role in de-unionisation, social insurance expansions enhance welfare by mitigating the loss of employer-provided benefits resulting from union declines induced by technological change. Subsidising unions raises low-skilled workers’ welfare, but the welfare gain from increased unionisation is smaller in the presence of more generous social insurance.

Jointly with N. Aizawa and K. Komatsu.