John Davidson propounded this theory. Under this theory, wages are determined by the relative bargaining power of workers of their union and of employers.

1. Bargaining theory – Wage theories
Compensation Management

2. Prepared By
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Manu Melwin Joy
Assistant Professor
Ilahia School of Management Studies
Kerala, India.
Phone – 9744551114
Mail – manu_melwinjoy@yahoo.com

3. Bargaining theories
• John Davidson
propounded this theory.
Under this theory, wages
are determined by the
relative bargaining power
of workers of their union
and of employers.

4. Bargaining theories
• The bargaining theory of
wages holds that wages,
hours, and working
conditions are determined
by the relative bargaining
strength of the parties to
the agreement.

5. Bargaining theories
• Smith hinted at such a
theory when he noted that
employers had greater
bargaining strength than
employees. Employers
were in a better position to
unify their opposition to
employee demands, and
employers were also able
to withstand.

6. Bargaining theories
• Limitations on the scope of
bargaining are also
suggested by theory.
Collective bargaining can
be seen as the reduction of
two risks to which the
worker is exposed through
individual bargaining.

7. Bargaining theories
• here is first the risk that
the worker will be merely
one of a number of
applicants for a single
vacancy and that
competition between
them will force the pay
down.

8. Bargaining theories
• In the bargaining theory of
wages, there is no single
economic principle or
force governing wages.
Instead, wages and other
working conditions are
determined by workers,
employers, and unions,
who determine these
conditions by negotiation.