Equal Pay for Unequal Work

Swedish labor unions pursue an egalitarian wage policy and have successfu lly squeezed wage differentials. The effects in the short run are a r ise in the wage of low-paid unskilled labor-as intended-and possibly also of high-paid skilled labor. But in the long-run, labor's income share falls, as does the wage of skilled labor and possibly even unsk illed labor. Some unskilled labor becomes unemployed in both the shor t and long run. Resources are shifted into the export-competing secto r and away from the import-competing sector. Copyright 1987 by The editors of the Scandinavian Journal of Economics.