Contractual responses to structural changes in labor markets

by James N. Dertouzos, Timothy H. Quinn

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This paper presents an empirical analysis of the employment adjustments of the daily newspaper industry in response to a major long-term structural change in the demand for labor that has occurred over the past quarter century due to new technologies. The authors present a bargaining framework for analyzing worker-manager responses to structural changes, and find that when long-term contractual relationships exist, displaced workers are likely to receive some form of compensation for their jobs. The authors also develop a simple model to understand the types of compensation that are more likely to emerge, and present a detailed empirical analysis of the bargaining outcomes adopted to introduce the new technologies. They conclude that the existence of compensation does not depend on factors such as the collective structure of organized workers or the absence of a powerful conglomerate. Different institutional and market influences may affect the form of compensation, but not whether it occurs. Finally, they suggest that workers have few incentives to resist technological change, because new technologies are not introduced without regard for worker welfare.

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