Declining union membership not the cause of low wages growth: RBA

Declining union membership is unlikely to be responsible for low wage growth, a research discussion paper from the Reserve Bank of Australia (RBA) has suggested.

The report, entitled Is Declining Union Membership Contributing to Low Wages Growth?, was authored by RBA economists James Bishop and Iris Chan looked at micro data, covering all enterprise agreements federally registered between 1991 and 2017.

It set out to test whether the hypothesis that the decline in union membership since the 1950s caused a fall in the bargaining power of workers, which in turn has contributed to low wages growth in recent years.

However, the report found that is unlikely that recent low wages growth is a result of changing unionisation patterns.

“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,” the report stated.

“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.”

The full report is available to read here.