DELAYED-PAYMENT CONTRACTS AS A MEANS OF DISCOURAGING UNIONIZATION

Delayed-payment, self-enforcing implicit contracts are a viable means of discouraging unionization. A contract which would be terminated if employees unionize would reduce the expected gains from unionization for employees, because the firm would not be required to make the delayed payment. These contracts thus reduce the likelihood of unionization and are equivalent to requiring employees to post performance bonds that are forfeited to the firm if the workers unionize. Such contracts would benefit workers as well as the firm, and thus be viable, if unionization would impose deadweight losses (most likely as a result of discouraging specialized investment) and the firm's promises are credible. Delayed-payment contracts designed for other purposes, such as discouraging shirking, would also discourage unionization if unionization increased the likelihood that the contract would be terminated.