Unionized workers are more likely to have health insurance and other non-wage benefits than non-union workers (for US evidence see here or here (gated)). Yet it is not clear why. Some obvious explanations do not stand up to scrutiny:
1. Health insurance receives preferential tax treatment.
2. Workplace insurance is efficient, because it avoids the adverse selection problems that cause private insurance markets to fail. All employees must buy into workplace insurance, not just those who are likely to get sick, making a viable insurance market possible.
These first two considerations explain why employers pay their workers in the form of health insurance benefits rather than cash. But they cannot explain why union employees are more likely to receive health insurance benefits than non-union employees.
3. Unions act as monopolists, restricting the supply of labour, increasing worker compensation, and thus health and other non-wage benefits.
Monopolistic unions can explain why the typical unionized worker earns more, all else being equal, than the typical non-unionized one (Canadian evidence here). But monopoly power does not explain why unions bargain for higher benefits, as opposed to simply pushing for higher wages.
A more interesting and persuasive explanation can be found in some of Richard Freeman's old work (e.g. here):
4. Unions give voice to worker preferences.
A related argument is based on the idea that....
5. Unions favour compressed wage structures. Assume unions represent the preferences of the median worker. Imagine, for simplicity, that the total wage bill is fixed. From what is known about wage structures in general, it is reasonable to suppose that, in the absence of unionization, the wage distribution would be skewed. A few high productivity/highly mobile employees would earn relatively large salaries, and the majority would earn much lower salaries. Consequently, the median salary is lower than the average salary. The union wants to make the median worker better off. Accordingly, they push for a more compressed wage structure, which increases median wages, even when the average wage doesn't change. One could say that unions "tax" the salaries of "star" or highly mobile employees to increase the wages of the typical worker. That's an analogy sometimes used in the literature - though one could also say that, in the absence of unionization, employers "tax" the average worker to pay large executive salaries.
Workplace health benefits - because they are worth roughly similar amounts to all employees - tend to compress the wage structure. This could be why unions favour them. But there is one last possibility....
6. People systematically overestimate the benefits of health insurance coverage
It's instructive to compare health insurance to auto insurance. Automobile insurance does not cover the cost of routine maintenance, like oil changes. This is a good thing. Every car is certain to need its oil changed, and it's impossible to insure against certainty. The administrative costs of providing insurance coverage for oil changes is greater than any risk-reduction benefits. Moreover, if insurance covered the cost of oil changes, people might change their oil more often than is strictly necessary, increasing the cost of car insurance.
Yet dental insurance - one of the major forms of private health insurance in Canada - does not work this way. Routine care like scaling or recall exams - the dental equivalent of oil changes - is covered. For example, Carleton's student plan covers 80% of the cost of two units of scaling and one recall exam (here).
This might possibly make sense when employers pay for the cost of health insurance. Employer health insurance contributions are not a taxable benefit, so the tax savings from paying for routine dental exams through insurance might outweigh the administrative and moral hazard (overuse) costs of using the insurance system. But insuring routine dental care makes no sense when the insured individual pays the full cost of the insurance plan - for students, for example.
Insurance is good for protecting people from sudden, large, and at least somewhat random and predictible losses. Automobile insurance works this way. It covers things like compensation to those injured in an automobile accident, or the cost of replacing a totalled brand new Lexus. But the dental equivalent of smashing up a Lexus - getting a root canal for example - are covered at just 10% of the cost in Carleton's student dental plan, up to a maximum of $600 per year.
Why would students vote to buy into insurance plans that paid for the cost of routine treatment, but not serious, expensive dental care?
Part of the answer can be found in the price tag. Carleton's student dental insurance costs $84.33 per year. That's pretty reasonable when two units of debridement (scaling) costs $97. All it takes is one routine visit to the dentist, and the plan pays for itself. Sounds like an offer one can't refuse?
Actually, if something sounds too good to be true, it probably is. A for profit plan can only offer dental insurance for $84 per year if the average person uses less than $84 per year of dental services. Behavioural economics finds that people suffer from "present bias" which makes them overweight current cost and underweight future benefits. People don't go to the gym (even though they mean to), they smoke (even though they know they shouldn't), and don't schedule routine dental check-ups.
Possibly unions bargain for health benefits for the same reason that people buy gym memberships and yoga passes: people think that they'll use the benefits, even though they don't.
Alternatively, it could be that...
7. People systematically understimate the benefits of health insurance.
As noted earlier, to attract capable employees, employers have to pay a wage that is attractive to the marginal worker. Imagine a potential employee with two competing job offers. It is very difficult for that potential employee to compare the two benefits packages on offer - there are just so many different dimensions along which benefits packages differ. So potential employees will tend to pick the offer that pays the greatest monetary amount.
In short, the labour market dictates a lower bound, say w*, on the money wage employers can offer. If a union can negotiate non-monetary compensation, they can raise their members' wages to w*+b.
I think there's something to that last argument, but there's also something not quite right about it.
I'm afraid there's no big conclusion here. I wrote this post because the question was puzzling me, and I wanted it answered.