Collective Bargaining
The process by which unions and employers reach an agreement is
known as collective bargaining. This process has an important
difference from the theoretical models that we discussed in the previous
section. In those models, we assumed that the union had the power to set
the wage unilaterally; the employer then decided how much labour to
hire. In actual collective bargaining, however, the firm and union typically
bargain over the wage (as well as other aspects of the employment
relationship, such as benefits, pensions, working conditions, overtime
conditions, and flexibility in scheduling). The actual result of the bargain
depends on the strengths of the two bargaining parties, the skill of their
negotiators, and the overall business environment. Note that while actual
collective bargaining has the firm and union bargaining over the wage, it
is typically the case in Canada and the United States that the firm retains
the “right to manage”—meaning that the firm can decide how much
labour it wants to employ at the negotiated wage.
Wages Versus Employment
Unions seek many goals when they bargain with management. They may
push for higher wages, more generous benefits, or less onerous working
conditions. Many unions in Canada also emphasize the importance of
“job security,” meaning a commitment by the firm not to lay workers off
in the event of a downturn in demand for its products. Firms, however,
are understandably reluctant to promise such security since reducing their