Collective bargaining and power

Abstract

Workers obtain wage increases by having labour market power. This labour market power can be achieved through one of several means. One is what economists like to call the ‘laws of supply and demand’. There may be a shortage of particular types of labour (such as workers with specific skills), or of labour generally within the economy (during a prolonged economic upturn). A second is what is often called ‘collective bargaining’. Workers band together to collectively negotiate a wage increase, as together they have more bargaining power than individually. Most commonly they do this through the mechanism of a trade union. There is nothing unusual about this. Owners of capital do exactly the same thing — they increase their income by joining together to form a ‘corporation’. Like a corporation, a trade union has a special status in law, though its status is not the same. A corporation has ‘limited liability’, meaning that individual capital owners cannot be sued for the full value of a corporation’s debt. Trade unions and their members are usually exempt from being sued for any loss they cause when taking lawful collective action, though often there are limits to the availability of this immunity. The existence of the wages crisis has been demonstrated elsewhere in this book. This chapter looks at how declining worker power explains the crisis, giving special attention to the role of collective bargaining. It considers both the factors directly limiting the achievement of wage increases through collective bargaining, and those indirectly limiting it.