The effect of replacement workers on public sector collective bargaining outcomes and social welfare

It might be natural to think that both policies should have opposite effects: an increase in the availability of replacement teachers raises, the bargaining power of the school board and reduces the wage demand of the union and the probability of strike, while an increase in the wages received by replacement teachers lowers the bargaining power of the board and raises the wage demand of the union [...] Specifically, an increase in the wages received by replacement teachers makes strikes more costly for the school board and hence, increases the likelihood that the school board accepts the initial wage demand of the union and reduces the probability of strike (direct effect). [...] On the other hand, an increase in the availability of replacement teachers makes strikes less costly for the school board, and hence reduces the likelihood that the school board accepts the initial wage demand of the union and increases the probability of strike (direct effect). [...] The rationale for the school board’s maximization of the difference between the valuation of labor services and the cost of these services relies on the budget constraint that a school district confronts. [...] The school board’s valuation of the loss in the quality of educational services due to a strike and the use of the less productive replacement teachers is greater than the difference in salary that the school needs to pay if the regular workers accept the reservation wage 14The results from the benchmark model still hold under this model setup.