The Institutionalist Law and Economics of Labor Union Renewal.

This Article proposes a new legal and economic analysis of labor unions to replace the "monopoly" model, according to which collective bargaining is likely to reduce union employment and lower non-union wages. The prospect that collective bargaining harm some of its intended beneficiaries in this way should be of some concern to those of us who advocate sweeping labor law reforms to transfer income to low-wage workers. It is also a pressing and unresolved theoretical question what precisely is wrong with the monopoly union model and what should replace it. This Article develops a model in which, under certain institutional conditions, labor unions can bargain with firms over both wages (the price of labor) and employment (the quantity of labor hired), along a contract curve rather than the labor demand curve. This "price-quantity" bargaining enables union wage gains that do not reduce employment or non-union wages and therefore have no counterproductive distributive effects. Unlike most progressive defenses of collective bargaining, this Article refrains from relying on market failures like monopsony and workplace public goods, the curing of which enables some union wage gains with no employment reductions. Instead, this Article is based on "legal institutionalism," an approach that posits that even perfect or textbook markets are inevitably shaped by legal rules and institutions. On the level of theory, the model of price-quantity collective bargaining enables fruitful developments of legal institutionalism, in particular of its core claim that there are always many possible market equilibria depending on how legal rules are configured. The contract curve, a locus of equally efficient points which parties can reach by exercising legally-created bargaining power, is the key component of this institutionalist alternative to the monopoly union model. On the level of policy, this analysis points to contractual and legislative mechanisms that can make labor unions a more effective redistributive instrument today. Price discrimination, fixed labor/capital ratios, profit sharing, seniority layoffs, job security, and cross-sectoral collective bargaining are the main policy tools analyzed here, in the spirit of revitalizing labor law in an age of endemic low-wage, precarious work. [ABSTRACT FROM AUTHOR]

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