Influence of deregulation and foreign competition in bargaining power
Deregulation refers to the removal of regulations of government in the sphere of economy. During the 1980s, the concept of deregulation emerges in the countries of advanced economies. Foreign competition and deregulation affect labor market directly rather than management of the company. Regulation usually restricts the entrance of many foreign enterprises in a country. Due to this impact, companies of a particular country face potential competitors. The result of deregulation is directly proportional to international competition. As foreign competition increases, bargaining power of the labor market also increases which ultimately hampers the management of the companies regarding decreased productivity (Azmat, Manningn & Reenen, 2012). Before deregulation, the labor unions of different sectors like airlines, railways, and telecommunications can negotiate the wages of their members in the union.
However, after deregulation the whole phase of the world economy has changed. Labors of varied sectors of industries face reduced bargaining power. Lower bargaining power is applied to only low-skilled workers. It is not effective on the income of the high paid workers like a doctor, more senior rank government officials, lawyers, etc. Foreign competition in a country increases the number of companies that leads to decline in bargaining power. Government regulation and other regulatory agencies have weak control of many foreign companies (Ibsen, 2015). The free market is the effect of deregulation. Consumer choice is changing day by day, which is the result of competition in the market. Free trade benefits the management of organizations around the world. It also has a direct impact on economies of many countries. The effect is distinguished as macroeconomic effects.
Azmat, G., Manning, A., & Reenen, J. V. (2012). Privatization and the decline of labour's share: international evidence from network industries. Economica, 79(315), 470-492.
Ibsen, C. L. (2015). Three approaches to coordinated bargaining: A case for power-based explanations. European Journal of Industrial Relations, 21(1), 39-56.