"Using CPS data for 1977-2002, the author tests the standard wage determination model's prediction that the threat of union organization increases nonunion wages and reduces the union/nonunion wage differential. The results are mixed. Estimates employing the predicted probability of union membership as a measure of the union threat show no important link between the union threat and either nonunion wages or the union wage gap. Estimates focusing on two states' introduction of right-to-work laws, which arguably affect wages independently of changes in labor demand, show that in one state the law was associated with a statistically significant drop in nonunion wages. Finally, an analysis of wage data for three industries that underwent deregulation--another natural experiment in which labor demand changes are unlikely to have been a complicating factor--yields stronger evidence of threat effects on nonunion wages than do either of the other two analyses."

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