The Effects of Globalisation on Unions and the Nature of Collective Bargaining

Abstract

An interesting finding of recent research is that strategic considerationsand collective bargaining structures often influence foreign directinvestment. In this paper, I argue that union support for the decentralisationof collective bargaining may be an optimal response to the growingglobal nature of the firms that employ their members. I show thatunions prefer a more wage-oriented bargaining posture if their membersare faced with a greater outsourcing threat. The model is able torationalise the empirically insignificant effects of outsourcingon wages. The findings are also consistent with the growing wageinequality and falling union membership that some countries haveexperienced since implementing more decentralised forms of collectivebargaining.