The Effect of Replacement Workers on Public Sector Collective Bargaining Outcomes and Social Welfare: The Case of School Teachers

Abstract:     
This paper studies the effect of replacement teachers on regular school teachers' wages, strike likelihood, and social welfare. We model the collective bargaining negotiations between the school board and the regular teachers' union as a sequential game theoretic model of incomplete information, and explicitly include into the model the effect of replacement teachers. Our findings suggest that the increase in the availability of replacement teachers in case of a strike increases the bargaining power of the school board. As a consequence, the probability of strike and the settlement wages of regular teachers are reduced. We show that the increase in the availability of replacement teachers has a positive welfare effect, and that the increase in the replacement teachers' wages is a welfare improving policy.

Number of Pages in PDF File: 30

Keywords: Collective Bargaining, Strikes, Replacement Workers, Non-Cooperative Games, Asymmetric Information

JEL Classification: J58, J52, C72, D82

working papers series