Wage Bargaining Under the National Labor Relations Act

Jesse Schwartz and Quan Wen ()
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Jesse Schwartz: Department of Economics, Vanderbilt University

No 412, Vanderbilt University Department of Economics Working Papers from Vanderbilt University Department of Economics

Abstract: Sections 8(a)(3) and 8(a)(5) of the National Labor Relations Act prohibit a firm from unilaterally increasing the wage it pays the union during the negotiation of a new wage contract. To understand this regulation, we study a counterfactual model where the firm can unilaterally increase wages during contract negotiations. Comparing this model to the case where the firm must pay the wage from the expired contract, we show that the firm may strategically increase the union's temporary wage to upset the union's incentive to strike and to decrease the union's bargaining power. Consequently, increasing temporary wages may shrink the set of equilibrium contracts in the firm's favor. Indeed, as the union becomes more patient, the set of equilibrium wages converges to the expired wage, the best equilibrium outcome to the firm. We further demonstrate that our counterfactual model is valid since our results maintain even if the union is allowed to block the firm's temporary wage increase.

Keywords: Collective Bargaining; National Labor Relations Act (search for similar items in EconPapers)
JEL-codes: C72 C73 C78 (search for similar items in EconPapers)
Date: 2004-05
New Economics Papers: this item is included in nep-lab and nep-reg
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http://www.accessecon.com/pubs/VUECON/vu04-w12.pdf First revision, 2004 (application/pdf)

Related works:
Journal Article: Wage Bargaining Under the National Labor Relations Act (2006)
Working Paper: Wage Bargaining under the National Labor Relations Act (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:van:wpaper:0412

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