How union members’ position in the wage distribution affects income inequality in Germany : An empirical analysis of data from the German Socio-Economic Panel

Abstract: This thesis investigates the effect of union members’ position in the wage distribution on income inequality in Germany between 1998 and 2019. Specifically, data from the German Socio-Economic Panel are analyzed on two levels. Regression analyses on the sector-year and individual level show that if a large share of union members is relatively well positioned in the wage spectrum, the inequality-reducing union effect weakens.The purpose of this thesis is to provide evidence on within-union dynamics that might contribute to the continued union decline in many industrialized economies. This thesis fills a gap in the literature as most researchers focus either on how union strength affects income inequality or look at how union members’ wages affect their preferences on redistribution. By directly studying the effect of union members’ wages on inequality levels, this thesis additionally engages with the theoretical tradition of Power Resource Theory (PRT). Specifically, this analysis confirms that union strength and income inequality are negatively associated. However, it also provides evidence for a central critique of PRT, suggesting that working-class interest is heterogeneous and not homogeneous as PRT presumes.