150910 Trade union wage premium
  • The premium. Trade union membership is good for your bank balance. Or at least that’s what the “trade union wage premium” suggests. This is the difference in the average hourly earnings of members and of non-members, expressed as a percentage of the latter. According to the Business Department’s latest figures – which I’m returning to for the (first, second) third To The Point post in a row – the average member earned £14.77 an hour last year, compared to only £12.66 for non-members. That puts the premium at 16.7 per cent.
  • The breakdown. As always, some of the most striking numbers come out in the breakdown. For example, the premium for women – who make a majority of the trade union membership – is recorded as 30.0 per cent. For those aged between 16 and 24 – who don’t – it’s 38.7 per cent. The graph at the top of this post shows the premiums for selected industries. The highest of the lot, at 40.0 per cent, is for the education trade. The lowest, which is so low that it’s actually negative, is for what Whitehall calls “financial and insurance activities”.
  • The first caveat. The problem with the trade union wage premium, as a statistical device, is that it isn’t entirely attributable to union membership. It arises, in part, because of other differences between members and non-members, such as their qualifications, ages and locations. Those finance professionals suffering from a negative premium of 23.8 per cent? They probably aren’t working at Goldman Sachs. The education professionals swimming in their extra cash? They could be particularly well-educated themselves. David Blanchflower – who may not be the most popular economist in these parts, but he has done a lot of work on this subject – reckons that, once these factors are accounted for, the overall premium reduces from 16.7 per cent to about 8.0 per cent.
  • The second caveat. The other problem is the size of the premium. Going by the official figures, it has grown over the past few years, from 15.9 per cent in 2012 to its current 16.7 per cent – which is just dandy for union members. But the longer-term trends are less felicitous. In 1995, when the government started properly collecting these numbers, the size of the gap was considerably larger, at 25.9 per cent. What’s happened in the meantime is that non-members’ wages have risen at a faster rate than members’.
  • The future. It all comes down to something that’s become a theme of these three To The Point posts: relevance. The unions are important organisations that still deliver significant benefits for their members and, I’d say, the wider society. But can they remain so when membership levels are declining, when the low-paid aren’t signing up, when those benefits aren’t as distinct as they once were? Hm. As it has elsewhere, change has forced itself upon the unions. They must change in turn.

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