Bargaining power denotes the partys ability to induce another party to accept an agreement on their terms. Economic factors are the greatest influence of parties bargaining power. When the economy is healthy, the profits are high, the market share is growing, and the cost of living rises at a negligible pace, unions can bargain over management. An expanding market share means that firms reap higher profits due to the competitive advantage. Workers usually expect to receive bonuses after the firm increases its profits (Wachtel, 2013). Unions can mobilize workers to engage in industrial actions, strikes, and work-to-contract in order to force the management to offer better conditions. In fact, while participating strikes, workers cannot find alternative positions because the unemployment rates are high. An extensive strike period is economically unsustainable for management hence they prefer to work with unions to have employees back.
Management has power in collective bargaining when profits are low, sales growth stagnates, uncertain economic conditions and 4% rise in the cost of living appear. First, the management or the employer has an opportunity to stockpile production bringing the business closer to capacity before the commencement of bargaining process. Stockpiling is possible in the manufacturing and production companies (Wachtel, 2013). Secondly, a company operating in a market with a high degree of economic concentration means that it has financial reserves to survive industrial instability. The management can use propaganda if the company operates in a diversified sector. It can shift to other countries if the company is a multinational (Wachtel, 2013). Alternatively, a firm can introduce higher wages, which unions demand, by establishing a higher price on the commodities. Thirdly, due to the fact that unemployment level is high in uncertain economic conditions, workers cannot afford to engage in strikes. Indeed, the management can find easily cheaper labor during the strike period. Availability of cheap labor influences employees morale forcing them to engage in the negotiation with the employers.
In conclusion, the ability to sway the bargaining agreement depends on unions or management that can estimate prevailing economic factors and influence the outcome. While unions are likely to be in a stronger position to bargain for their preferred wage in favorable economic conditions, management gains more power under uncertain economic conditions.
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