UNION EGALITARIANISM AS INCOME INSURANCE

It is a common observation that unions often try to compress the wage distribution among their members as compared with the productivity distribution. A troublesome aspect of standard theories of redistributive unions is the question why high-productivity workers choose to enter the union in the first place. This paper develops and explores the implications of an alternative insurance rationale for egalitarian wage objectives. Apart from providing a simple explanation of why heterogeneous union members may agree on egalitarian wage policies, it also suggests a more guarded attitude towards the welfare costs of pay compression.