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Workers salaries are determined by bargaining a new wage rate per year (Expensive), but keeps a...

Workers salaries are determined by bargaining a new wage rate per year (Expensive), but keeps a good quality-of-life. One option is to instead pay the workers a wage that is indexed to the CPI (Consumer Price Index), What are the advantages and disadvantages for a town to move from bargaining wage rate to a CPI model?

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Expert Solution

The advantages of paying a wage rate indexed to CPI is that it gets to understand what income level can match the level of increased prices and this would actually be easier for the organisation. Apart from that there are no conflict arising from this sort of calculation all in all. However the disadvantage is that there is actually no real growth in wages for workers and union of.workers power gets down all in all

Rahul Sunny answered 2 years ago
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