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Daniel Kelly's avatar

I also like the reading chart idea!

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DavesNotHere's avatar

“bargaining power of workers vs. employers: diminishing marginal utility. Businesses and employers are richer than their employees the vast majority of the time. It seems like employers can afford to not have a worker more than a worker can afford to not have a job because employers have a larger financial safety net. Given that, how do employers not have more bargaining power over their employees?”

Doesn’t the workers' bargaining power depend more on their alternative opportunities with other employers? Or are you saying that employers can collude explicitly or find a Schelling point that prevents them from competing for workers?

Who is richer seems irrelevant. I could be very rich, but have no bargaining power at all, or very poor but have an advantageous position, depending on the specific transaction. E.g., Bill Gates doesn’t have an advantage over other pork producers, unless his ability to wait counts as a significant advantage over producers with urgent need for cash flow. His ability to borrow could be an advantage, but that doesn’t seem to apply in the labor market.

What is bargaining power? It is the ability to walk away from a negotiation. The amount of money in the bank is at best only loosely related. I might have billions in the bank, but still face an urgent crisis that means I must negotiate or take a loss. Just because I can survive a loss doesn’t mean I like taking losses. And if I am on the verge of bankruptcy, I could still have bargaining power in a specific circumstance, if I have plenty of reasonably attractive alternatives.

Government policy seems related to the plausible sources of any bargaining power imbalance. E.g., one of the most significant costs of switching employers is the need to switch health plans. So workers that would find it hard to change insurers are incentivized not to change employers.

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