Collective Bargaining: A Law and Economic Critique

Abstract

Industrial harmony is essential for economic progress and the concept of industrial harmony assumes the existence of understanding, co-operation and a sense of partnership between employers and employees. Collective bargaining implies "agreements between representatives of employers and freely designated representatives of employees relating to the solution of industrial problems with minimum governmental dictates". More certainly, it involves a symbiotic relationship between the two parties, i.e. a relationship which involves elements of both co-operation and competition. The parties gain from cooperation and agreement which leads to production of some goods and services and sharing of revenues derived from it. But how to share the revenue and what "terms of trade" would be are some of the issues that put the parties in a position of competition. Trade unions have been a subject of considerable interest to economists. Economics helps us to understand the costs and benefits of our policy decisions. It shows how to examine legal regulation for the effect it has on the ability of workers and firms to maximize their wealth or utility. The researcher would delve to seek answers to questions like Does Collective Bargaining actually promote "economic efficiency"? What are the economic arguments for Worker Participation-theories explaining how Unions may increase productivity (Traditional economic analysis) and arguments against Worker Participation? What are the costs of collective bargaining? How do labour economists treat the costs of collective bargaining as positional externalities through a game theory model?