Business and politics

1. Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/Irwin

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Chapter 16
The Changing Workplace
This chapter takes a systematic look at the
external and governmental forces changing the
workplace.

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Ford Motor Company
Opening Case
 Ford sold 15.5 million Model T’s from 1908 to 1926
 In 1927 failure to observe market trends forced the
plant to close for 7 months while the Model A was
designed.
 Henry Ford was a obstinate man, obsessed with
power, iron-willed, dictatorial, and cynical about
human nature.
 Henry Ford’s treatment of his employees led to
unionization in 1941.
 In the early 1980s the firm suffered disastrous
losses due to heightened international competition.
 Ford tried to change the company culture.

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Ford Motor Company
Opening Case (continued)
 Taurus rejuvenates profits from 1985 to 1995.
 1994 - Chairman Alexander Trotman instituted a radical
change program to prepare for an even more competitive
global car market.
 1999 - a new CEO, Jacques Nasser, attempts to remake
Ford’s culture yet again.
 2000 – Ford Explorer tire failures cause disaster.
 2001 – Henry Clay Ford, Jr. restructures.
 2006 – New CEO Alan Mulally announced the need for one
more reorganization.
This short history of Ford Motor Company illustrates how forces
in the business environment have shaped the work lives of Ford
employees.

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External Forces Changing
the Workplace
 Demographic change
 Technological change
 Structural change
 Competitive pressures
 Reorganization of work
 Government intervention

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Demographic Change
 Population dynamics slowly but continuously
alter labor forces.
 Overall labor force growth is slowing
 The number of workers in some demographic
categories is growing faster than in others,
producing incremental but significant changes.
 Hispanics and Asians are increasing their
numbers faster than whites and blacks are.
 Since the 1970s women have increased their
participation more rapidly than men.
 The workforce is aging.

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Technological Change
 Technical change has many impacts
on work.
 It affects the number and type of jobs
available.
 Automation has a turbulent impact on
employment.
 Automation causes significant job loss
in less-skilled manufacturing and service
occupations.

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Structural Change
 Structural change is caused by processes of job
creation and job destruction that continuously alter
the mix of productive work in every economy.
 Three long-term structural trends:
 The agricultural sector has declined from predominance
to near insignificance as an occupation.
 The percentage of workers employed in the goods-
producing sector is now in long-term decline.
 There is explosive growth in the service sector.
 Structural change is a critical factor in the decline
of labor unions.

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Historical Trend Lines for
Employment by Major Industry
Sector, 1800 to 2012 (Projection)

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Competitive Pressures
 Recent trends have intensified competition
for American companies.
 Customer demand
 Deregulation of large industries
 Global competition
 By global standards, American workers are
extremely expensive.
 Companies in some industries now
contract to have manufacturing done in a
foreign country.

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Reorganization of Work
 Corporations alter business processes as they
adjust to environmental changes, primarily
competition.
 As transport costs have fallen, manufacturers more
often separate production from consumption by
sending their manufacturing to low-cost countries,
then shipping products back to customers.
 Because of communication technology, service
work can now be sent to low-cost locations.
 Trade in services between nations is growing,
creating fears about job loss from outsourcing.

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Reorganization of Work
(continued)
 Offshoring has fueled attacks on
corporations for destroying well-paying jobs
in developed nations out of greed.
 In a recent one-year period 937,652
workers lost their jobs in mass layoffs,
however only 31,089 were unemployed
because their work left the country.
 Outsourcing so far is a minor portion of the
job gains and job losses of American
workers.

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Development of Labor
Regulation in the United States
 Historically, a strong laissez-faire
current in American economic
philosophy made governments at all
levels reluctant to interfere with the
employment contract.
 Today, government intervention is
extensive and growing, but this is a
twentieth-century trend.

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Liberty of Contract
 Before the 1930s, government intervention
on behalf of workers was very limited.
 In the late 1800s and early 1900s, strong
majorities on the Supreme Court upheld the
liberty of contract doctrine.
 The great flaw in the liberty of contract
doctrine was that it assumed equal
bargaining power for all parties,
whereas employers unquestionably
predominated.

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Waves of Regulation
 First wave – federal workplace regulation in the
1930s, which established union rights.
 Second wave – between 1963 and 1974, moved
federal law into new areas, protecting civil rights,
worker health and safety, and pension rights.
 Third wave – between 1986 and 1996, again
broadened the scope of federal law to address
additional, and somewhat narrower, employment
issues.
 State courts and legislatures have created
additional rules.

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Erosion of the Employment-at-
Will Doctrine
 Employment-at-will was traditionally defined
as an employment contract that could be
ended by either party without notice and for
any reason – or for no reason.
 Federal and state laws take away the right
to fire employees for many reasons,
including union activity, pregnancy, physical
disability, race, sex, national origin, and
religious belief.

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Erosion of the Employment-at-
Will Doctrine (continued)
 In addition, state courts have
introduced three common-law
exceptions to firing at will:
 Employees cannot be fired for complying
with public policy.
 Employees cannot be fired where an
implied contract exists.
 Courts in 11 states limit the employer’s
ability to fire when an implied covenant of
good faith is breached.

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Work and Worker Protection
in Japan
 Elsewhere in the developed world, workers benefit
from similar and even greater welfare guarantees
than in the U.S.
 Japanese males, called salarymen, enjoy virtual
lifetime employment in major firms.
 Japanese workers are very committed and
sometimes work themselves to illness or death.
 In Japan, the centuries-old Confucian tradition of
harmony in relationships prevents a labor-
management fissure, therefore unions never grew
strong and unified.

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Work and Worker Protection
in Europe
 In the aftermath of World War II, many countries
adopted a social welfare model of industrial
relations to protect their populations against the
ravages of depression and unemployment.
 Forces of global competition now strain this social
welfare model.
 European workers are so expensive to employ
that job-creating investments go elsewhere.
 In much of Europe, the results of lavish social
safety nets and protections are persistent, high
unemployment and slowed economic growth.

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The Trade-off in
Labor Regulation

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Labor Regulation
in Perspective
 The bare minimum for labor market
regulation is compliance with four core
labor standards set forth in
international labor conventions.
 Eliminate all types of forced labor.
 Abolish child labor.
 Ensure equal opportunity and
nondiscrimination.
 Guarantee collective bargaining.

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Concluding Observations
 The combined impact of the six forces changing
the workplace creates both uncertainty and
opportunity.
 Demographic and structural changes are
uncontrollable but also slow and predictable.
 Technological change is a disruptive force but it
has always created new jobs to replace the ones it
destroys.
 Competition and work reorganization are reshaping
labor markets everywhere.
 Experience suggests that workers fortunes will be
mixed.