What is collective bargaining?
- “Collective bargaining” is the process in which an employer and a group of workers (usually a labor union)agree on the terms of employment.
- During this process, workers express their feelings about their contract including the scope of work, hours, salary, overtime wages, holidays, health and retirement benefits.
- This negotiating process is the product of years of workers’ emancipation, social activism, and humanitarian efforts.
- Violation of any agreement with the collective bargaining may result in labor strikes and government sanctions. These events are detrimental to the interest of employers and can result in lower share prices.
During the Industrial Revolution (1760-1840), workers coming from rural towns flocked to the major cities in search of lucrative job opportunities. Company owners hired them to work in factories and on production lines. However, the living conditions during this time period were horrendous. Laborers worked for most of the day with only a few hours of sleep. They were also paid so little that they could not afford to feed their families. Collective bargaining came to the rescue.
After witnessing the struggles of the laborers, some notable thinkers started movements to improve the conditions and lives of the operators. The efforts of these activists became the foundation for many laws that protect modern-day employees.
Who benefits from collective bargaining?
- The workers: Through collective bargaining, workers get paid more, enabling them to take better care of their homes and families. They also have more time for their families. Vacation leaves supplement their need for rest and give an excellent work-life balance. Employees are also secured with health and retirement benefits. Labor unions can require their human resources managers to issue insurance documents and process other mandated benefits like Social Security.
- The employers: Increasing the budget for workers may sound counterproductive for company owners. However, employers reap benefits in the long run. If the employers meet the demands of the collective bargaining agreement, they will enjoy loyalty from their workers. Avoiding labor strikes and other business-damaging actions prevent companies from getting disruptions to their business operations.
- Society at large: When both workers and employers are happy, society prospers. Better wages increase the workforce purchasing power, thus improving the economy. More time with family promotes better overall health, both physical and mental. In a societal context, a healthy workforce is a wealthy one. Companies that faithfully conform to collective bargaining agreements improve their popularity. They increase their networks and engage in charities. Workers get more rights and privileges. Remember the vacation leaves and sick leaves? Our ancestors decades ago fought big companies to give us those rights, making the workforce, and society, healthier and happier.
In a nutshell
The strength of a collective bargain depends on the unity of workers. If the labor union is weak, most likely their voices would not be heard. However, if these workers unite, they can make an intensely political statement.
Some investors will divest or sell their shares and investments in a company that does not treat their workers well. If a company manages the employees poorly, there may be strikes which can cause the price of shares to plummet. Researching how a company treats its customers and clients may give you an idea if a company is worth investing or not, and a reasonable collective bargaining agreement can show how serious a company is in protecting the rights of workers.