Workers in French firms that recognise a trade union enjoy a relatively small wage premium over their non-unionised counterparts. According to research by Professor Thomas Breda, published in the December 2015 issue of the Economic Journal, the average wage gains in unionised firms compared with non-unionised firms is only 2-3%. This contrasts with the union wage premium in the UK, the United States and elsewhere, which has regularly been estimated to be much higher, at around 10%.
This finding may seem surprising given the widely held impression that unions in France are more powerful than in many other countries. For example, French unions regularly manage to rally hundreds of thousands of citizens in large-scale organised strikes and protests against government policy.
But as Professor Breda explains, their relatively weak impact on pay can be explained by institutional specificities of the French labour market. In particular, he points to the fact that large numbers of workers in the private sector are in unionised firms without actually being union members.
His study also finds that unions are more effective in boosting pay for their members in firms that have significant market power and which therefore are making excessive profits or ''rents''. In workplaces whose market share is above 50%, unions can achieve up to 8% higher wages for their members.
Before 2008, five large national unions were recognised in France for bargaining within firms de jure. In practice, this meant that they could bargain and sign collective agreements as soon as a worker in a firm was willing to be their representative. Conditions got slightly more restrictive after 2008, but the big picture remains the same: to be present in firms, the hardest task for unions is to find workers who are willing to be their representative.
This permissive regulation implies that almost two thirds of private sector workers are represented by one or more unions at their workplace, even though only about 5% of them are union members. Indeed, another important rule is that workers do not need to be union members to be covered by unions and collective agreements. Hence, the large gap between the high coverage – due to the permissive regulation – and the low unionisation rate.
This situation has implications for the actual average bargaining power of unions. The permissive regulation allows for the presence of unions in many firms. But in many cases, those unions are not supported by the workers, who are not unionised and sometimes not even aware that unions are bargaining for them in their firm. That''s why the average gain associated with union bargaining at the firm level is so low.
Another reason for the relatively small average wage gains achieved by unions is that in today''s globalised and very competitive economies, it is rare for firms to have rents to be captured by unions. The increase in product market competition might actually be one of the main reasons for the decline in unionisation observed almost everywhere in the past four decades.
But in the few firms that still have rents that can be captured – as measured by firms'' self-declared market power – things are different:
• First, more workers become union members.
• Second, the unions get much more: up to 8% higher wages in workplaces whose market share is above 50%. In contrast, unions get nothing in firms that face many competitors.
Thomas Breda concludes:
''All together, my findings suggest that unions do manage to organise to increase their bargaining power to capture firms'' rents. But they do so only when rents are high enough.''
''In firms facing strong competition, unions do not seem to push wages above market levels, so that they do not endanger those firms.''
''In that sense, unions are an effective institution to redistribute rents from firms to workers when they exist.''
''Firms'' Rents, Workers'' Bargaining Power and the Union Wage Premium'' by Thomas Breda is published in the December 2015 issue of the Economic Journal. Thomas Breda is at the Paris School of Economics.
