Negotiating with Labor Under Financial Distress

48 Pages Posted: 11 Jul 2011

See all articles by Efraim Benmelech

Efraim Benmelech

Northwestern University - Kellogg School of Management; National Bureau of Economic Research (NBER)

Nittai Bergman

Tel Aviv University; National Bureau of Economic Research (NBER)

Ricardo Enriquez

Harvard University

Multiple version iconThere are 2 versions of this paper

Date Written: July 2011

Abstract

We analyze how firms renegotiate labor contracts to extract concessions from labor. While anecdotal evidence suggests that firms tend to renegotiate down wages in times of financial distress, there is no empirical evidence that documents such renegotiation, its determinants, and its magnitude. This paper attempts to fill this gap. Using a unique data set of airlines that includes detailed information on wages and pension plans we document an empirical link between airline financial distress, pension underfunding, and wage concessions.

Suggested Citation

Benmelech, Efraim and Bergman, Nittai and Enriquez, Ricardo, Negotiating with Labor Under Financial Distress (July 2011). NBER Working Paper No. w17192. Available at SSRN: https://ssrn.com/abstract=1882160

Efraim Benmelech (Contact Author)

Northwestern University - Kellogg School of Management ( email )

Evanston, IL 60208
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Nittai Bergman

Tel Aviv University

Ramat Aviv
Tel-Aviv, 6997801
Israel

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ricardo Enriquez

Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

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