Bargaining Power for Unskilled Labor
https://medium.com/david-grace-columns-organized-by-topic/limitations-on-bargaining-power-are-the-primary-reasons-for-the-low-price-paid-for-unskilled-labor-bc8c7f344eb6
According to Investopedia unskilled labor is “used to refer to a segment of the workforce associated with a limited skill set or minimal economic value for the work performed,”(https://www.investopedia.com/terms/u/unskilled-labor.asp) or in other words work that does not need any higher level of education than a high school diploma, sometimes work that does not even require a high school level of education. In this blog post I will be discussing the bargaining power of unskilled laborers and how that effects the reason for the low prices for unskilled labor.
Consider bargaining power in respect to demand-supply relationship. If a seller has high rates of selling for a certain item to the point of selling out, the demand is high for that item and the buyer does not have any other outside options or very few outside options allowing the seller’s bargaining power to increase (including 3rd party sellers with that item). On the other hand, when looking at buyers, if there is a surplus of certain items, the demand is lower than the supply, so the buyer has more bargaining power as sellers have no outside option. However this relationship is neither equal or inclusive in the real world, through further analysis of the seller-unskilled laborer relationship I will show that in real life situations numbers and actions do not have to necessarily have to follow the theories and assumptions precisely.
Due to the imbalance in bargaining power of each side (seller and unskilled laborer), sellers are able to set their own initial values for unskilled laborers. Now, we should assume there is no “correct” monetary value for unskilled labor, the values are set by the seller. This happens because the sellers can afford to do so, and they have many outside options they could use if they preferred. In addition, unskilled workers due to their financial situation and the fact that there is no unified bargaining unit, it puts unskilled laborers in a position where they hold almost no bargaining power. While supply and demand prices are set from market competition, there is not much of a market competition with unskilled workers as there is a saturation of unskilled workers and limited amount of space for sellers that need unskilled workers. This leads to giving the sellers all of the power as it allows them to negotiate with an ultimatum for workers, this “leave it or take it” style of negotiation where the seller is bound to win every time due to their position, as hiring a single unskilled laborer is not a must, but finding work for the unskilled laborer is a mandatory pursuit. Therefore, this gives sellers free-range for payment for unskilled workers causing low payments for unskilled workers.