Union Wage Bargaining and Status

The paper investigates the nexus between the structure of union wage bargaining and workers' preferences for status, which is measured by relative wages. For two types of workers it is shown that due to externalities on the other group's status wages of both types of workers will be lower if an encompassing union negotiates for the whole workforce than if different groups of workers are unionized separately. Moreover, unemployment will be reduced by the central union relative to separate negotiations even if unions are not concerned with employment effects of wage negotiations at all.Series: Department of Economics Working Paper Serie