MSc Dissertation Research, London School of Economics - ONGOING
Regulating Outside Earnings in Pay Setting Systems: Collective Bargaining and Institutional Dependence
MSc Dissertation Prospectus, London School of Economics (in progress)
Introduction and Stakes
This project examines how outside earning opportunities affect bargaining within systems of pay setting. Much of the existing literature assumes that improved outside options strengthen bargaining power and lead to higher wages. This expectation, however, rests on the assumption that workers continue to rely on a shared institutional framework when negotiating pay.
This dissertation advances a different claim. Outside earnings introduce a tension: while they may increase bargaining power, they may also reduce reliance on collective systems. Framed in these terms, the problem is one of regulation. Regulatory arrangements structure how workers relate to pay-setting institutions and, in doing so, shape whether outside earnings strengthen bargaining within a system or shift workers away from it. This prospectus focuses on clarifying this mechanism and identifying observable implications through which it can be empirically assessed.
Research Question
How do outside earning opportunities affect workers’ reliance on collective pay-setting systems, and how does regulation shape whether they strengthen or weaken bargaining within those systems?
Theoretical Framework
Access to outside earnings changes the position from which workers bargain. Once workers can supplement their primary income, they face a choice between using those earnings to strengthen their position within an existing system or relying on them independently. This choice is shaped by the regulatory environment.
Regulation structures both exit and bargaining, either anchoring workers within a shared system or allowing external income to develop independently. To capture this variation, regulation is understood along three dimensions: centralisation, integration, and enforcement, which together determine whether workers remain embedded in a coordinated system or are able to operate outside it.
Within this framework, outside earnings generate two distinct dynamics. In one, they function as leverage, strengthening bargaining within the system. In the other, they function as a substitute, reducing reliance on the system and encouraging more individualised earning strategies. Which dynamic dominates depends on how regulation is structured.
Hypotheses
This framework generates two competing hypotheses concerning how outside earnings shape bargaining within regulated pay setting systems.
The leverage hypothesis holds that, within a centralised and regulated system, access to outside earnings increases bargaining power within the system, which should be observable in higher negotiated salaries and sustained or stronger engagement with collective bargaining institutions. This expectation would be undermined if outside earnings are not associated with higher pay or coincide with declining union engagement.
By contrast, the substitution hypothesis holds that, where outside earnings are not integrated into a shared system, access to those earnings reduces reliance on collective bargaining. This should be observable in weaker engagement with the union and no clear positive relationship between outside earnings and salary, and would be undermined if workers with outside earnings both earn more within the system and remain equally or more engaged in collective bargaining.
Mechanism and Evidence
The argument links access to outside earnings to the strength of collective bargaining institutions. By increasing reservation income, outside earnings alter dependence on league salaries and, in turn, incentives to engage with collective bargaining.
This produces two pathways. Reduced dependence may lower the risks associated with collective action, making players more willing to support union activity, including coordinated demands or strike action. Alternatively, external income may reduce the perceived importance of collectively negotiated contracts, encouraging a shift towards individual strategies and weakening engagement with the system.
If outside earnings function as leverage, they should be associated with higher salaries within the WNBA and visible support for union activity, including participation in collective actions and public backing of union demands. If they function as a substitute, there should be little or no relationship between outside earnings and salary, alongside lower levels of participation in union activity and a greater emphasis on financial independence.
Two forms of evidence are used to assess these expectations. E1 focuses on outcomes within the system, using salary comparisons between players with and without access to outside earnings. These earnings will be proxied through overseas participation, endorsements, and alternative competitions such as Unrivaled. E2 focuses on behaviour, drawing on interviews, media coverage, and social media activity to assess how players engage with the union and describe their relationship to the league. These indicators are not exhaustive, and additional forms of evidence will be incorporated as the research develops.
Case Selection and Research Design
The empirical focus is the Women’s National Basketball Association, which combines a centralised collective bargaining agreement with significant opportunities for outside earnings. Players routinely supplement their salaries through overseas leagues, commercial partnerships, and alternative competitions while remaining part of a structured pay setting system, making it possible to observe how external income interacts with collective bargaining.
The timing of the project is particularly relevant in light of the 2026 collective bargaining agreement, which substantially increases salaries and links pay more directly to league revenue. These changes represent an effort to strengthen the centrality of the WNBA as a pay setting system and may reduce reliance on outside earnings.
To clarify the role of regulation, the project also considers Name, Image, and Likeness compensation in college sports as a shadow case. In this setting, pay setting is fragmented and individualised, and athletes earn income through sponsorships outside any centralised bargaining system. This contrast illustrates how different regulatory environments shape whether outside earnings reinforce or undermine collective arrangements.
Evidence and Methods
The project combines quantitative and qualitative evidence to evaluate the proposed mechanism. Publicly available WNBA salary data will be used to assess outcome differences within the system, while indicators of outside earnings will be constructed using observable proxies. This will be complemented by qualitative evidence, including interviews with players, agents, league representatives, and members of the players’ association, as well as analysis of media coverage and public statements.
The aim is not to establish strict causality, but to assess which hypothesis is better supported by the evidence.
Contribution and Limitations
This dissertation contributes to the study of regulation by showing that outside earnings affect not only bargaining power but also the strength of collective bargaining institutions. It highlights how regulatory structures shape whether those institutions are reinforced or weakened.
Outside earnings are not fully observable, and higher profile players may both earn more and have greater access to external opportunities. The project is therefore best understood as theory building, using empirical evidence to evaluate competing explanations.
Conclusion
Outside earning opportunities do not have a uniform effect on bargaining power. They create a tension between strengthening workers’ position within a system and enabling them to operate outside it. Whether that tension resolves in favour of leverage or substitution depends on how regulation structures the relationship between workers, their earnings, and the institutions that govern pay.