Negotiated Cartelism

Negotiated cartelism is a labor arrangement in which labor prices are held above the market clearing level through union leverage over employers.

Labor finds this desirable because it can point to the increased wages it offers as signs of its achievement, and labor receives more money. Capitalists may find this desirable because there are "worse alternatives," i.e., strikes, workplace disruptions, etc. Furthermore, it acts as a barrier to entry against upstart firms. If all firms are required to pay higher than normal wages, it is difficult to compete on price, and an employer can take out an undercutting competitor by encouraging strikes. In this arrangement, consumers of the industry lose.