Wage Bargaining under the National Labor Relations Act

Sections 8(a)(3) and 8(a)(5) of the National Labor Relations Act (NLRA) prohibit the management of a firm from unilaterally increasing the wage during contract negotiations without the union\u27s approval. We show how the management can strategically increase the wage during negotiations without violating the NLRA. Increasing the wage during negotiations will upset the union\u27s incentive to strike and decrease the union\u27s bargaining power, thereby shrinking the set of equilibrium contracts in the firm\u27s favor. Indeed, as the union becomes more patient, the set of equilibrium wages converges to the best equilibrium outcome to the firm