Prizes in an industrial union environment

This paper proposes a short-run cross-sectional theory of how employers in an industrial union work environment try to foster and reward greater efforts and more productivity by individual workers by offering a “prize” in the form of shift premiums, overtime pay, and accident risk premiums. The theory is evaluated empirically with a set of micro data from a large industrial establishment. We found that the effect of such prizes is to steepen the upward portion of the earnings profile, dampen the compression of earnings in a union environment, and increase earnings differentiation.