The Effect of Unionization on Faculty Salaries 1978-1996: A Test of Empirical Methods

This article analyzes the union/nonunion differential for faculty compensation. Using a unique data set that includes information on public academic institutions over two time periods, the analysis examines whether the union premium changed over time. Various model specifications proposed by previous researchers are also tested. The estimated outcomes suggest: a) that the union/nonunion differential increased substantially in the 1990s compared to the late 1970s and early 1980s. Estimates suggest that unionized faculty experienced a 5 percent advantage in the 1970s-80s, and a 13 percent advantage in the 1990s; b) the model specification is somewhat sensitive to controls for heterogeneity and endogeneity, but less so for the unobserved individual effect typical with panel data. The growth in the union premium may be important as the legal structure underlying faculty unionization becomes more inclusive for private institutions and part-time faculty. Since the 1970s, the unionization rate for higher education has grown dramatically. Despite setbacks in the private sector, the change in the underlying legal structure of collective bargaining in public universities and colleges permitted many faculty groups desiring better compensation or a higher level of governance to freely organize [1]. However, empirical research investigating unionization in higher education has found mixed evidence that collective bargaining increases compensation. This article examines the union effect on faculty compensation 251 2007, Baywood Publishing Co., Inc. doi: 10.2190/CN.31. 3.e http://baywood.com from 1978 to 1996 to explore why the evidence has been mixed and to investigate whether collective bargaining has an economic effect on faculty compensation. The mixed empirical results may be due to several causes. First, it may be that the time period of study is correlated with external factors that either dampen or increase the union effect. Union wage theories focus on spillover and threat effects. While spillover effects tend to increase the union/nonunion salary gap (unions raise salaries and lower employment in the union sector, increasing employment and lowering salaries in the nonunion sector), the threat effect causes nonunion organizations to raise the salaries of their employees to avoid unionization. The overall unionization impact depends on the size of each effect and the interaction of labor supply and demand in both sectors. Union service models suggest that union power is dampened when the costs of unionization is high [2]. These theories suggest that the size of the union/nonunion compensation gap may be sensitive to business cycles, as well as when markets are “buyer” or “seller” dominated, because unions have relatively little power when markets are not tight. A second problem is related to the changing methodology used to examine the faculty compensation differentials. Some researchers attribute their relatively smaller union effects to the advancement of statistical techniques that control for the heterogeneity of faculty salaries and for the endogeneity of the union variable [3, 4]. Compared to research outcomes from the 1970s, more recent studies may be finding small differentials because researchers have developed advanced techniques to control for a variety of statistical problems that lead to overestimation of the union effect. This article examines the union-nonunion compensation differential over an 18-year time span to investigate whether the time factor and/or the statistical technique affects the size and direction of the union effect. The investigation uses selected years of panel data on institutions of higher learning from 1978 to 1996, collected by the National Center for Education Statistics (NCES) and compiled for the National Science Foundation [5, 6], union information from the Directory of Faculty Contracts and Bargaining Agents in Institutions of Higher Education [7, 8], and school classifications as provided by Peterson’s Register of Higher Education [9]. Included in the analysis are cross-sectional and panel data estimation, as well as an investigation into the effect of controlling for heterogeneity, endogeneity, and unobserved institution effects. FACULTY UNIONIZATION AND THE UNION-NONUNION COMPENSATION DIFFERENTIAL As mentioned earlier, the unionization rate for higher education has grown since the 1970s. Hemmasi and Graf related the following statistics: Collective bargaining began in full force in the late 1960s, and between 1969 and 1979 the number of academic institutions with unionized faculty grew from 24 to 227 [10]. 252 / BENEDICT