Negotiating with Labor Under Financial Distress

By Efraim Benmelech, Nittai K. Bergman, Ricardo Enriquez. 2012

146 citations recorded by the source corpus.

We analyze how firms renegotiate labor contracts to extract concessions from labor. While anecdotal evidence suggests that firms tend to renegotiate down wages in times of financial distress, there is no empirical evidence that documents such renegotiation, its determinants, and its magnitude. This paper attempts to fill this gap. Using a unique data set of airlines that includes detailed information on wages and pension plans we document an empirical link between airline financial distress, pension underfunding, and wage concessions.

Subfields: Accounting

View Paper: https://www.semanticscholar.org/paper/1d0ad1f69f285530457f6b519b7f393fb67e4a69

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Citations in the corpus

Using 10-K Text to Gauge Financial Constraints (2015, background): “Benmelech, Bergman, and Enriquez (2012) show that airlines obtain wage concessions from employees whose pension plans are underfunded.”
Labor Protection and Leverage (2015, unknown): “yit = γt + λi + δ · EPLk,t−1 + ζ · Lit + θ · (EPLk,t−1 × Lit) + β ·Xit + it (7) Here Lit denotes the liquidation value of the assets and our variable of interest is θ.”
Human Capital, Capital Structure, and Employee Pay: An Empirical Analysis (2013, background): “See, e.g., Benmelech, Bergman, and Enriquez (2009), who show that airlines in financial distress obtain wage concessions from employees whose pension plans are underfunded; Matsa (2010), who finds that firms characterized by greater union bargaining power use greater leverage; and Hanka (1998), who…”
Boarding a Sinking Ship? An Investigation of Job Applications to Distressed Firms (2016, background): “Other recent papers also integrate labor economics and finance and focus on the use of leverage as a strategic input in the bargaining process between workers and firms (e.g., Matsa 2010; Chen, Kacperczyk, and Ortiz-Molina 2011; Benmelech, Bergman, and Enriquez 2012).”
Do Nonfinancial Stakeholders Affect the Pricing of Risky Debt? Evidence from Unionized Workers (2012, unknown): “See Ippolito (1985) and Benmelech et al. (2010). 5 The idea that workers and managers are natural allies in some circumstances is stressed by Hellwig (2000) and formalized by Pagano and Volpin (2005b) in the context of takeover threats.”