Recession and Bargaining Power
Recession and Bargaining Power
Recession refers to economic slowdown or activity which occurs as a result of contraction which lasts for longer few months. Two consecutive quarters of a negative economic growth are an indication of economic recession. Economic recession is usually followed by increased rates of unemployment, a sudden drop in the stock market and a sudden decline in the housing marketing(Canterbery, 2011). On the other hand, bargaining power refers to the ability of group of individuals, an organization, or an individual to exert influence over others. This bargaining is mostly between trade unions and employers’ organizations or employers for the purposes of determining the employment terms and conditions. It is also done for the purposes of negotiation in order to achieve a deal that is favorable to those parties. Some research economists say that, over the last forty years, the workers’ bargaining power has gone down and due to that, economic growth has increased due to increased income distribution.Thus, the paper discusses how economic recession affects management’s bargaining power and also discuss how a union’s power is also affected by the same. Three historical examples of how bargaining power is affected by recessions and the parties mostly negatively affected will also be discussed.
How recession affect the management’s bargaining power and unions bargaining power
Basically, recession lowers the management’s bargaining power. The trade union’s bargaining power has been rising depending on the rate of economic growth whereby the union membership has been increasing with the increase in the rate of economic growth. Recessions on the other hand have been affecting the rate of membership negatively and decreasing the labor movement.
In the cases where there is a single employer, the bargaining employees may be withheld from work andthe issue of unions may be withdrawn to serve as a threat to the employees to agree with the available cheap contracts. The employment may also be restricted to conditions that do not allow unionizing. This is mostly done by the employers when the economic development is low such that there is recession where by so many people are facing unemployment. Therefore economic recessions weakens the bargaining power of the unions and employees since the economic grown is usually general down. When there are no recessions in the economy, the employees unionize and plead for better pay and better working conditions. But when there are recessions, the economy is usually generally down and therefore, some restrictions that discourage collective bargaining in institutions are put in place(Gersbach, & Haller, 2006).
Consequently, the length of terms and agreements together with the agreement validity is influenced by some procedures whereby these procedures also influence the bargaining coverage and power.These procedures are there to protect the employees in case the employers fail to honor the agreed terms and conditions of employment. The procedures strengthen the position of the unions during the negotiations just in case the employer want to violate their rights and lower the standards. Economic recession has therefore resulted to the validity of these agreements being reduced to a shorter period like six months within which if an agreement is not reached, then the agreement is termed as expired. In other countries, the expired agreement are given another duration of like three months within which, if an agreement is not reached, then the agreement is completely termed as expired and forgotten about and no replacement of the same is done. This has really led to a tremendous drop in bargaining power and activity.
Examples of recessions affecting bargaining power
A good number of employees has been interviewed about what recession has done towards bargaining power. The response has usually been that, employers do not keep their word. Workers are promised some vacation leaves and other benefits nut that is hardly kept. Since the great depression from 1930, a great gap has been created between the rich and the poor hence widening the income inequality. Therefore, due to financial crisis, the employees’ bargaining power has decreased over the last 50 years and because of that, the growth of the economy has greatly increased to the top of income distribution(Kerrigan, 2013).
In 2009 it was reported that millions of workers in the whole world who ranged between 80 and 81 percent lost their jobs due to the great depression that was experienced. This was as a result of lack of collective bargaining by unions due to laws that had been passed restricting bargaining. This example shows how important collective bargaining is because with it, all the employees are represented. To solve this problem in USA, the ILO called for a stronger collective bargaining. It was reported that 80 percent of workers were not socially protected and that’s why they lost their jobs during the great depression. In April the year 2009, the Director General emphasized on the importance of collective bargaining and unions. He therefore urged the unions and employers to have a common meeting and negotiate on terms and conditions of employment.
Another example of how recession affect the bargaining power is seen in China. Back in history, China’s economy was affected so much by the bargaining power of the unions and the employers whereby they could not come into consensus since the employers did not want to increase the employees’ pay. The employer passed across rules which banned the existence of bargaining union and therefore the organizations’ production began to decrease hence resulting to a depression whereby many lost their jobs. It has been said that presently, China has made an attempt to increase the workers’ pay so as to build a domestic economy which is more robust. The reason as to why many economies are lagging behind is because the middle class owners do not have enough money to support their economies as a result of the great recession. Therefore, most of countries have decided to pass a law that allow unions to bargain on behalf of the other workers. That has been seen as the only solution towards recession.
Therefore economic recessions greatly affect the management’s and unions’ bargaining power and therefore a remedy should be found to ensure that unions and employers are bound together in unity so as to have a good relationship that would lead to economic growth rather than recession.
Kerrigan, H. (2013). Historic documents of 2011 (1st ed.). Los Angeles: CQ Press, a division of SAGE.
Canterbery, E. (2011). The global great recession (1st ed.). Singapore: World Scientific.
Gersbach, H., & Haller, H. (2006). Voice and bargaining power (1st ed.). Munich: CESifo.
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