A Brief Definition

Through collective bargaining, employers and employees negotiate the conditions of employment.

Learning Objective

Define the monopoly union model, the right-to-manage model, and the efficient bargaining model as theories of collective bargaining

Key Points

The ability to form trade unions is recognized through international human rights conventions as an essential right of workers.
Trade union representatives usually represent the employees during the collective bargaining process. The union representatives negotiate with a single employer or a group of businesses. Negotiations with a group of businesses results in an industry-wide agreement.
There are various economic theories which attempt to explain the various aspects of collective bargaining.
The agreement reached as a result of the collective bargaining process functions as a contract between the parties.

Terms

efficient bargaining model
The efficient bargaining model sees the union and the firm bargaining over both wages and employment (or, more realistically, hours of work).
collective bargaining agreement
A collective agreement or collective bargaining agreement (CBA) is an agreement between employers and employees which regulates the terms and conditions of employees in their workplace, their duties, and the duties of the employer. It is usually the result of a process of collective bargaining between an employer (or a number of employers) and a trade union representing workers.
monopoly union model
This model states that the monopoly union has the power to maximize the wage rate; the firm then chooses the level of employment.

Example

Factory workers may unionize and use collective bargaining to determine a wage rate that is mutually beneficial to the workers and the employers.

Full Text

Collective Bargaining Defined

Collective bargaining is a process of negotiation between employers and a group of employees aimed at reaching an agreement that regulates working conditions .

Collective Bargaining

Map of proposed collective bargaining legislation

The right to collectively bargain is recognized through international human rights conventions. Article 23 of the Universal Declaration of Human Rights identifies the ability to organize trade unions as a fundamental human right. Item 2(a) of the International Labour Organization's Declaration on Fundamental Principles and Rights at Work defines the "freedom of association and the effective recognition of the right to collective bargaining" as an essential right of workers.

The Participants

The interests of the employees are commonly presented by representatives of a trade union to which the employees belong. The union may negotiate with a single employer (who is typically representing a company's shareholders) or may negotiate with a group of businesses, depending on the country, to reach an industry-wide agreement.

The Result

The parties often refer to the result of the negotiation as a collective bargaining agreement (CBA) or as a collective employment agreement (CEA). A collective agreement functions as a labor contract between an employer and one or more unions.

The collective agreements reached by these negotiations usually set out wage scales, working hours, training, health and safety, overtime, grievance mechanisms, and rights to participate in workplace or company affairs.

Collective Bargaining Models

Different economic theories provide a number of models intended to explain some aspects of collective bargaining:

The so-called monopoly union model (Dunlop, 1944) states that the monopoly union has the power to maximize the wage rate; the firm then chooses the level of employment.
The right-to-manage model, developed by the British school during the 1980s (Nickell), views the labor union and the firm bargaining over the wage rate according to a typical Nash Bargaining Maximin.
The efficient bargaining model (McDonald and Solow, 1981) sees the union and the firm bargaining over both wages and employment (or, more realistically, hours of work).

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