Trade unions help raise wages and reduce the gender pay gap

A study from NTNU shows that if the proportion of employees who join a trade union increases, women will see a larger increase in their paychecks than men.

As a result, the notorious gender pay gap will also become smaller.

“We have observed a fairly significant effect,” says Fredrik Bakkemo Kostøl.

He is a researcher at NTNU’s Department of Industrial Economics and Technology Management and studies the impact of trade unions in the workplace.

Searching for cause and effect

Together 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, they show that trade unions not only play an important role in wage formation, but also in ensuring equal pay in Norway.

They explain that Norway has a high level of unionisation and that collective bargaining agreements are common. We already know that trade unions help reduce wage disparities within workplaces and across the economy as a whole.

“That's why we wanted to investigate whether they also help reduce the wage differences between men and women. There's still a research gap when it comes to identifying the causes behind this,” says Kostøl.

The effect of unionisation

The researchers have examined registry data from the period 2000–2014. The dataset 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 were 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 unionisation of 10 percentage points, for example from 10 to 20 per cent, could reduce the wage gap by approximately 2–3 percentage points.

The results are fairly stable across different model. Kostøl nevertheless emphasises that these are average effects. 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,” he says.

A wage gap of 12 per cent

Gender equality has come a long way, but women still earn less than men – both in Norway and other countries.

The OECD is the Organisation for Economic Co-operation and Development. It consists of 30 member countries. 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 median wage is the middle wage when all wages in a group are ranked from lowest to highest. This means that half of the people earn less than the median wage, while the other half earn more.

Kostøl says the wage gap still exists, but it is narrowing and will close systematically over time. He also says that the remaining differences in Norway are relatively small.

Works best where there are more women

The researchers found significant differences depending on how the workplace is organised. In workplaces where collective bargaining agreements are in place, trade unions clearly contribute to higher wages for women and a smaller gender pay gap.

In workplaces without collective bargaining agreements, this effect is small or even reversed.

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 genders. Others 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. There is a difference in men’s and women’s appetite for risk, which in turn affects negotiation results and therefore pay.

Education doesn’t level the ‘payfield’

Kostøl and Svarstad’s study 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 are, on average, 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,” says Kostøl.

He notes that these types of generational differences will probably help narrow the remaining wage gap in the years to come.

Reference:

Kostøl, F.B. & Svarstad, E. From bargaining to balance: How unions shape gender wage outcomes, Journal of Economic Behaviour and Organization, 2025. DOI: 10.1016/j.jebo.2025.107130

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Read the Norwegian version of this article on forskning.no

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