Abstract

This article explores the implications of the OECD‐wide decline of union density for earnings inequality and income redistribution by looking at aggregate (country‐level) data. Over the period 1975–95, countries that experienced relatively large declines in union density also experienced relatively large increases in earnings inequality. In addition, governments apparently became less willing to engage in ‘compensatory redistribution’ in these countries. Since the early 1990s, however, union decline has become less closely associated with rising earnings inequality and redistributive policy changes. I argue that the declining relevance of unionization has to do with changes in the position of union members in the income distribution. In most OECD countries, the average union member has become relatively better off as union density has declined and union members have probably become less supportive of wage solidarity and redistributive government policies.