Unions Improve Chinese Workers' Welfare

Based on a survey of 1,268 firms in 12 Chinese cities, this paper empirically studies the effects of unions on three aspects of workers welfare, namely, hourly wages, monthly working hours, and pension coverage. Our baseline results show that unionization increases hourly wage rates by 5.6%, reduces monthly working hours by 1.4%, and raises pension coverage by 12.3%. Taking the endogeneity of unionization into consideration, our 3SLS estimation finds larger effects. These results are robust in the subsample of domestic private enterprises where unions are less common than in other types of firms. Further econometric analysis has established two channels for unions to improve workers welfare, one by encouraging collective wage contracts, and the other by encouraging written contracts.