Unions and Equity

Trade unions have been successful in compressing the wage distributionbut not in influencing the share of national income going to labour. This paperclaims that a compressed wage distribution provides insurance in the same way thatthe tax and benefit system does and thus may be welfare-improving. Moreover, aunion-based wage compression system may be a better than a conventional taxbenefitsystem in providing such insurance and may well complement the operationof the latter....