How will the recent wave of mergers affect the nation?
June 2, 1998
in this forum:
What is the correlation between mergers and the strength of the economy overall? How will the recent wave of mergers affect the consumer? Does the recent wave of mergers mean fewer rights for labor? In this emerging global economy, how do mergers affect third world countries? Is bigger better? H. Victor Youngmeyer of Toa Baja, Puerto Rico, asks: Does [the recent wave of mergers] mean fewer rights for labor?
Professor Adams responds:
Mega-mergers tend to distort the equality of bargaining power between management and labor. They tend to weaken the position of labor at the bargaining table.
A multinational giant, for example, typically operates in many markets and diverse industries. It clearly has superior bargaining power to a labor union in any one country. It commands incomparably greater resources which it can mobilize to outspend and outwait a local labor union in the case of industrial disputes. Generally, such inequality of power weakens the position of organized labor.
Professor Weston responds:
Merger activity has been associated with forces that have been good for labor. In 1980, 99 million were employed in the U.S. During the decade of hectic merger activity, 20 million jobs were added to bring the total in 1990 to 119 million. Another 11 million jobs were added to bring the total to 130 million by 1997.
In the early 80s, the unemployment rate was 9.7%. In 1998, the unemployment rate has been running at 4.6%, more than a 50% drop. So the forces that have produced mergers have also produced more jobs for labor.
If one looks at the industries and firms in which labor has unions to enforce worker rights, it is in the industries and companies that are big. So the bigger firms will mean stronger labor unions and more rights for labor.