A Power Model of the Labour Market
- 1 Multidisciplinary Economic Methodology, Utrecht University School of Economics, Utrecht, The Netherlands
Abstract
This article discusses a bilateral monopoly model of wage determination in which the employers determine the level of production and employment. The threat of a strike is the principal instrument of the employees, while employers, being the owners of the monopoly surplus, can simply ignore wage claims. In the orthodox-economic model the wage elasticity of labour demand as well as the horizon and the discount rate used when calculating strike costs and strike benefits, are essential. In a heterodox-economic model employers can frame their reality in an Austrian or in a neoclassical way. Employees can frame their reality in a radical-economic or in a post-Keynesian way. The frame chosen affects the factors discussed in the orthodox model. Moreover, irrationality (from behavioural economics) and immorality (fro m social economics/economic sociology) play a significant role in the outcome of the negotiations. To make participants more rational and morally aware, a Communication Platform should be set up, in order to organize Habermas-like power-free confrontations. In this way society could slowly move from a shareholder society to a stakeholder society.
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