Pros and Cons of The Negotiation Process Between Employers and Employees

The definition of "labor market" is the market in which workers compete for jobs and employers compete for workers. In labor market, wages, benefits and responsibilities of workers are bought and sold. The differentiating factor of labor market from the other markets is the fact that supply and demand rule is not applicable. In the old days, workers (slaves) were bought and sold just like products and therefore, labor market and product market showed major similarities. Since the rise of human rights, the slave issue has been solved and wages (and benefits) are used to compensate the hourly work of the worker. In spite of the rise of worker rights, there are still inequalities of strength between employees and the companies. If the definition of "labor market" is thought over, one can easily see the problem in the labor market. The companies are stronger; they can determine the rules of labor. Since the companies are stronger and a single employee is defenseless against the whole company, new factors must be brought into the equation to balance the strength difference. The new factors are unions and collective bargaining. With unions, workers can unite and act stronger for demands. The employers, on the other hand, unite to form their own unions. In this picture, there is still inequality favoring the employers. The workers united; however, they still do not have the necessary tool or strength to negotiate their demands. Therefore, the ability to strike is given to the workers as a tool, while the employers are equipped with the lock-out option. With the unions and the new tools, the environment for collective bargaining is set.

With collective bargaining, the workers are stronger; workers form unions and unions make demands from the employers for the workers. It is definite that union can get more for the worker compared to an individual worker's demand. With collective bargaining, the workers can go to strike to accept their demands. An individual worker does not have such option.

The negative side of collective bargaining is the fact that individual needs are not taken into consideration. Also, with collective bargaining, the requests of majority among the union are taken into consideration. An individual worker may not want to go to strike; however, if the union decides to go to strike, that individual is forced to stop working and earn wage. With collective bargaining, monthly wage, benefits, working hours are set on the negotiation table.

Another negative side of collective bargaining is the fact that both parties are equipped with extremely strong weapons; strike and lock-out. Any party with unacceptable demands can end the negotiations and start the strike/lock-out phase. Another negative effect of collective bargaining and unions is the fact if the union is strong, the union can gain very substantial gains compared to other unions in other industries.

Also, unions have their own costs. The cost of unions and the collective bargaining is shared by both workers and employers. Every month, union fee is cut from employers.

In the existing method, wages and benefits are calculated with collective bargaining. The monthly wage has nothing to do with the production that worker creates or all workers create. If inflation is excluded from the environment, an increase in wages should come from one of the places fundamentally. It can come from increased production or it can come from some redistribution of the existing output. If the workers/employers demand more, it has to be linked to one of the arguments above. Otherwise, the demand is meaningless. I feel that there must be a tie between production and wages. The tie can be established industry by industry or firm by firm to measure the output per man-hour. If this is not easily calculated, the percentage increase in nation's annual income can be used to set the increase in wages of workers.