Trade union membership and bonus payments: German survey evidence

This study provides the first comprehensive investigation of the relationship between trade union membership and non-performance-oriented bonuses. We expect a positive impact of union membership because members can benefit from special entitlements, increased bargaining power and informational advantages. Using data from the German Socio-economic Panel (GSOEP), we observe that union members are more likely to receive at least one bonus payment per year, a higher number and amount of bonuses than comparable non-members. We also observe the positive union membership effect for employees covered by collective bargaining or co-determination via works councils. Employing a novel instrumental variable, we find evidence of a positive effect of union membership on the number and level of bonus payments. Furthermore, higher bonuses do not go along with decreases in base wages or other pay components.