Arbitration safeguards employee interest by providing a means of grievance settlement that uses neutral third parties. It also promotes the public interest by providing a way to resolve conflict without strikes or service interruptions. Gradually, the use of arbitration has increased, indicating an inhibition of the use of the prearbitration phase for settling grievances. Nevertheless, the proportions of cases reaching arbitration and those settled at the prearbitration phase have remained almost constant. However, arbitration may have enhanced Federal employees' chances for greater wage rates than their private counterparts, since the wages of public employees have increased faster than those of private employees from 1955 to 1973, and this increase has come at less cost to the individual employee. Although the existence of arbitration in the public sector has not eliminated bargaining, compulsory arbitration is likely to subvert and weaken collective bargaining if disputing parties view that process as the least costly alternative for resolving grievance issues. Data tables, figures, distribution list, and 30 references are provided.