Wage Share, Market Power and Unionism: Some Contrary U.S. Evidence

In a recent article, Cowling and Molho (1982) presented empirical evidence on the relationships among the wage share, market power, and unionism in the U.K. Using multiple regression analysis on cross-sectional 1968 data for 118 industries,1 they found strong, negative relationships between the share of production worker wages in value added and two measures of monopoly power in the product market, namely, concentration and advertising intensity. However, utilizing several alternative measures of union power, they found only limited support for the hypothesis that union power is positively associated with this wage share. Cowling and Molho (hereafter, GM) also examined the relationships between the share of non-production worker salaries in value added and these same market power variables. They found a significant, positive relationship between the salary share and concentration and no relationship between the salary share and advertising intensity. Their one puzzling result was that union power appeared to be more closely related to the salary share of nonproduction workers than it was to the wage share of production workers. The C-M results with respect to the concentration-wage share relationship are inconsistent with the only previously published study on the topic (Maroney and Allen, 1969) but consistent with the unpublished work of Barbee (1974). Since little empirical work has been done on this question, and since no other study has estimated the effect of either advertising or union power on the wage and salary shares, it is clear that more research on these questions is in order