Unions and the Great Leveling: Evidence from Across the Atlantic
With Jakob Molinder
We investigate the role of unionization in shaping income distributions during the Great Leveling, comparing Sweden and the United States—two countries with markedly different union traditions and levels of organization. Using data from the 1940 and 1950 U.S. Censuses and newly compiled Swedish tax registers for the same years, we exploit plausibly exogenous variation in unionization through a Bartik-style strategy and estimate distributional effects using quantile regressions and interactions with worker characteristics. Our results indicate that stronger unions elevated earnings in both countries, but the elasticity was roughly double in United States compared with Sweden. U.S. unions also had a more radical impact on the earnings distribution: the effect at the 10th percentile was almost twice that at the 90th percentile while also reducing earnings differences between workers with different levels of skill and education. We relate the difference between the two countries to their patterns of union membership: in the United States it was concentrated among lower-skilled workers, whereas in Sweden it was high across the occupational distribution and among employees with both low and high levels of education, shaping their incentives to negotiate higher wages and to compress the earnings distribution. Taken together, our study shows that unions played a pivotal role in the Great Leveling in two countries at opposite ends of the labor-market-regime continuum. While there appears to be a trade-off between unions’ organizational reach and their impact on wage differentials, Sweden’s more encompassing unions have ultimately been more successful in engendering a compressed income distribution, whereas U.S. unions have gradually lost their power to affect these outcomes.
Working paper at the ehes