Trade Unions, Wage Formation and Macroeconomic Stability—An Introduction

Calmfors, Lars

doi:10.1007/978-1-349-08596-5_1

Cited by 15 publications

(13 citation statements)

References 13 publications

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“…Hence, for the wage-maximization objective to be effective, the union must monopolise the entire industry: all the firms will then be able to increase their output prices and still stay in competition. Oswald concurs that the unilateral setting of wages by a union, has a devastating effect on employment and output prices (Calmfors and Horn, 1986;Calmfors and Driffill, 1988;Carlin and Soskice, 1990) . Inevitably, therefore, the union has no choice but to try to increase its market power by controlling the entire labour supply within a given industry.…”

Section: Wage Settlements and Macro -Economic Consequences: A Theoretmentioning

confidence: 99%

An Appropriate Wage Bargaining System to Improve Economic Performance

Sithole

1995

South African J Economics

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1) AGAINST THE BACKGROUND of a current inflation rate of close to 10 per cent and unemployment possibly as high as 40 per cent, as well as low level of productivity, South African labour market organisations, both collectively and individually, are faced with the task of revitalising the entire economy as the country prepares for the post-apartheid era. According to some observers, an average annual growth rate of 5 per cent will be necessary to create a sufficient number of new jobs to ab-sorb new entrants into the labour market and the prevailing unemployment. A growth rate of 5 per cent per annum is, however, substantially below that envisaged by Brummer and Muller of the National Manpower Commission (NMC), who argue that an annual economic growth of 8 to 10 per cent is necessary in order to reduce significantly the present level of unemployment (NMC, 1992:1). The challenges that confront organised labour and organised business, with regard to the prevailing unfavourable macro-economic conditions, require these parties to be creative and objective in their approach to collective bargaining. Collective bargaining should not be undertaken without regard to the wider social and economic environment. Account should be taken of the fact that collective bargaining can impact on macro-economic performance, particularly in the areas of inflation and unemployment. Furthermore, the problems facing capital and labour are exacerbated by the fact that there is no one bargaining system in South Africa. Rather, as Baskin (1993:20) argues, "there are disparate systems which are neither comprehensive nor compulsory". Issues of wages and conditions of employment are presently tackled through four separate systems, none of which encompasses the whole workforce. Of the 8 million working people in South Africa, only 873 000 are covered by industrial councils and, as SAJE v63(1) p27Barker points out, while there are 27 wage determination boards, they only cover between 500 000 and 700 000 employees nationwide, thus leaving the vast majority outside any wage-setting mechanisms (NMC, 1992:44). Without a systematic approach to wage bargaining, it is consequently very difficult for the bargaining partners to take into account the extent to which wage settlements can impact on inflation and un-employment. Failure to formulate such a systematic approach probably does not stem from disagreement between unions and employers on how inflation and unemployment can be combatted but rather from self-interest. High inflation and mass unemployment are the major problems facing South Africa today, and the need for employers and trade unions, both collectively and individually, to play a decisive role in the vital task of significantly improving the prevailing poor economic situation cannot be overemphasized. Unless organised labour and organised business take into account macro-economic problems in conducting collective bargaining, any agreements they arrive at will prove futile. This paper will endeavour to show how wage bargaining can impact on...

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Section: Wage Settlements and Macro -Economic Consequences: A Theoretmentioning

confidence: 99%

An Appropriate Wage Bargaining System to Improve Economic Performance

Sithole

1995

South African J Economics

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“…As explained in Figure 1, the union determined wageemployment solution at point Eo is not Pareto-efficient because there is scope for both the union and the firm to improve their welfare by agreeing on a lower wage rate and higher employment; the resulting efficient bargains are likely to be negotiated on the contract curve CC', which is off the labour demand schedule, except at point C. But, on the contract curve the solution point is indeterminate, in the sense that there exists a multitude of outcomes and that a unique solution cannot be obtained unless additional conditions are introduced. Examples are generalised Nash solutions (unions and firms share the rents from their joint activities in relation to their relative bargaining strengths), fair-share rules (the shares of value added that should accrue to capitalists and labour, respectively, are held constant), and minimum profit conditions (trade unions push wages up to the point before which firms are closed down, see Calmfors, 1986; McDonald and Solow, 1981).…”

Section: N Wage Determination Through the Arbitration Systemmentioning

confidence: 99%

Trade Unions and Inflation: The Case of Australia

Hossain¹

1991

J of App Econs and Policy

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“…Important questions are whether the non~ooperative structure of the interaction between the players Ieads to inefficiencies, in what sense the outcome is satisfactory seen from the government's point of view, and how the outcome is aífected by the fact that the interaction takes place repeatedly. (The papers brought together in Calmfors and Horn (1986), for example, discuss a number of these issues).…”

Section: Introductionmentioning

confidence: 99%

“…Calmfors and Horn (1985) argued that the tendency of governments to take up labour market slack in recessions may, through its effect on union wage setting, have been one cause of stagflation in Sweden and other corporatist and semi~orporatist European countries in the 1960's and 1970's. Driffill (1984, 1985, using a similar model, argued that stabilization policy in the face of random shocks to the eeonomy may have made unions ]ess concerned about the unemployment consequences of high real wages, leading to a higher mean level, although to a lower variance, of unemployment.…”

Section: Introductionmentioning

confidence: 99%

Wage Setting and Stabilization Policy in a Game With Renegotiation *

Driffill

Schultz²

1992

Oxford Economic Papers

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This paper analyses an in(initely repeated game between a government and a union situated in a simple macrceconomic model. The economy is subject to a stochastic shock. The union sets wages and the government can stabilize the economy. Results are that for some parameter values and a high discount factor the set of subgame perfect equilibria includes an equilibrium where the wage rate and degree oí stabilization in each period is optimal for the government, and the same holds true for the union. However, some subgame perfect equilibria rest on punisliment phases where both players are hurt.When players can coinmunicate during play such punishments seem not credible. Therefore we investigate Weakly Rcnegotiation Proof Equilibria (WRP). It is shown that the set oí Weakly Renegotiation Proof Equilibria dces not include equilibria where in each period the most preferred actions for the government (or union) are taken. Also it is shown that in this game there is no WRP which for all discount factors less than one is also SLrongly Renegotiation Proof.

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Trade Unions, Wage Formation and Macroeconomic Stability—An Introduction

Cited by 15 publications

References 13 publications

An Appropriate Wage Bargaining System to Improve Economic Performance

An Appropriate Wage Bargaining System to Improve Economic Performance

Trade Unions and Inflation: The Case of Australia

Wage Setting and Stabilization Policy in a Game With Renegotiation *

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