Conditions to Reach Optimum Salary Agreements Between Unions and Companies in Mexico

We show that a skewed income distribution and incomes greater than the minimum wage are sufficient conditions for the median to approach the average income in Mexico and thereby reduce inequality. Additionally, final salaries (Nash equilibria) are deducted for the companies and union, by replicating Farber's (1980) final arbitration model. We show that the initial proposals of 25% and 12.8%, from the union and the company respectively, are insufficient; since under the aforementioned conditions, final salaries can be determined in a proportion of 3 and 2 times the initial proposals of the union and companies, respectively. Furthermore, the parties involved should consider in their initial proposals that the authorities do not necessarily have the conditions to act in an unbiased manner.