A study from the Norwegian University of Science and Technology (NTNU) shows that if the proportion of employees who join a trade union increases, women will earn more than men. As a result, the notorious gender pay gap will also become smaller.
“We have observed a fairly significant effect,” said Fredrik Bakkemo Kostøl.
He is an associate professor at NTNU’s Department of Industrial Economics and Technology Management, and conducts research on the impact of trade unions in the workplace.
Searching for causes and correlations
In collaboration with researcher Elin Svarstad at Fafo, he has investigated the role trade unions play in differences in pay between women and men in the private sector in Norway. In the study ‘From bargaining to balance: How unions shape gender wage outcomes’, they show that Norwegian trade unions not only play an important role in wage formation, but also in equal pay.
Norway has a high level of union membership, and collective agreements are common. We already know that trade unions help reduce wage disparity in the workplace and in the economy as a whole.
“That is why we wanted to investigate whether they also help reduce the pay differences between men and women. There is still a research gap when it comes to identifying the causes behind this,” added Kostøl.
The effect of unionization
The researchers have examined registry data from the period 2000–2014. The data set includes 1.8 million employees from 94,000 workplaces over a period of 15 years. By studying changes in the rules for tax deductions on union fees, they have been able to investigate how union membership affects pay.
It appears that trade unions help raise wages for both men and women, but women seem to benefit the most – and when women’s wages increase more than men’s, the gender pay gap is reduced.
Narrowing the gap by 2–3 per cent
The researchers estimate that an increase in unionization of 10 percentage points, for example from 10 to 20 per cent, can reduce the wage gap by approximately 2–3 percentage points. The results are fairly stable across different models, but Kostøl emphasizes that these are average effects and that the actual impact may vary between workplaces.
“Regardless, when we compare it with the size of the wage gap in Norway, this is a relatively strong effect. A reduction in the wage gap of 2–3 per cent represents a fairly significant portion of the difference between men and women,” said the NTNU researcher.
A wage gap of 12 per cent
Gender equality has come a long way, but women still earn less than men – in Norway and elsewhere. In 2022, the wage gap in the OECD was over 12 per cent, measured as the difference in median pay among full-time employees. The OECD is the Organization for Economic Co-operation and Development, and consists of 30 member countries.
According to Kostøl, the wage gap still exists, but it is narrowing and will close systematically over time. He also mentions that the remaining differences in Norway are relatively small.
Works best in female-majority workplaces
The researchers found significant differences depending on how the workplace is organized. In workplaces where collective agreements are in place, trade unions clearly contribute to higher wages for women and a smaller pay gap. In workplaces that do not have collective agreements, this effect is small or inverted.
“The wage gap still exists, but it is narrowing and will close systematically over time.”
Trade unions also seem to function best in workplaces where many women are employed. This is consistent with the theory that trade unions’ priorities are influenced by who makes up the majority of their members. They also help reduce disparities by raising the lowest wages and helping curb the highest levels of pay.
Productivity and risk-taking – determined by gender?
Many researchers have investigated why the pay gap between men and women arises in the first place. Various studies highlight different levels of ‘productivity’ between the sexes, while other people explain it by noting that men and women often have different occupations or work in different places with varying pay levels.
There is also research showing that men and women negotiate differently when it comes to pay. Risk appetite also tends to differ, which in turn affects negotiation results and therefore pay.
Education doesn’t level the ‘payfield’
The study by Kostøl and Svarstad indicates that women do not seem to benefit as much from their education in terms of pay as men do. One possible explanation is that highly educated men, on average, are older and have more experience than many of the highly educated women in the current labour market.
“You can easily end up comparing a male civil engineer who graduated from the Norwegian Institute of Technology in 1960 with a female civil engineer who graduated in 2014. The latter has not yet had time to gain as much experience,” explained the NTNU researcher.
Kostøl emphasizes that these types of generational differences will probably help narrow the remaining wage gap in the years to come.