International Trade Effects And The Decline In The Union Sector

Abstract

Since the 1960s, U.S. manufacturing has undergone tremendous changes due to international trade and technological convergence.  Not all industry sectors have fared equally.  High-tech sectors (e.g., aircraft and computers) have maintained a high degree of international competitiveness as evidenced by an increasing export share.  Common technology sectors (e.g., autos and steel), conversely, have not as they have experienced a declining export share and increasing import competition.  High-tech industries typically employ highly skilled, human capital intensive workers while common technology industries are characterized by unskilled labor with lower levels of human capital.  International trade theory suggests that the more skilled high-tech labor force should receive relatively higher wages than the relatively less skilled common-tech sector under international competition.  Secondly, the level of unionization in a given industry may or may not have adverse impacts on international competitiveness.  Also, unions tend to oppose adoption of new technologies, drive highly educated workers into the nonunion sector, and may adopt end game strategies to maximize current wages at the expense of future economic viability.  Consequently, international trade and high-tech industries may have a negative effect on union participation rates.

The issues addressed include the effect of international trade and technological comparative advantage on union and nonunion wage levels, and the indirect effect of trade and technology on union participation.  This study uses the National Longitudinal Survey (NLS) panel data set.  The empirical results suggest that international trade effects wage levels, and high-tech industries appear to have a higher wage distribution after controlling for labor market, product market, and individual characteristics.  Furthermore, trade and technology appear to be negatively related to the degree of union density.  The secondary effect tends to lower union and nonunion wages, primarily for less-skilled workers.  It also may partially explain the trend of increasing income inequality for less-skilled workers and the opposition of unions to free-trade policies.(JEL J3, J5)