The auto industry is made up of many auto parts suppliers that are unionized by the United Auto Workers. Explain why the UAW and the auto parts suppliers might prefer a centralized over a decentralized bargaining structure and vice versa.

Question

Fill in the blank(s) with the appropriate word(s).

Answer 1

Employers are typically believed to prefer decentralized bargaining structures because this forces local unions to compete with each other, reduces the likelihood of pattern bargaining, and therefore allows wage competition to flourish. In addition, it is easier for the employer to address particular needs of individual locations. Unions are generally in favor of centralized bargaining because it allows them to consolidate their power and prevent whipsawing (competing with each other by driving down the price of labor). However, there are some downsides of centralized bargaining for the union. Centralized bargaining makes it more difficult for the union leaders to respond to local member demands because there is greater social and physical distance between them. Centralization also tends to increase the number of issues that arise at the bargaining table and make it difficult to tailor settlements to the individual needs at the local level because you are trying to please many constituents.