Question
Negotiations between Delco Manufacturing and the union representing its employees are at an impasse. The union is seeking a 4.5% wage increase. Delcos offer is
Negotiations between Delco Manufacturing and the union representing its employees are at an impasse. The union is seeking a 4.5% wage increase. Delcos offer is 2%. The employees have passed a vote authorizing job action. Suppose the union succeeds in winning the 4.5% increase after a two-month strike. For an employee 10 years from retirement, will there be any economic gain? Compare the current economic values of (1) 10 years end-of-month wages at the employers offer (102% of last years wages) vs. (2) wages including a 4.5% increase to the same time horizon but after a two-month strike. Assume money is worth 6% compounded monthly.
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