Though textbooks would suggest that the presence of labour unions would lead to higher wages (i.e. wage pressure), reality is (as per usual) more complex. Empirical evidence seems to suggest that wage pressure because of labour unions depends on the degree of centralisation of wage negotiations. That is, if the wage negotiations predominantly take place at the firm level (so firms negotiate with the labour union representing the employees of the firm), wage pressure is limited (for example in the US). If wage negotiations take place at the sector level, wage claims are relatively significant (Australia?). If wage negotiations take place at the national level, wage claims are moderate again (Sweden).

Figure 3 shows this ‘humped shaped' relation between the degree of centralisation and wage pressure.