What Is Sectoral Bargaining?

Briana Mercedes Weidner, illustrator by day - janitor by night

Sectoral bargaining—also known as multiemployer, industrywide, or broad-based bargaining—is a form of collective bargaining that provides contract coverage and sets compensation floors for most workers in a particular occupation, industry, or region.

While broad-based bargaining can—and sometimes does—occur in the United States, current labor laws emphasize enterprise-based bargaining, in which unions negotiate with individual employers on behalf of a group of workers at a particular worksite. For example, a union might negotiate with a supermarket chain on behalf of workers at a particular store or with a building service company on behalf of janitors in a specific building. With sectoral bargaining, collectively bargained standards extend to every grocery store worker or janitor in the region.

Although both enterprise-based and sectoral bargaining raise compensation and reduce inequality, sectoral bargaining offers several advantages over worksite-level bargaining that make it well-suited for the modern economy.

Why does the United States need sectoral bargaining?

The current enterprise-based system makes joining a union and bargaining very difficult. Today, less than 12 percent of workers are covered by a collective bargaining agreement—even as roughly half of workers say they would like to join a union. Moreover, current labor laws leave out millions of workers, many of whom are women and people of color. The protections of the National Labor Relations Act, for example, exclude domestic workers, agricultural workers, and independent contractors. And in some of the fastest-growing industries—including food service and retail—layers of contracting make traditional union organizing and bargaining challenging.

What are the benefits of sectoral bargaining?

Sectoral bargaining offers an inclusive path forward with several benefits, including:

  • Increases coverage: Under sectoral bargaining, more workers receive the higher wages and benefits that collective bargaining delivers. Indeed, researchers at the Organization for Economic Cooperation and Development explain that “collective bargaining coverage is high and stable only in countries where multi-employer agreements (i.e. at sector or national level) are negotiated.” Broad-based bargaining is particularly effective at covering those who are hardest to reach, such as workers in small worksites and people who are employed part time or in other nonstandard employment.
  • Closes racial and gender pay gaps: By standardizing pay, sectoral bargaining encourages a more compressed wage distribution, which helps equalize pay for women. Centralized pay structures also help limit racial discrimination. As a result, in the public sector—where unions and standardized compensation structures are more common—women and African American and Hispanic workers experience smaller gender and racial pay gaps than their counterparts in the private sector.
  • Reduces economic inequality: Research consistently shows that collective bargaining reduces economic inequality. By increasing coverage, centralized sectoral bargaining tends to reduce inequality even more than workplace-level bargaining.
  • Boosts economic productivity: By setting higher compensation floors and encouraging employers to provide similar pay to workers who do similar jobs, sectoral bargaining incentivizes companies to compete based on greater productivity rather than lower pay. In doing so, it prevents low-road companies—those that do not offer good wages and benefits—from undermining high-road companies that do right by their workers. Broad-based bargaining can also reduce employee turnover, promote workplace collaboration, and incentivize worker training. 

How can the United States achieve sectoral bargaining?

In order to achieve sectoral bargaining across the U.S. economy, policymakers must take the following steps:

  • Strengthen unions: A critical step to facilitate worker organization is to pass the Protecting the Right to Organize Act. The bill would increase penalties on companies that break the law, enhance workers’ right to strike, and override “right-to-work” laws that undermine workers’ basic right to come together in strong unions. In addition, policymakers should pass the Public Service Freedom to Negotiate Act, which would give all public sector workers the right to organize and collectively bargain. Elected officials should also actively encourage union membership with policies that are proven to facilitate union recruitment.
  • Extend union contracts: Policymakers should promote collective bargaining and allow the gains of union contracts to be spread to similarly placed workers, regardless of whether those workers belong to a union. For example, U.S. policy could expand upon prevailing wage laws that require companies receiving government funding to match existing wage and benefits levels in their industry or region.
  • Create workers’ boards: In industries where work is particularly fissured or unions are particularly weak, policymakers can create workers’ boards. Workers’ boards—also known as wage boards—are government bodies that bring together representatives of workers, employers, and government to set minimum wage rates, benefits, and workplace standards across an entire occupation or industry.

While some of these changes would require federal reforms, policymakers already have the power to implement many of these elements at the state and local levels.

How does sectoral bargaining interact with workplace-level bargaining?

Sectoral bargaining helps to set compensation floors that cover most workers, while worksite-level unions are better at addressing workplace-specific issues. A modernized labor system requires both sectoral bargaining and workplace-level bargaining. Sectoral efforts ensure that union and nonunion worksites have similar labor costs, which reduces employer incentives to fight unionization. Stronger worksite unions, in turn, allow workers to negotiate for more at the sectoral level. Most countries with sectoral bargaining combine it with worksite-level bargaining, and countries that encourage sectoral bargaining generally have higher union density than countries that do not encourage it. In the mid-20th century, a variety of U.S. industries—including, most notably, the auto industry—successfully engaged in broad-based bargaining alongside workplace-level bargaining, which was critical to fostering high middle-class wages and low economic inequality.

David Madland is a senior fellow and the senior adviser to the American Worker Project at the Center for American Progress Action Fund. Malkie Wall is a research assistant for the Economic Policy team at the Action Fund.

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