Technology,international competitiveness,and union behavior

Union opposition to a free trade agreement with Mexico affirms the conventional wisdom that international trade damages the union movement. This study uses data from the March and May CPS for 1984 to 1987 to investigate this issue for production workers. The results indicate that union wages are not influenced by greater trade at medium union densities. However, at low union densities, greater imports (exports) reduce (increase) wages with the opposite pattern occurring at high union densities. The union wage pattern is consistent with product market considerations playing a strong role at low union densities and end game considerations playing a strong role at high union densities. In general, nonunion wages are not significantly impacted by greater trade. After controlling for imports and exports, nonunion wages are much greater in internationally competitive industries while union wages are not significantly greater in competitive industries. Nonunion wages appear to be more influenced by efficiency wage considerations. Thus, a Mexican free trade agreement will have little influence on union wages and should increase nonunion wages. I thank Wally Hendricks, Larry Kahn, Dan Rickman, and Doug Dalenberg for their very useful comments. All remaining errors are my own.