Bryan Caplan asks:
I don't doubt that unions tend to oppose merit pay, but the reasons are unclear. Profit-maximizing monopolists still suffer financially if they cut quality; the same should hold for unionized workers. Why not simply jack average wages 15% above the competitive level, and leave relative wages unchanged?
Or to put the puzzle another way: Once you've secured a raise for all the workers in your union, why prevent employers from offering additional compensation for exceptionally good workers?
Earlier, Megan McArdle considered the topic. One simple model is to invoke the median voter as either ruling the union or constraining it. The implication is that most union members fear they will lose from greater accountability, even if the total size of the pie goes up. As Megan noted, unions are set up to favor the bottom 55 percent of the workers; furthermore productivity can be very unevenly distributed.