Chapter 01


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Contemporary Labor Relations

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Chapter 01

  1. 2. Foundations <ul><li>Labor relations is more than negotiating employment contracts </li></ul><ul><ul><li>The labor relationship </li></ul></ul><ul><ul><li>Key models of the employment relationship </li></ul></ul><ul><ul><li>Determinants of labor relations outcomes </li></ul></ul>
  2. 3. Foundations <ul><li>Topics by Chapter </li></ul><ul><ul><li>Contemporary Labor Relations Objectives, Practices, and Challenges </li></ul></ul><ul><ul><li>Labor Unions: Good or Bad? </li></ul></ul><ul><ul><li>Labor Relations Outcomes: Individuals and the Environment </li></ul></ul>
  3. 4. Learning Objectives <ul><li>By the end of this chapter… </li></ul><ul><ul><li>Understand why studying labor relations is important, and how it can be fascinating </li></ul></ul><ul><ul><li>Define the objectives of the employment relationship (efficiency, equity, and voice) and of labor relations (striking a balance) </li></ul></ul><ul><ul><li>Describe the basic features of the contemporary U.S. labor relations system exclusive representation, collective bargaining, detailed contracts, and private sector union density decline </li></ul></ul>
  4. 5. Learning Objectives <ul><ul><li>Discuss the current pressures on the U.S. labor relations system </li></ul></ul><ul><ul><ul><li>On the corporate side, workplace flexibility and employment involvement </li></ul></ul></ul><ul><ul><ul><li>On the labor side, low union density, a representation gap, and difficulties organizing new workers </li></ul></ul></ul><ul><ul><li>Determine that there are many different options for structuring labor relations systems, as illustrated by examples from around the world </li></ul></ul>
  5. 6. Objectives of Employment Relationships <ul><li>What do you want to get out of working? </li></ul><ul><ul><li>Money? </li></ul></ul><ul><ul><li>Health insurance? </li></ul></ul><ul><ul><li>A feeling of accomplishment? </li></ul></ul><ul><ul><li>A sense of self-worth? </li></ul></ul><ul><ul><li>Something else? </li></ul></ul>
  6. 7. Objectives of Employment Relationships <ul><li>How do you want to be treated? </li></ul><ul><ul><li>Like a machine, or fairly and with respect? </li></ul></ul><ul><ul><li>Do you want to be told what to do? </li></ul></ul><ul><ul><li>Would you rather have input into the job? </li></ul></ul><ul><li>What do employers want? </li></ul><ul><ul><li>High-quality work </li></ul></ul><ul><ul><li>Productivity </li></ul></ul><ul><ul><li>Team players </li></ul></ul>
  7. 8. Objectives of Employment Relationships <ul><li>Efficiency </li></ul><ul><ul><li>Productive use of scarce resources for economic prosperity </li></ul></ul><ul><li>Equity </li></ul><ul><ul><li>The provision of fair labor standards for both material outcomes and personal treatment </li></ul></ul><ul><li>Voice </li></ul><ul><ul><li>The ability of employees to have meaningful input into workplace decisions </li></ul></ul>
  8. 9. Objectives of Employment Relationships <ul><li>Efficiency, equity, and voice often clash </li></ul><ul><ul><li>Equitable treatment might reduce flexibility and efficiency </li></ul></ul><ul><ul><li>Employee voice might make decision making more cumbersome and therefore less efficient </li></ul></ul><ul><ul><li>Unions centralize power to better achieve equity, but become less responsive to individuals </li></ul></ul><ul><li>Labor relations must strike a balance between these conflicting goals </li></ul>
  9. 10. Regulation of Employment Relationships <ul><li>The U.S. not only tolerates collective bargaining, but encourages it </li></ul><ul><ul><li>Everyone has the right to form and join trade unions for the protection of his/her interests </li></ul></ul><ul><li>Bargaining Objectives </li></ul><ul><ul><li>Negotiate the terms and conditions of employment </li></ul></ul><ul><ul><li>Mutual aid </li></ul></ul><ul><ul><li>Protection </li></ul></ul>
  10. 11. The Role of Labor Unions <ul><li>Although stereotyped with inflated wages and restrictive work rules, unions typically </li></ul><ul><ul><li>Secure better wages to provide decent living standards for their members </li></ul></ul><ul><ul><li>Negotiate extensive work rules to protect members against unfair treatment by management </li></ul></ul><ul><ul><li>Provide voice and representation to individual workers </li></ul></ul>
  11. 12. Plan of the Book <ul><li>Part 1 </li></ul><ul><ul><li>Presents the major themes of labor relations </li></ul></ul><ul><li>Part 2 </li></ul><ul><ul><li>Focuses on New Deal industrial relations system </li></ul></ul><ul><ul><li>History of the system and labor law </li></ul></ul><ul><ul><li>Strategies, structures, and conflicting rights </li></ul></ul><ul><ul><li>How unions are formed </li></ul></ul><ul><ul><li>How contracts are negotiated </li></ul></ul><ul><ul><li>Resolution of bargaining disputes </li></ul></ul><ul><ul><li>How grievances are solved </li></ul></ul>
  12. 13. Plan of the Book <ul><li>Part 3 </li></ul><ul><ul><li>Focuses on issues straining the New Deal industrial relations system in the 21 st century </li></ul></ul><ul><ul><ul><li>Employee involvement </li></ul></ul></ul><ul><ul><ul><li>Workplace flexibility </li></ul></ul></ul><ul><ul><ul><li>Globalization </li></ul></ul></ul><ul><li>Part 4 </li></ul><ul><ul><li>The current state of employment affairs and future options for reform </li></ul></ul>
  13. 14. Major Components of the Book
  14. 15. Efficiency <ul><li>Efficiency is important to the employment relationship because of its effect on </li></ul><ul><ul><li>Competitiveness </li></ul></ul><ul><ul><li>Economic development </li></ul></ul><ul><ul><li>Economic prosperity </li></ul></ul><ul><li>Efficiency equals Pareto optimality </li></ul><ul><ul><li>No one can be made better off without making someone else worse off </li></ul></ul>
  15. 16. Efficiency <ul><li>The efficiency of self-interested individuals exchanging in free markets is fostered by </li></ul><ul><ul><li>Well-defined property-rights </li></ul></ul><ul><ul><li>The freedom to enter into contracts </li></ul></ul><ul><ul><li>Protections against property damage </li></ul></ul><ul><li>These economic and legal theories are mutually reinforcing </li></ul>
  16. 17. Market Failure <ul><li>An inefficient outcome is a market failure </li></ul><ul><ul><li>Trying to correct this failure through government regulation or subsidies can make things worse </li></ul></ul><ul><li>Labor market “perfect competition” </li></ul><ul><ul><li>Employers and employees are economic and legal equals </li></ul></ul><ul><ul><li>Real-world market imperfections can favor the employer </li></ul></ul>
  17. 18. Labor Market Failure <ul><li>The realities of labor markets </li></ul><ul><ul><li>Employees have incomplete information about dismissal policies, accident risks, or pensions </li></ul></ul><ul><ul><li>Individuals without financial resources aren’t the legal equal of corporations </li></ul></ul><ul><li>Employees are made less mobile by </li></ul><ul><ul><li>Labor markets </li></ul></ul><ul><ul><li>Unvested pension benefits </li></ul></ul><ul><ul><li>Health insurance </li></ul></ul><ul><ul><li>Lack of savings or other resources </li></ul></ul>
  18. 19. Labor Market Failure <ul><li>Superior employer bargaining power can produce </li></ul><ul><ul><li>Low wages and long hours </li></ul></ul><ul><ul><li>Dangerous conditions </li></ul></ul><ul><ul><li>Arbitrary or abusive supervisory practices </li></ul></ul><ul><li>These conditions undermine </li></ul><ul><ul><li>Trust </li></ul></ul><ul><ul><li>Cooperation </li></ul></ul><ul><ul><li>Motivation </li></ul></ul>
  19. 20. Labor Market Failure <ul><li>Industrial Parasitism </li></ul><ul><ul><li>A company profits from paying low wages with no health insurance </li></ul></ul><ul><ul><li>Society pays for food and medical care for the workers’ families </li></ul></ul>
  20. 21. Efficiency in Employment Relationships
  21. 22. Equity Standards <ul><li>The push for equitable employment focuses largely on minimum standards </li></ul><ul><ul><li>Minimum wages </li></ul></ul><ul><ul><li>Maximum hours </li></ul></ul><ul><ul><li>Minimum safety standards </li></ul></ul><ul><ul><li>Protections against arbitrary discharge and favoritism </li></ul></ul><ul><ul><li>Restrictions on child labor </li></ul></ul>
  22. 23. Equity <ul><li>Equity theory defines fairness in terms of inputs and outputs or effort and reward </li></ul><ul><ul><li>A fair day’s pay for a fair day’s work </li></ul></ul><ul><ul><li>Distributive justice </li></ul></ul><ul><li>Other equity factors </li></ul><ul><ul><li>Political equality </li></ul></ul><ul><ul><li>Social stability </li></ul></ul><ul><ul><li>Workplace fairness </li></ul></ul>
  23. 24. Equity Factors <ul><li>Workplace equity can also be based on </li></ul><ul><ul><li>Political theories of liberty and democracy </li></ul></ul><ul><ul><li>Moral views of human dignity </li></ul></ul><ul><ul><li>Humanistic psychology theories of human nature </li></ul></ul><ul><ul><li>Religious beliefs about the sanctity of human life </li></ul></ul>
  24. 25. Sources of Support for Equity <ul><li>Democratic Ideals </li></ul><ul><ul><li>Discriminatory treatment and a lack of minimum standards is counter to the ideals of democracy </li></ul></ul><ul><ul><li>Citizens should be free and equal </li></ul></ul><ul><ul><li>Citizens must have a basic level of material well-bring to function as political equals </li></ul></ul><ul><ul><li>Equal protection </li></ul></ul><ul><ul><li>Due process </li></ul></ul>
  25. 26. Sources of Support for Equity <ul><li>Principles of Human Dignity </li></ul><ul><ul><li>Paying unfair wages violates Kant’s philosophy that actions must treat humanity as an end, not as a means </li></ul></ul><ul><ul><li>According to Maslow, the workplace should provide the basics needed for self-development and actualization </li></ul></ul>
  26. 27. Sources of Support for Equity <ul><li>Many religions emphasize sanctity of human life and respect for human dignity </li></ul><ul><ul><li>Standards for wages and hours of work </li></ul></ul><ul><ul><li>Sick and disability pay </li></ul></ul><ul><ul><li>Justice, fairness, and equitable distribution of wealth </li></ul></ul><ul><ul><li>Lack of discrimination or favoritism </li></ul></ul><ul><ul><li>Restrictions on child labor </li></ul></ul>
  27. 28. Voice <ul><li>Having meaningful input into decisions </li></ul><ul><ul><li>Workers should be able to express unpopular views without fear of arbitrary treatment </li></ul></ul><ul><ul><li>Disagreements should be resolved through fair dispute resolution procedures </li></ul></ul><ul><ul><li>Workers should be able to participate in decision making, either directly or through representatives </li></ul></ul>
  28. 29. Voice <ul><li>Key Distinctions </li></ul><ul><ul><li>Management establishes/controls the collective voice mechanism for nonunion employees </li></ul></ul><ul><ul><li>Unions that represent individual employees are largely free of managerial authority </li></ul></ul><ul><li>Employee voice is an important part of </li></ul><ul><ul><li>Improving competitiveness and quality via employee involvement programs </li></ul></ul><ul><ul><li>Creating high-performance work systems </li></ul></ul>
  29. 30. Voice <ul><li>Benefits of Employee Voice </li></ul><ul><ul><li>Formal mechanism for employees to contribute to productivity-improving ideas </li></ul></ul><ul><ul><li>Fulfills need for personal growth and development </li></ul></ul><ul><ul><li>Enhances performance through increased job satisfaction and motivation </li></ul></ul><ul><ul><li>Improves two-way communication between employees and management </li></ul></ul><ul><ul><li>Increases cooperation and reduces turnover by facilitating trust and sense of fairness </li></ul></ul>
  30. 31. Voice <ul><li>Industrial Democracy </li></ul><ul><ul><li>Premised on belief that workers are entitled to democratic participation in the workplace </li></ul></ul><ul><li>Theory versus Reality </li></ul><ul><ul><li>The workplace as a school or training ground for democracy </li></ul></ul><ul><ul><li>Work is often undemocratic </li></ul></ul>
  31. 32. Voice <ul><li>Stakeholder Theory </li></ul><ul><ul><li>All stakeholders, not just shareholders or owners, deserve the right to participate in decision making </li></ul></ul><ul><ul><li>Not arguing in favor of labor unions </li></ul></ul><ul><li>Voice Perspectives </li></ul><ul><ul><li>Moral </li></ul></ul><ul><ul><li>Religious </li></ul></ul><ul><ul><li>Psychological </li></ul></ul><ul><ul><li>Political </li></ul></ul><ul><ul><li>Economic </li></ul></ul>
  32. 33. Isn’t Efficiency Enough? <ul><li>Efficiency, measured by profits, is often the only consideration </li></ul><ul><ul><li>Mainstream media has elevated the rights of consumers over the rights of workers </li></ul></ul><ul><ul><li>General belief is “what’s good for a company is good for the world” </li></ul></ul><ul><ul><li>Businesses are not designed to be democratic training grounds </li></ul></ul><ul><ul><li>A company has no obligation to provide personal and moral development </li></ul></ul>
  33. 34. Social and Human Boundaries <ul><li>Equity and voice are social boundaries on efficiency </li></ul><ul><ul><li>Often quite weak, as with employment-at-will </li></ul></ul><ul><ul><li>Lack of just cause discharge protections </li></ul></ul><ul><li>In agrarian and crafts-based societies, quality of life is linked to property </li></ul><ul><ul><li>Modern workers are dependant on jobs, not property </li></ul></ul>
  34. 35. Social and Human Boundaries <ul><li>Jobs and the Workplace </li></ul><ul><ul><li>The most important site of cooperative interactivity and sociability with adults, outside of the family </li></ul></ul><ul><ul><li>Economic inequality exacerbates social inequalities in </li></ul></ul><ul><ul><ul><li>Schooling </li></ul></ul></ul><ul><ul><ul><li>Health </li></ul></ul></ul><ul><ul><ul><li>Housing </li></ul></ul></ul><ul><ul><ul><li>Political participation </li></ul></ul></ul>
  35. 36. Social and Human Boundaries <ul><li>Most workers want more influence over decisions that affect their job or work life </li></ul><ul><ul><li>They would enjoy their jobs more </li></ul></ul><ul><ul><li>Their businesses would be more competitive </li></ul></ul><ul><li>Managers like to deal with workers 1-on-1 </li></ul><ul><ul><li>Half of workers prefer dealing with management as a group </li></ul></ul><ul><li>The Internet and email help workers exercise their voice </li></ul>
  36. 37. Unions and Voice <ul><li>Unions underscore voice in union literature and campaigns </li></ul><ul><ul><li>Unions overseas also emphasize voice </li></ul></ul><ul><li>Social commentators, labor leaders, and workers want </li></ul><ul><ul><li>Fairly distributed outcomes (equity) </li></ul></ul><ul><ul><li>Participation in decision making (voice) </li></ul></ul><ul><ul><li>Profitable and effective production of goods and services (efficiency) </li></ul></ul>
  37. 38. Contemporary U.S. Labor Relations <ul><li>Why might society and workers support unionization? </li></ul><ul><ul><li>Unions help strike a balance between efficiency, equity, and voice </li></ul></ul><ul><li>U.S. labor law assumes that corporations have greater power than individual workers </li></ul><ul><ul><li>This can result in substandard wages and benefits, discriminatory treatment, autocratic supervision, long hours, dangerous working conditions </li></ul></ul>
  38. 39. Contemporary U.S. Labor Relations <ul><li>U.S. labor law protects union activity in order to promote </li></ul><ul><ul><li>Efficiency : increasing the purchasing power of workers and reducing disruptive strike activity </li></ul></ul><ul><ul><li>Equity : achieving fair standards and protections against exploitation </li></ul></ul><ul><ul><li>Voice : providing democracy in the workplace </li></ul></ul>
  39. 40. Contemporary U.S. Labor Relations <ul><li>If a majority of workers want union representation </li></ul><ul><ul><li>The employer must bargain with the union over wages, hours, other terms/conditions </li></ul></ul><ul><ul><li>Workers cannot be fired or discriminated against for their union support </li></ul></ul><ul><ul><li>Employers cannot threaten employees or take action to prevent unionization </li></ul></ul>
  40. 41. Collective Bargaining <ul><li>Representatives of the employer and employees negotiate employment terms and conditions </li></ul><ul><ul><li>Compensation (economic items) </li></ul></ul><ul><ul><li>Personnel policies/procedures (language issues) </li></ul></ul><ul><ul><li>Employee and employer rights and responsibilities </li></ul></ul><ul><ul><li>Union rights and responsibilities </li></ul></ul><ul><ul><li>Dispute resolution and ongoing decision making </li></ul></ul>
  41. 42. Collective Bargaining <ul><li>The crucial feature of collective bargaining </li></ul><ul><ul><li>Management’s authority to unilaterally establish the terms and conditions of employment is replaced by bilateral negotiations </li></ul></ul><ul><ul><li>Workers have a collective voice </li></ul></ul><ul><li>The result of bargaining is a contract </li></ul><ul><ul><li>One page in 1937 </li></ul></ul><ul><ul><li>Hundreds of pages and multiple volumes today </li></ul></ul>
  42. 43. Collective Bargaining <ul><li>Pressures for competitiveness and quality add pressure to collective bargaining </li></ul><ul><ul><li>The need for flexibility (efficiency) clashes with lengthy contracts with detailed work rules (equity) </li></ul></ul><ul><ul><li>The need for cooperation and employee involvement clashes with the adversarial bargaining process </li></ul></ul><ul><ul><li>The need for flexibility and involvement is not well served by long-term contracts </li></ul></ul>
  43. 44. Pressure for Reform <ul><li>Management’s Perspective </li></ul><ul><ul><li>Adversarial negotiations do not promote trust and cooperation </li></ul></ul><ul><ul><li>Need to supplement high-level, periodic negotiations with ongoing low-level communication and problem-solving mechanism </li></ul></ul><ul><ul><li>Lengthy, detailed contracts inhibit flexibility and involvement </li></ul></ul><ul><ul><li>Labor laws are outdated </li></ul></ul>
  44. 45. Pressure for Reform <ul><li>Labor’s Perspective </li></ul><ul><ul><li>Labor law is weak </li></ul></ul><ul><ul><ul><li>Penalties are minimal </li></ul></ul></ul><ul><ul><ul><li>Delays are frequent </li></ul></ul></ul><ul><ul><ul><li>Employers can use captive audience speeches and permanent strike replacements </li></ul></ul></ul><ul><ul><ul><li>Secondary boycotts are prohibited </li></ul></ul></ul><ul><ul><li>Private sector union density is less than 10 percent </li></ul></ul><ul><ul><li>Workers in the global economy need protection more than ever </li></ul></ul>
  45. 46. Declining Union Membership <ul><li>Private sector U.S. union density has been declining for at least 50 years </li></ul><ul><ul><li>Decline in traditionally unionized industries </li></ul></ul><ul><ul><li>Regional and demographic shifts </li></ul></ul><ul><ul><li>Increased numbers of women in the workforce </li></ul></ul><ul><ul><li>Increased education and skill levels </li></ul></ul>
  46. 47. Declining Union Membership
  47. 48. Declining Union Membership <ul><li>Demand for union services has declined </li></ul><ul><ul><li>Unions not doing a good job of responding to the needs of a changing workforce </li></ul></ul><ul><ul><li>Employers have improved their responsiveness to employees’ needs </li></ul></ul><ul><ul><li>Increased protective legislation has provided a substitute for unions </li></ul></ul><ul><ul><ul><li>Civil Rights Act and Equal Pay Act </li></ul></ul></ul><ul><ul><ul><li>Occupational Safety and Health Act </li></ul></ul></ul><ul><ul><ul><li>Family Medical Leave Act </li></ul></ul></ul>
  48. 49. Declining Union Membership <ul><li>Employer Resistance or Opposition </li></ul><ul><ul><li>American managers are exceptionally hostile toward unions </li></ul></ul><ul><ul><li>Strong tradition of using union avoidance tactics </li></ul></ul><ul><ul><li>Failure to invest in unionized plants </li></ul></ul><ul><ul><li>Actively fighting organization drives </li></ul></ul>
  49. 50. Representation Gap <ul><li>Employees want more representation in the workplace than they have </li></ul><ul><ul><li>One-third of nonunion workers would like a union in their workplace </li></ul></ul><ul><ul><li>Union density is only 10 percent </li></ul></ul><ul><li>Is this related to private section employer opposition to unionization? </li></ul><ul><ul><li>Also declining in Great Britain </li></ul></ul>
  50. 51. Global Snapshot of Labor Relations
  51. 52. Continued Relevance of Labor Relations <ul><li>Labor relations continues to be a relevant and dynamic area of study and practice </li></ul><ul><ul><li>All managers should understand labor relations </li></ul></ul><ul><ul><li>U.S. labor laws affect both union and non-union workplaces </li></ul></ul><ul><ul><li>Reveals consequences of poorly managed workforces </li></ul></ul><ul><ul><li>Explains historical, social, and political influences on business </li></ul></ul><ul><ul><li>Helps everyone understand and resolve conflict </li></ul></ul><ul><ul><li>Reveals how work and business are embedded in a complex environment </li></ul></ul>
  52. 53. Continued Relevance of Labor Relations <ul><li>Labor relations involves diverse factors </li></ul><ul><ul><li>Market forces </li></ul></ul><ul><ul><li>Managerial strategies </li></ul></ul><ul><ul><li>Forms of work organization </li></ul></ul><ul><ul><li>Constitutional and legal issues </li></ul></ul><ul><ul><li>History </li></ul></ul><ul><ul><li>Questions of human rights </li></ul></ul><ul><ul><li>Negotiation and conflict resolution strategies </li></ul></ul><ul><ul><li>Debates over globalization </li></ul></ul><ul><ul><li>Ethical challenges </li></ul></ul>
  53. 54. Continued Relevance of Labor Relations <ul><li>Underlying labor relations issues </li></ul><ul><ul><li>Goals of the employment relationship </li></ul></ul><ul><ul><li>How labor markets operate </li></ul></ul><ul><ul><li>Major environmental pressures </li></ul></ul><ul><ul><li>Union strategies </li></ul></ul><ul><ul><li>Public policy </li></ul></ul>