Collective Bargaining and Disclosure of Information: A View From Labour Economics

Abstract

Industrial relations can be said to be concerned with who makes the rules relating to employment matters, what rules will exist and how any adjustments to such rules will be made. In a large number of industrial relations systems the process of adjustment is by collective bargaining, and most industrial relations commentators and practitioners would accept that the scope for adjustment is constrained by economic, social and political forces. However, the practicalities and dynamics of this adjustment process are such that decisions can only be in terms of what Williamson calls ‘bounded rationality’. This is a situation where at the moment of decision, given the quantity and quality of information that is held, that decision seems rational and acceptable. However, innate imperfections in information and its flow eventually show the decision to be something less than satisfactory. Further, many writers believe that collective bargaining is characterised by management and labour having, at the very least, potentially conflicting objectives so that for each ‘bounded rationality’ is different. The practical results are often some ‘compromise’ or ‘optimal’ outcome that temporarily satisfies the welfare of the parties but can rarely maximise it. However, we should note that while the parties may reach a jointly satisfactory outcome, that outcome could be less than optimal for society as a whole; an inflationary wage settlement is the most obvious example.

Citation

Sullivan, T. (1978), "Collective Bargaining and Disclosure of Information: A View From Labour Economics", Personnel Review, Vol. 7 No. 3, pp. 45-51. https://doi.org/10.1108/eb055367