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Bargaining theory – Wage theoriesCompensation Management
Prepared By
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Manu Melwin JoyAssistant Professor
Ilahia School of Management Studies
Kerala, India.Phone – 9744551114
Mail – [email protected]
Bargaining theories
• John Davidson
propounded this theory.
Under this theory, wages
are determined by the
relative bargaining power
of workers of their union
and of employers.
Bargaining theories
• The bargaining theory of
wages holds that wages,
hours, and working
conditions are determined
by the relative bargaining
strength of the parties to
the agreement.
Bargaining theories• Smith hinted at such a
theory when he noted that employers had greater bargaining strength than employees. Employers were in a better position to unify their opposition to employee demands, and employers were also able to withstand.
Bargaining theories• Limitations on the scope of
bargaining are also suggested by theory. Collective bargaining can be seen as the reduction of two risks to which the worker is exposed through individual bargaining.
Bargaining theories• here is first the risk that
the worker will be merely one of a number of applicants for a single vacancy and that competition between them will force the pay down.
Bargaining theories• In the bargaining theory of
wages, there is no single economic principle or force governing wages. Instead, wages and other working conditions are determined by workers, employers, and unions, who determine these conditions by negotiation.