McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. C1-2 Chapter One Efficiency, Equity and Voice

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. C1-3 Studying labor relations must begin with the objectives of the employment relationship. The U.S. labor relations system represents an attempt to achieve and balance these objectives. This system faces important pressures and continues to be criticized from many directions. As illustrated by the labor relations system of other countries, however there are numerous alternatives. CONTEMPORARY LABOR RELATIONS: OBJECTIVES, PRACTICES, AND CHALLENGES

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. C1-4 LEARNING OBJECTIVES 1.Why studying labor relations is important, and how it can be fascinating. 2.The objectives of the employment relationship (efficiency, equity, and voice) and of labor relations (striking a balance). 3.The basic features of the contemporary U.S. labor relations system- exclusive representation, collective bargaining, detailed contracts, and private sector union density decline. 4.The current pressures on the U.S. labor relations system-on the corporate side, workplace flexibility and employment involvement (stemming at least partly from globalization); on the labor side, low union density, a representation gap, and difficulties organizing new workers. 5.That there are many different options for structuring labor relations systems as illustrated by examples from around the world.

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. C1-5 ASK YOURSELF Q1: What do you want to get out of working? Q2: How do you want to be treated? Q3: How do you want your job conditions determined? Q4: What do employers want?

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. C1-6 ASK YOURSELF Common Responses: Q1: What do you want to get out of working? $, benefits, self-worth, accomplishments Q2: How do you want to be treated? Fairly, and with respect Q3: How do you want your job conditions determined? Talk with supervisor Q4: What do employers want? High-quality work, productivity

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. C1-7 THE OBJECTIVES OF THE EMPLOYMENT RELATIONSHIP Efficiency Economic performance-the effective use of scarce resources (competitiveness, productivity, quality, economic prosperity) Equity Fair employment standards fir outcomes and treatment (justice) Voice Meaningful input into decisions (discretion, industrial democracy)

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. C1-8 EFFICIENCY Effective use of scarce resources. Economic performance and competitiveness Basis for consumption and investment Central focus is on whether labor is being utilized effectively? But how to achieve an efficient employment relationship? Baseline: free markets with common law supports Question marks: Externalities? Destructive competition? Rational, selfish human agents? And thus, a role for institutions?

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. C1-9 Beyond Efficiency Contemporary discourse is dominated by Efficiency Neoclassical economics Human resource management Conservative political discourse By the closely-aligned sanctity of Property Rights Standard economic theory: well defined property rights+free transactions=aggregate welfare maximization Property Rights also serve as basis of liberty But what about a concern for how people are treated?

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. C1-10 EQUITY Fair employment outcomes and treatment IR emphasis: minimum standards and protections against exploitation and abuse HR emphasis: fairness and organizational justice (distributive and procedural Why? Efficiency: increases employee loyalty/commitment Moral: importance of human dignity (e.g., Kant) Religious: sanctity of human life (e.g., Rerum Novarum) Political: free and equal citizens (e.g., Rawls)

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. C1-11 VOICE Meaningful input into workplace decisions. Industrial democracy Individual decision-making/autonomy Includes both individual and collective voice. Includes both nonunion and independent employee representation. Why? Political: industrial democracy necessary for a political democracy (counter coercive power; create a culture of participation) Moral: human dignity includes self-determination Religious: sanctity of human life includes self-development Efficiency: employee involvement Property Rights: Stakeholder theory Rights

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. C1-12 VOICE Industrial democracy is this inherent collective voice and representation in the workplace. Social commentators, labor leaders, and workers want a workplace that provides fairly distributed outcomes. Participation in decision making. Production of goods and services profitably and effectively.

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. C1-13 Labor Relations LABOR RELATIONS examines how employee representation, typically through independent labor unions, contributes towards achieving a BALANCE between efficiency, equity, and voice. E FFICIENCY E QUITY V OICE U.S. labor law protects union activity to promote efficiency, equity, and voice.

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. C1-14 CONTEMPORARY U.S U.S. labor law protects union activity to promote efficiency, equity, and voice.

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. C1-15 Employee Decision-Making Some element of control or discretion Importance of self-determination in human dignity Basic human need? Stakeholder theory Employees have a legitimate “stake” in the enterprise and should be entitled to participate in decision-making Unlike Hirschman’s “voice,” voice here is not just an efficiency-enhancing alternative to exit It is important in its own right as self-determination

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. C1-16 Major Collective Bargaining Subjects Compensation Personnel Policies and Procedures Employee Rights and Responsibilities Employer Rights and Responsibilities Union Rights and Responsibilities Dispute Resolution and Ongoing Decision-Making

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. C1-17 Thickness of U.S. Union Contracts First UAW-General Motors Contract (1937) Contemporary UAW-General Motors Contract (circa 2000) Contemporary UAW-Saturn Contract (circa 2000) National Agreement (2”) Local Supplement ( 3/8”) (1/16”)

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. C1-18 Continuing pressures on the New Deal Industrial Relations System Management’s Perspective Adversarial negotiations create distrust and acrimony rather than trust and cooperation. Need to supplement high-level, periodic negotiations with ongoing low-level communication and problem solving mechanisms. Lengthy, detailed contracts inhibit flexibility and involvement. Labor law is outdated: these are things of the past: us v. them (management v. labor) bureaucratic production American domination of markets

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. C1-19 Continuing pressures on the New Deal Industrial Relations System Labor’s Perspective Labor law is weak: penalties are minimal, delays are frequent, employers can use captive audience speeches and permanent strike replacements, secondary boycotts are prohibited. Private sector union density is less than 10 percent. Workers need protection more than ever in the global economy.

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. C1-20 U.S. Union Membership,

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. C1-21 CONTEMPORARY U.S. LABOR RELATIONS Business climate of the 21 st Century is characterized by: Flexible production methods. The rise of knowledge workers. The blurring of traditional distinctions between brawn and brains. Intense global competition.

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. C1-22 United States Union DensityBargaining Structure 15 percent and falling Decentralized Key Features Exclusive RepresentationBusiness Unionism Very formal, legalistic, enforceable contracts resulting from formalized negotiations Public policy is very interventionist in terms of labor relations processes (certification, bargaining, dispute resolution, etc.) One example of an attempt to balance the rights of labor and capital, and balance efficiency, equity, and voice…but there are alternatives...

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. C1-23 Canada Union DensityBargaining Structure 35 percent and stable Decentralized Key Features Exclusive RepresentationMore Social Unionism Law is decentralized relative to United States Wagner Act model but with key modifications (certification procedures, strike replacement restrictions) Canada is a 10 percent random sample of the United States (but with small differences that matter)

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. C1-24 Mexico Union Density 25 percent Bargaining Structure Government control with “negotiations” as part of national development strategies as dictated by political leaders Key Features Appearance v. Reality: Constitution grants the right to form unions, strike, etc. (much stronger protections than in the United States), but unions have been weak, undemocratic, and tightly controlled (labor leaders more loyal to the state than the workers) Representative of other developing countries: labor relations controlled by the state; growing tension as independent labor movements emerge and international competitive pressures intensify

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. C1-25 European Union 15 European countries progressing towards an economic and monetary union, but Integration Requires Standards The EU’s Solution (regarding labor): The Charter of Fundamental Social Rights of Workers Non-binding declaration of workers’ rights, including Freedom of association and collective bargaining Information, consultation, and participation rights For specific points to be binding, they must be passed into EU legislation (generally requiring unanimity) or enacted as national laws Conflicting pressures of standards, integration, competitiveness, and autonomy

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. C1-26 Great Britain Union Density 30 percent and falling; coverage is 50 percent Bargaining Structure Varied: fragmented unions but industry/wage councils Key Features Minimal government intervention (bargaining is voluntary, agreements not legally enforceable) (though recent trend towards regulation of unions (mandating secret votes, closed shops, etc.) Recent trend toward greater formalization of workplace practices (rather than informal understandings and wildcat strikes) Unions have traditionally had close ties with the Labour Party Illustrates drawbacks of a voluntary system?

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. C1-27 Germany Union Density 30 percent and stable; coverage is percent Bargaining Structure Centralized: industrywide bargaining between national unions and employer associations (regional/national) Agreements can be extended to all employers in the industry Key Features Codetermination Works Councils Government has power to intervene, but isn’t typically necessary High degree of government-mandated benefits and protections Generally representative of northern European countries, but is the system flexible enough for the 21st century?

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. C1-28 Australia Union Density 30 percent and falling, but coverage of awards had been high Bargaining Structure Mixed: (weakening) centralized system of arbitration awards for pay combined with decentralized negotiations Key Features Unions organized primarily by craft/occupation (multiple unions common for single employer) Strikes are legally restricted, but labor relations often characterized as adversarial and conflictual Is decentralization and deregulation the answer to international competitive pressures?

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. C1-29 Japan Union DensityBargaining Structure 25 percent and falling Decentralized, ex. Shunto Key Features Enterprise Unionism: relationships generally characterized as cooperative Extensive information sharing between firms and employees Informal resolution of grievances (importance of maintaining a sense of community) Shunto (spring labor offensive): wages only; other issues settled by consultation A model for the 21st century? Or the domination of labor?

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. C1-30 THE CONTINUED RELEVANCE OF LABOR RELATIONS Continues to be relevant and dynamic area of study. HR managers, and managers generally, should understand the nature of labor relations. Important benefits for nonunion managers. Rich and fascinating way to reflect upon the nature of work from diverse perspectives.

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. C1-31 THE CONTINUED RELEVANCE OF LABOR RELATIONS LR involves diverse factors: Market forces Managerial strategies Forms of work organization Constitutional and legal issues History Questions of human rights Negotiation and conflict resolution strategies Debates over globalization Ethical challenges

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. C1-32 THE CONTINUED RELEVANCE OF LABOR RELATIONS Underlying LR issues include: Goals of the employment relationship. How labor markets operate. Major environmental pressures. Union strategies. Public policy.