A Multidisciplinary Approach to Labour Market Institutions

This article addresses a bilateral monopoly wage determination model in which employers ascertain the level of production and employment. The threat of a strike is the primary tool of employees, whereas employers, as owners of the monopoly surplus, can simply ignore wage claims. The wage elasticity of labour demand, as well as the horizon and discount rate used when calculating strike costs and benefits, are critical in the orthodox-economic model. Employers in a heterodox economic model can frame their reality in either an Austrian or a neoclassical manner. Employees can frame their reality in a radical-economic or post-Keynesian manner. The frame chosen has an impact on the factors discussed in the orthodox model. Furthermore, the outcomes of the negotiations are influenced by irrationality (from behavioural economics) and immorality (from social economics/economic sociology). A Communication Platform should be established to organize Habermas-style power-free confrontations in order to make participants more rational and morally aware. In this way, society could gradually transition from a shareholder to a stakeholder society.

The institutions of the different labour markets in the world are very diverse. So are the outcomes – Northern European countries show the best results in terms of human well-being. Institutions are significantly affected by the relative power of workers, employers and government. This article shows that not only hard power does play a role. Also soft power factors are important in reaching societal goals in terms of efficiency, stability and justice. Ideology and mentality do matter.