This article builds and tests a model of the impact of a firm's bank-ruptcy probability on its propensity to offer deferred compensation schemes. Using 1983 Current Population Survey data, we find that, ceteris paribus, lower failure rates raise the incidence of pensions for nonunion workers outside manufacturing. Further, we find some evidence that, among those workers with a pension, a higher industry failure rate steepens tenure-earnings profiles (jointly controlling for union-nonunion and pension-no pension selectivity). Such a result suggests that workers discount implicit promises of future earnings increases by the likelihood that the firm will not survive.

Previous research has found that union standard rate policies lower the dispersion of union wages and that unions indirectly raise nonunion wage levels, as firms weigh the probability of unionizing and wage costs. These two findings imply that unions lower the dispersion of nonunion wages since, for a given payroll, a nonunion firm can achieve the greatest reduction in the probability of unionism by giving raises to those who would benefit most from a union. This hypothesis is confirmed on Current Population Survey data: taking into account the endogeneity of unionism, ceteris paribus, nonunion wage dispersion is lower in more highly unionized industries. Copyright 1987 by MIT Press.