Abstract

We study the labor market impacts of unions by accounting for their effects on employers’ insurance provisions, and explore the implications for the design of social insurance programs. We first provide descriptive evidence that social insurance expansions may crowd out unionization in the United States. We then develop and estimate an equilibrium labor search model where unionization, wages, insurance provisions, and job security are endogenously determined. We demonstrate that unionization, along with the threat of unionization, increases employer-sponsored insurance provisions in both unionized and nonunionized firms. We find that social insurance expansions can affect inequality through (de)unionization, and inequality may increase or decrease depending on how social insurance is targeted. Social insurance expansions, along with technological changes, contribute to the long-term decline of unions in the U.S. Despite their role in deunionization, social insurance expansions enhance welfare by mitigating the loss of employer-provided benefits resulting from union declines induced by technological change. Subsidizing unions raises low-skilled workers’ welfare, but the welfare gain from increased unionization is smaller in the presence of more generous social insurance.

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