Research Discussion Paper – RDP 2019-02 Is Declining Union Membership Contributing to Low Wages Growth?

The union membership rate has declined steadily in Australia since the 1950s. Some have suggested that this decline has caused a fall in the bargaining power of workers, which in turn has contributed to low wages growth in recent years. We test this hypothesis using a newly available source of micro data, covering all enterprise agreements federally registered between 1991 and 2017. We find that changing unionisation patterns are unlikely to account for much of the recent low wages growth. This conclusion reflects three key results. First, there has been no decline in the share of employees covered by enterprise agreements negotiated with union involvement even as union membership has declined. Second, the ‘union wage growth premium’ in the private sector has been stable over time. Third, spillover effects from union involvement in enterprise agreement negotiations onto wage outcomes in other enterprise agreements exist, but have not changed materially over time.