Table of Contents

Research Handbook on the Economics of Labor and Employment Law

Research Handbook on the Economics of Labor and Employment Law

Research Handbooks in Law and Economics series

Edited by Cynthia L. Estlund and Michael L. Wachter

This Research Handbook assembles the original work of leading legal and economic scholars, working in a variety of traditions and methodologies, on the economic analysis of labor and employment law. In addition to surveying the current state of the art on the economics of labor markets and employment relations, the volume’s 16 chapters assess aspects of traditional labor law and union organizing, the law governing the employment contract and termination of employment, employment discrimination and other employer mandates, restrictions on employee mobility, and the forum and remedies for labor and employment claims.

Chapter 2: Neoclassical labor economics: its implications for labor and employment law

Michael L. Wachter

Subjects: economics and finance, labour economics, law and economics, law - academic, law and economics


The application of economics to labor and employment law trails its application in virtually all other areas of business and commercial law. Topics such as contracts, torts, corporations, commercial law, and tax have all readily integrated economic reasoning as an assist to legal reasoning. In almost all these cases, moreover, the economics concept of efficiency has been accepted as one of the goals of the law. This is decidedly not the case in labor law or, for the most part, in employment law. Disagreement over fundamental principles serves as an important explanation for this relative lack of emphasis on economic reasoning. Most labor law scholars believe deeply that collective bargaining is the preferred framework for the employment relationship. They tend to share the original goal of the National Labor Relations Act (NLRA), which remains on the books today, of equalizing bargaining power by enabling workers to engage in collective bargaining with their employers. The NLRA’s goal of equalizing bargaining power encompassed both procedural and substantive ends: it sought to promote the mechanism of collective bargaining and, in doing so, to raise wages above the market wage that would prevail absent unionization.

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