Law and Collective Bargaining Power: Results of a Simulated Study

Abstract

A fundamental premise of the National Labor Relations Act (NLRA) when it was enacted in 1935 was the rebalancing of bargaining power between employer and labor (Budd, 1996). Congress stated in section 1 of the NLRA that real negotiation is impossible when corporate law allows employers to become collectivized and, as a result, gives the employer collective power so great that the individual employee, who lacks this legal support and power, cannot bargain as an equal party. The result of this inequality, it found, was a ratcheting down of wages and working conditions and the destruction of commerce (Section 1, 29 U.S.C. Section 151, 1994). Collective bargaining is necessary in order to rectify the imbalance of bargaining power corporate law had created. Section 1 of the NLRA states that its purpose is to restore equality of bargaining power between employers and employees and that collective bargaining is the appropriate vehicle to do so Section 1, 29 U.S.C. Section 151, 1994). Underlying these findings is the idea that law affects bargaining power. The authors conducted a series of simulations to test the relationship of law to bargaining power. Subjects were placed in either a union or employer caucus to prepare bargaining strategies under one of three legal regimes for resolving bargaining impasses: (a) the current system in the US private sector (at impasse the employer can implement its final offer - the employer can permanently replace strikers); (b) the system under some public sector contracts (no strike or lockout allowed - at impasse an arbitrator chooses one offer); and (c) the market power system originally contemplated by the NLRA's drafters (strikes and lockouts are permitted but not replacement of strikers - no changes can be made unless negotiated by the parties). The authors theorized that each regime would lead to specific outcomes: under Regime A, the bargaining position of the employer is strengthened and that of the union is weakened; under Regime B, neither the employer nor the union is favored in terms of bargaining strength; under Regime C, generally, neither the employer nor the union is favored in terms of bargaining strength as a result of law, but they will be affected by economic or social factors. The results of surveys administered to the subjects supported theorized outcomes for Regimes A and B but - dramatically - not for C.

Keywords: collective bargaining, bargaining power

JEL Classification: J5, J52, J53, K0, K31