The Economics of Collective Bargaining
In the preceding chapters, the labor market was analyzed ignoring the existence of trade unions. In the United States today, however, and indeed in every modern industrial market economy country, trade unions are an accepted part of the industrial scene. Although only about 16 percent of the total labor force is unionized, the percentage is about 50 percent for nonagricultural production workers, and nearly 85 percent for workers in manufacturing plants employing 100 workers or more. Thus, unions are in a position to have a major impact on the national labor market, and it would be inappropriate to analyze wage and employment determination only in their absence.
Labor unions are complex organizations, with various desires and goals. Some of these goals are purely economic, for example, favorable wage settlements and levels of employment. In addition, some of the things unions desire are nonmonetary, although still "economic" in the sense of having an identifiable and quantifiable cost to the employer. Among this second group would fall various fringe benefits -- for example, contributions to pension funds, hospitalization programs, paid holidays, and so on. A third category of union goals might be called indirect economic goals, in that their long-run effect is indirectly intended to be economic improvement of union members. Included in this category would be control over labor supply through apprenticeship regulations, closed- or union-shop provisions, restrictive working roles, and so on. Finally, we may speak of noneconomic goals of unions, goals of a social or political nature. We find the expression of these both within and without the employment relationship: the demand for just and equitable treatment of workers by their employers (matters usually relegated to grievance procedures) and in the relationship of trade unions to the community at large.
When the union and employer sit down to bargain collectively, a variety of issues is open to discussion. Some of these are purely economic, and some deal with such mundane issues as the work duties of shop stewards, the timing of the coffee break, or even the color of paint in the engineering shop.
Normally, a few months before a union-management contract is to run out, the parties will come together to discuss a new contract. At this time, each side presents its views on what the new contract's terms should be. Seldom is agreement immediately