Question

Even in the absence of collective bargaining, workers do have some bargaining power that allows them to receive wages higher than their reservation wage. Each worker’s bargaining power depends both on the nature of the job and on the economy-wide labor market conditions.

(a) Compare the job of a delivery person to a computer network administrator. Which of these jobs does a worker have more bargaining power? Why?

(b) For any given job, how do labor market conditions (like high or low unemployment) affect a worker’s bargaining power?

Answer 1

Introduction: -

Bargaining with an enterprise has evolved over a period of time and has developed into a full blown skill, whereby you may be able to collect additional income for yourself, if you chose to weigh your options and negotiate with the firm which was hiring you, well within time.

Collective Bargaining refers to unions demanding better working conditions or payments which in the modern world indeed realizes. On the other hand, individual bargaining takes place in an organization depending upon labour market conditions, personal characteristics and the level of skills required to undertake a particular job type.

Case Specifics: -

A) Delivery Person V/s Computer Administration Job: -

Wages in the typical labour market, are determined by numerous factors such as demand and supply of the workers, the existing market conditions as well as the net benefit which is expected to an enterprise over a period of time.

If you have higher skill sets and offer firms higher returns, chances are that your bargaining power would be significantly higher. In this case, a delivery person does not need high skill like a computer administration job. People who want to attempt deliveries would be in thousands in any city whereas those who can do computer administration jobs would be few.

This allows for those who do a computer administration job higher bargaining power than those who are doing a delivery person job.

B) Market Conditions: -

In sound market conditions, which means that there is little or no recession in an economy, the chances of negotiation for people is relatively high. During a recession, the total amount of jobs available in a market are few. This disallows people from being able to find work easily. Those that find work, are in no position to bargain and become price takers.

On the contrary if the market is sound, the bargaining power for individuals increases.

Please feel free to ask your doubts in the comments section.