For many reasons a group of workers may have sufficient bargaining power to claim for themselves some share of any monopoly surplus earned by an enterprise and (in the short run) a share of the return on fixed assets. This paper explores the effect of the threat of collective action on wages and employment in firms which wish to avoid collective bargaining with their employees.The threat of collective action analyzed here is a stylized representation of the institutional situation created by U.S. labor laws. If a firm wishes to avoid collective bargaining it must choose wages and employment so that no coalition greater than or equal to a fixed fraction of its workforce can be formed around a feasible bargaining agreement. The constraint this implies on employment and wages is analyzed for several assumptions about how bargained surplus is distributed among workers.It is found that the threat may affect only employment, or both wages and employment. For a firm with monopoly power a threat may either increase or decrease employment. Effects on wages and employment are found to be possible even in a market with price competition and free entry if firms must make fixed investments to produce output. Even when union contracts are efficient a threat of collective action can be expected to distort employment and investment decisions.If a threat causes firms to pay a wage above the reservation wage there will be an excess supply of labor to the firm. Under certain conditions this may manifest itself as involuntary unemployment. Further, unemployed workers will be unable to bid wages down. Like efficiency wage models, the threat of collective action provides an explanation for industry wage differences and the dual structure of the labor market. The model may also be able to provide some insight into the reasons for the stability of nominal and real wages over the business cycle.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
file. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Publisher Info
Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
1856.
Length: Date of creation: Mar 1986 Date of revision: Handle: RePEc:nbr:nberwo:1856
Note: LS Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A. Phone: 617-868-3900 Email: Web page: http://www.nber.org More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: ().
Related research
Keywords:
Other versions of this item:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)
John D. Burger & Stephen J.K. Walters, 2006.
"Testing Fair Wage Theory,"
Working Papers
0623, International Association of Sports Economists.
[Downloadable!]