The article explores how wages are set in a unionized economy like Sweden, where most blue-collar workers are part of a central trade union. The researchers found that the central trade union tends to set lower wages when workers have different skills or care a lot about their relative pay. If workers' alternative wages are equal, envy can lead to higher wage differences. But if the relation between alternative wages matches their competitive wages, wage differences decrease. An egalitarian wage policy works best when workers' alternative wages are based on their competitive wages. However, if alternative wages are based on unemployment benefits, a pseudo-egalitarian policy can benefit the central trade union by keeping skilled workers happy and preventing them from leaving.