This paper examines trends in union membership during the twentieth century. The hypothesis is advanced that the provision of certain social welfare benefits by government substitutes for the private provision by unions, thereby reducing the attractiveness of union membership. The empirical implications of this hypothesis are examined using time-series data on aggregate union membership for the period 1904-80 and using pooled state data for the period 1964-80. These latter data are used to examine the effect of departures from the traditional doctrine of "employment at will." Both the time-series and the cross-section evidence suggest that government supply of "union-like" services reduces union membership.

The article structually estimates an on‐the‐job search model of job separations. Given each employer pays observably equivalent workers the same but wages are dispersed across employers, an employer's separation flow is the sum of an exogenous outflow unrelated to the wage and a job‐to‐job flow that decreases with the employer's wage. Using data from the Danish Integrated Database for Labour Market Research, the empirical results imply, as predicted by theory, that search effort declines with the wage. Furthermore, the estimates explain the employment effect, defined as the horizontal difference between the distribution of wages earned and the wage offer distribution.