Investigating the cause of death: Industrial relations and plant closures in Australia

Abstract

This is the first study to focus on how unions affect the likelihood of plant closures in Australia. Australia is of special interest in this connection, the authors argue, because of its unique industrial relations institutions, which, at the time of the study (1990–95), limited the capacity of established unionized firms to remove unions except through plant closure. An analysis of Australian Workplace Industrial Relations Survey data shows that two of three measures of unionization had a robust positive influence on the probability of plant closure, and the third had a weaker positive influence. Depending on the specification, for example, a 10 percentage point increase in union density (one of the two measures found to have strong influence) was associated with a 1.3–1.7 percentage point increase in the probability of plant closure—representing a substantial increment, since the mean closure probability among these plants was about 16%.