Manipulating Alternatives to No Agreement Question 4: Consider union-management

Question

Manipulating Alternatives to No Agreement Question 4: Consider union-management wage bargaining during Thanksgiving Weekend at Medieval Times Dinner Theatre. The extended weekend lasts Thursday through Sunday (4 days). On the Wednesday before the weekend, the employee's union confronts the management over wages. The union presents its demand. The management either accepts it, or rejects it and returns the next day with a counteroffer. Offers alternate each day thereafter. Each day Medieval Times operates with union labor, Medieval Times makes a profit of $37,000 before paying union wages. Each day without an agreement with the union, Medieval Times makes a profit of $18,000 after paying for expensive scab (non-union) labor, and union labor earns $7,000 from outside employment What percentage of the gains from an agreement should the union demand from management in the initial bargaining round? What wage should the union demand from management in the initial bargaining round? Should management accept that initial demand? Now suppose that, before bargaining takes place, the union convinces management that each day Medieval Times operates without union labor will cause the union to strike and that strike will subtract $4,000 from Medieval Times profit from scab (non-union) labor and will subtract $3,000 from labor's earmings from outside employment. Re-compute the wage the union should demand from management in the initial bargaining round Answer to Question

Explanation / Answer

Let's consider the 2 scenarios as mentioned in the question.

Assuming union wages/day when union works with the company=$x/day

For a considerable proposal the company must be proposed with an advantage of atleast 5-10% in the beginning and further bargaining can be done later.

As a member of management team I would re-propose to the union with a 25% advantage for the company.

This will still be double of union wages in scenario 2. So I think the union will accept this offer.

Now lets consider the second situation wherein, union explains a strike situation.

Again, For a considerable proposal the company must be proposed with an advantage of atleast 5-10% in the beginning and further bargaining can be done later.

Same calculations:

As a member of management team I would re-propose to the union with a 25% advantage for the company.

This will still be 4 times of union wages in scenario 2. So I think the union will accept this offer.

With union labor Without union labor Company profit/day ($37,000)-(x) $18,000 Union wages/day x $7,000

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