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collective bargaining, process of negotiation between representatives of workers and management to determine the conditions of employment. The power of each party in the bargaining process depends on its ability to convince the other of the reasonableness of its demands and the sanctions it can impose if its demands are not met (of which strikes by labour and lockouts by management are the primary examples). The collectively determined agreement may cover not only wages but hiring practices, layoffs, promotions, working conditions and hours, worker discipline, and benefit programs.
Collective bargaining existed as early as the end of the 18th century in England; its development on the European continent and in the United States occurred later and more slowly. Collective agreements are probably most significant in the United States and the United Kingdom and least significant in developing countries with large pools of surplus labour. The degree of centralization in the bargaining process and the functions performed by collective agreements vary.
Contract negotiation may occur at the national, regional, or local level, depending on the structure of industry within a country. National agreements, which are more frequent in smaller countries, usually settle general matters, leaving more detailed issues for local consideration. Collective agreements may set actual wage rates or may be limited to minimum wage rates. In Germany, for example, considerable differentiais between the contract wage rate and the actual prevailing rates are considered quite normal. Collective agreements are not legally binding in all countries; in England, for example, their application depends on the goodwill of the signatories. In some countries, including Germany, France, and Australia, the terms of negotiated settlements may be extended by the government to apply to all firms in an industry. Similar results are sometimes accomplished informally in the United States under the tradition of allowing key bargaining agreements to set the pattern for other settlements in an industry.
