Labor’s inequality of bargaining power: Changes over time and implications for public policy

A major justification for enacting the Wagner Act and encouraging collective bargaining was that in the wage-determination process individual workers suffer from an inequality of bargaining power vis-á-vis employers. This critical review of this justification examines the analytical meaning of the concept of an inequality of bargaining power, the factors responsible for this inequality, the change that has taken place in labor’s disadvantage since the 1930s, and the implications for national labor policy. It is concluded that some employers continue to have significant market power over wages but that the extent and degree of labor’s disadvantage in bargaining has diminished substantially since World War II. The implication is that the Wagner Act’s protection of the right to organize remains in the social interest but that the bargaining power of labor unions should be further circumscribed to preserve a balance of power in wage determination.