What is the difference between collective bargaining and efficiency wages?

When, Where and on what basis did this appear in which countries economy. How does this relate to the current U.S. economy?


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Collective bargaining is essentially where organised workers unions negotiate wage rates (also working hours, conditions etc) with employers. In practice this will generally mean that employees that are members of unions will recieve a higher rate of pay than non-union employees.

An efficiency wage is the theory that by paying workers more than the market equilibrium wage, the employer will gain higher productivity and efficiency for their firm. The idea is that by paying higher than the average wage, workers will be less inclined to look for other jobs (as they will usually be lower paid) and also be happier and healthier (better standard of living).

Both practices are common in any nation that protects unions and aims to increase productivity and efficiency.

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