Final answer:
Unions and employers face risks with arbitration such as potential unfavorable outcomes, higher operational costs, and strained relationships.
Step-by-step explanation:
When unions and employers decide to use arbitration, they are taking on several risks. For unions, there is always the concern that arbitration may not result in favorable terms, especially in regards to job security in the face of emerging technologies. Unions, such as the longshoremen referenced in the historical case, often fear that labor-saving technology could reduce the number of jobs, which was manifested in the work stoppage on the western coast of the United States.
Employers, on the other side, risk arbitration resulting in higher operational costs, as the resulting agreements may require them to maintain high wages, health, and pension benefits.
Another aspect of the risk involves the potential for a breakdown in the relationship between the two parties. As highlighted by the usage of the Taft-Hartley Act in some labor disputes, governmental intervention can either exacerbate tensions or smooth the path to agreement. When arbitration is selected as the method to resolve conflicts, both unions and employers are essentially agreeing to yield control of the outcome to a third party, possibly abiding by decisions that could be seen as suboptimal or detrimental to their interests.
Therefore, the primary risks associated with the decision to use arbitration include the possibility of unfavorable terms of agreement, the risk of higher costs for employers, and the potential strain on labor relations. These risks are set against a backdrop of declining union membership and a shifting economy, where only about 12 percent of workers are currently unionized, and a majority of these are employed in the governmental sector rather than in private enterprise.