Strike costs and public policy

Abstract

Strike costs provide incentives for bargaining parties to seek agreement by effective negotiation. To perform this role efficiently both the magnitude and distribution of such costs are crucial. Despite the apparently low aggregate costs of strikes the extreme concentration of stoppages indicates that costs may be sufficient. The burden of such costs appears inefficient in certain situations. In such cases government intervention may be required. Impending legislative changes in Britain contribute little to strike containment and are likely to manifest their effect in bargaining outcomes as opposed to the bargaining process. Increases in the strike costs suffered by one side in wage negotiations serve only to increase the relative bargaining power of the other side. Reductions in state subsidies to the strike costs suffered by labour appear more effective as a device for controlling wage growth than strike activity. A poor level of understanding of the strike process makes this an area where public policy must incorporate gradualism and pragmatism.

Industrial Conflict and the Nature of Labour Contracts

“…Secondly, efficient distribution of such costs requires that the major portion of them are borne by the parties directly involved, i.e. employer and employees, and not by outsiders or third parties [31]. Viewing conflict costs in this way highlights their positive role in a context of informational imperfections and discourages the view that such costs merely represent a welfare burden to society.…”