Turning non-members into members: Do public subsidies to union membership matter?

• Increased subsidisation of the unions increases union take-up. • Increased union fees reduce the demand for membership. • In the absence of the hikes in tax subsidies and holding workforce composition constant aggregate private sector union membership density would have fallen by 5 percentage points between 2001 and 2012. • The elasticity of union membership with respect to subsidies is higher in segments of the labour market where unions have low representation in the first place, such as among temporary workers, youth, immigrants, and among workers in low-wage firms, thus government policies to bolster unionisation by tax subsidisation seems effective. Using linked employer-employee data for Norway's private sector we estimate the impact of changes in tax subsidies for union membership on individuals’ membership probabilities. Increased subsidisation of the union members increases union take-up, while increased union fees reduce the demand for membership. The subsidy elasticity of demand for union membership was 0.29 in 2012, though effects are heterogeneous across workers. In the absence of the hikes in tax subsidies and holding workforce composition constant aggregate private sector union membership density would have fallen by 5 percentage points between 2001 and 2012. The elasticity of union membership with respect to subsidies is higher in segments of the labour market where unions have low representation in the first place, such as among temporary workers, youth, immigrants, and among workers in low-wage firms.