Strengthening workers’ bargaining power can raise overall economic well-being, SU study finds

What determines wages and productivity?

The study combines detailed data on French firms and workers, including wages, hours worked, and product prices, with a model of how firms compete for customers and workers and how wages are bargained.

Findings show that high-paying firms tend to charge higher prices and share more of their profits with workers.

“They can charge higher prices partly because they make better-quality products, but also because they have greater market power,” Horng Chern Wong says.

Establishing workers’ negotiating skills is an important key to increasing both wages and productivity. Nevertheless, there are limits to how much it can actually achieve, according to Wong.

“Even if workers had all the bargaining power, only about one-third of the gap between the market outcome and the socially efficient benchmark would be eliminated,” he continues.

The findings point to the potential of competition policy and stronger worker bargaining power to improve economic outcomes, while also showing that their impact has clear limits.

Earlier this year, Denmark's Presidency of the Economic Council applied Wong’s approach developed in the paper, for their 2026 spring report on Danish economy.