Unions,employment risks,and market provision of employment risk differentials

The role of unions in providing compensating differentials for wage and hours risk is analyzed. Unions are shown to increase wages for workers in more risky jobs. A negative compensating differential for nonunion workers is taken as evidence of worker-specific, or supply-side risk. This component of risk is removed by controlling for union status, based on the belief that unionized firms will be more likely to filter out high-risk unproductive workers. Hours risk is compensated for in the labor market, while wage risk is not.