It is frequently said that employers and employees would both benefit if only they would cooperate with each other. Although this notion is largely true, being primarily a matter of production, it cannot be used to resolve labor disputes, which are mainly concerned with distribution. In fact, if one assumes that preference functions and production techniques are given, then the options that benefit both sides would have already been exhausted, except for those choices discouraged by imperfect information and risk uncertainty. However, it is in dealing with this imperfect information and risk uncertainty that the government and the labor unions may play an important role.
This paper attempts to investigate the functions of the government and labor unions in the broad area of labor relations. Our conclusion is that rigorous labor laws and regulations should deal only with the most basic work conditions, while the details and specifics of separate cases should be left to individual labor contracts. Labor disputes must also be settled quickly and fairly. Finally, labor unions should be developed further so that they may independently spread knowledge of labor laws and oversee their implementation.
