Macroeconomic Modeling of Labor Union Activity in the 21st Century: A Vector Autoregression Analysis

After decades of decline in membership and related activities such as strikes and certification elections, the American labor movement has received renewed attention in the aftermath of the COVID-19 pandemic and its associated economic aftershocks. While there is substantial literature on the relationships between public policy, labor unions, and economic performance, little empirical research exists regarding how labor union activity is observed in a macroeconomic model. This project seeks to investigate the relationship between labor union activities and economic indicators, such as changes in GDP, labor market tightness, and CPI inflation using a vector autoregression model. While the estimated VAR coefficients and accompanying analyses provide nuanced results, changes in real GDP give evidence of having a statistically significant impact on strikes and union member employee compensation. Empirical results and data trends also suggest that labor union activities may be structurally affected by exogenous legal and public policy factors not captured by the model.