During the stagflation of the late 1970s, unions played a role in worsening inflation in some countries but not in others. This can be attributed to differences in laws governing the bargaining process. In continental Europe, each large sector of the economy is generally covered by a single collective bargaining agreement that provides for standardized wages. In the United States and the United Kingdom, there are a multitude of collective bargaining agreements. These are usually specific to a single employer, sometimes to specific worksites and even specific types of workers at that site. The result is a hodgepodge of wage rates. This fractionalized bargaining process fueled inflationary wage demands and labor strife. Among the explanations is the theory of relative deprivation that people are primed to focus on disparities.
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There have been periods when, at the insistence of management, unions accepted “two tier” wage systems where more recent hires got paid less for the same work as previous hires. So far as I know, unions invariably protested, though not always successfully, and in subsequent negotiations fought, often with success, to undo the two tier systems by granting newer employees higher increases.
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Lepie, J. Bargaining Structure and Inflation. Employ Respons Rights J 31, 189–195 (2019). https://doi.org/10.1007/s10672-019-09335-w
- Labor law