Should Workers of the World Unite? Native-Migrant Wage Gap and Labor Unions
This paper investigates the role of labor unions in shaping the wage gap between native and immigrant workers in the United States from 1994 to 2021. While unions typically compress wage distributions, their effects on native-immigrant wage differentials remain theoretically ambiguous: unions may reduce inequality or reinforce insider-outsider divisions. Using Current Population Survey data aggregated at the state-industry-year level, I examine how variation in union density affects residual wages and the wage gap between natives and immigrants. To address endogeneity concerns, I employ an instrumental variable strategy that leverages the differential impact of Right-to-Work laws across industries. The results show that a 1 percentage point increase in union share raises native residual wages by 0.28% but has no significant effect on immigrant wages, thereby widening the wage gap by approximately 0.24%. These findings suggest that collective bargaining institutions transmit wage-setting power unequally across worker groups, with unions favoring labor market insiders and potentially reinforcing wage disparities between natives and immigrants.