Introduction to Labor Relations
Professor Bruce Fortado
University of North Florida
MAN 4401/6411 Labor Relations
When students enter Labor Relations class, they often bring some emotionally charged
opinions with them. This is more the case in this course than it is in Human Resource
Management, Economics or Organization Behavior. This course contains components
that are political and ideological. It also involves moral values. The experiences students,
family members and friends have had all shape their outlooks toward labor unions.
This class has a unique perspective that many students have not seen before.
Most courses in business schools take a managerial perspective, and with the exception of
perhaps Business Ethics, little is said about improper managerial conduct. While Human
Resource Management and Organization Behavior do mention the employees, Labor
Relations normally is approached from a more balanced labor-management perspective.
In some cases, Labor Relations has material written from the perspective of the workers
on the lower levels. This can be quite a culture shock to some people who have only seen
a managerial perspective before.
In Europe, there is a relatively new outlook called “social constructionism.” This
deals with how meanings are built via negotiating, networking, story telling, joking, etc.
(“ing” words). Some people go a step further and talk about “deconstructionism.” Here,
the fundamental assumptions governing a situation are sought out, and the power
inequities and injustices are considered from the viewpoint of the disenfranchised. This
deconstructionist view involves a critique that may produce social change, or a
reconstruction of reality. I believe, long before these schools of thought were in vogue,
Labor Relations scholars were looking at how social structures were built, they identified
the inequities that existed, and they sought social reforms.
Our goals will be to learn about the roots and growth of U.S. unions. Many
people have an incomplete and sometimes sugar coated view of U.S. history. When my
students leave this class, they should have a more complete picture. Second, press reports
tend to emphasize conflicts and scandals, rather than cooperation and normal day-to-day
relations. We will strive to provide a balanced view of what exists. Third, whether you
love unions or hate them, you will be better off if you can understand why we have our
current laws, the practices one commonly encounters, and the reasons certain behavior
patterns exist.
I have found it useful historically to air some of the frequently encountered
viewpoints or criticisms of U.S. business unions.
(1) Are unions riddled with crooks?
During the 1950s there were Congressional inquiries into organized crime’s
involvement in certain unions (the Teamsters, the Bakery and Confectionary Workers,
the Longshoremen, etc.). Some unions were cleaned up at the time. Some unions that
resisted were ejected from the AFL-CIO. The Teamsters union got a great deal of press
over a very long period of time. Several of the Teamsters leaders were prosecuted and
some were convicted. You do not hear as much today about organized crime in unions.
One of my old texts pointed out only 300 out of 75,000 union locals had problems. This
was one-half of one percent. While I am not sure what the percentage is today, it is lower
than it once was. It is unclear that unions have more of a problem in this area today than
business organizations.
(2) Do unions featherbed (create jobs that have few if any duties), so some people are
paid for doing little if any work?
(3) Do most unions strive to create restrictive work rules? For example, someone
might lament how a worker can clean a light bulb, but only an electrician is
allowed to change a burned out light bulb. Can management live with such
restrictions in today’s highly competitive environment?
There is a legal restriction regarding featherbedding that we will see later.
Do managers ever take long lunches, socialize or knock off early? Have managers
ever been criticized for having lavish golf outings during a period of austerity? Have
some defense contractors gotten caught charging ridiculous amounts for toilet seats and
claw hammers? Do managers in the U.S. get paid far more compared to our workers than
their counterparts in Japan and other countries? Are managers immune from what the
workers and their unions are being criticized for? Is part of this human nature? Once
competition becomes intense, do these practices have to be brought in line?
Frederick Taylor and his Scientific Management associates pioneered breaking down
the elements of jobs. They sought out the “one best way” in terms of an exact set of
efficient motions for each job. Later, some unions institutionalized these distinctions.
Some craft unions resisted having the jobs they dealt with broken down. Restrictive
work rules, like the one mention above, grew out of craft unions attempting to retain their
skills. Restrictive work rules also grew out of the institutionalization of the specialization
created by scientific management. In recent years, there has been a loosening of work
rules, and many various job descriptions have been abandoned in favor of fewer job titles
that are much broader in nature.
(4) Do unions focus so much on raising wages that the leaders lose sight of the job
loses that are caused by increased labor costs?
When demand is expanding as it was over the course of the 1950s and 60s, one did
not feel the tradeoff between rising wages and lost jobs very strongly. As demand growth
slowed, came to a halt or shrank, an adjustment had to be made to save jobs. Many
people questioned in the late 1970s and early 80s whether the situation in industries like
the auto industry were in a temporary fluctuation or a long-term change. In other words,
this adjustment was slow and painful. Nevertheless, adjustments have been made.
(5) Are U.S. unions communistic?
Unions are a key part of free societies. Business unions have no place in totalitarian
regimes such as Facism and Communism.
The unions discussed in communist theory and those put in place in practice have
nothing to do with U.S. business unionism. Lenin felt business unionism would be
harmful. These unions improve conditions in the short-term, thereby putting off the
revolution he felt was necessary. Our unions view the classical communist unions after
the revolution as puppets (guardians of productivity). The people in Russia who felt they
would run the plants from the bottom-up were killed shortly after the revolution.
There were some instances historically were one would say communism was evident
in U.S. unions. The International Workers of the World (IWW) did talk in terms one
could call communistic (1905-WWI). The Congress of Industrial Organizations (CIO)
had communists within it. They had to be purged before the AFL and CIO could merge
in the mid-1950s.
(6) Do unions cause inflation?
When there is rapid inflation, some unions will bargain to keep up and some may
obtain Cost of Living Allowance clauses (COLAs) that kick in automatically. In other
words, unions may reinforce inflation once it is underway. In the late 1970s, we had high
unemployment and high inflation. Prior to this, many economists talked about there
being a tradeoff between inflation and unemployment (Phillips Curve). During this
period, some government officials and economists began talking about cost-push
inflation. The OPEC Cartel raising oil prices and unions raising wages in auto, steel,
rubber, etc., were cited as causes for inflation. My own feeling is, our government is the
biggest cause of inflation, and we should recognize who is responsible. Unions had been
in declined since the mid-1950s, so how they were causing inflation in the late 70s is a bit
of a mystery. Once bad economic conditions become clear, unions adjust. There are far
fewer union-management contract COLAs today. Social Security and military pensions
probably have more COLA impact than private sector unions do. The reason these
clauses were sought out was a defensive reaction to inflation.
(7) There are very few unions in the South, so why bother to study labor relations?
Florida was the nation’s first Right-to-Work state. In the sense unions cannot require
membership, after say 30 days, they are weaker in Right-to-Work states. One does not
see unions in the news and they do not strike very often in Florida. There are, however,
unions all around us. I have found unions in the Georgia-Pacific plant in Palatka, in the
paper plants here and in Fernandina, at AT&T, at Budweiser, at UPS, at JEA, at the
docks, in city government, and even in our junior colleges and universities.
(8) Some students work in white-collar settings. Why they should bother learning
about unions?
The workers in unions are people, not Martians. Many of the topics are interesting
and broadly applicable (discipline, negotiation, etc.). If one wants to avoid unions, and
most employers do, you had better understand them. Unions are a significant part of our
environment. If you want to operate in this environment, in terms of business, the stock
market, politics, costs, trade, etc., you should know something about unions.
Pluralism: The Ideology of the Institutional Economists
In order to understand the ideology underlying this course, we first have to review
some economic arguments. The assumptions and assertions of what might be called
Orthodox Economics (Adam Smith, 1937- originally 1776 ) were harshly criticized and
rejected by people who became known as “Pluralists” and/or the “Institutional
Economists.” The societal benefits of giving management a totally free hand did not
always coincide with the reality they observed. Nevertheless, we need to outline these
Orthodox Economic views to place Pluralism in the proper historical perspective.
First, let us consider the basic Supply and Demand picture of a labor market, where
the “invisible hand” will soon result in an equilibrium wage (W-1) being offered and an
equilibrium number of people being employed (N-1). These equilibrium levels are found
by looking for the intersection of the Supply Curve and the Demand Curve. This
intersection point results in the optimum allocation of resources for society. Things that
would interfere with this process would be labeled inefficiencies.
Several assumptions underpin the process of the “invisible hand” bringing us to
equilibrium. People are assumed to have “perfect information.” “Perfect mobility” is
also assumed. Employers are assumed to be small and powerless relative to market
forces. Employers must meet the working conditions offered by the market, or they will
not be able to staff their operations. This assumption is call “atomism.” In other words,
we are not considering the employment practices of monopolies or oligopolies at this
point. In a labor market, “exit” is the necessary and sufficient adjustment mechanism. If
an employer offered very poor employment conditions, employees will begin to leave for
more desirable positions. The employer will have to reform or face the prospect of losing
sales and market share to the competitors who can adequately staff their operations.
“Laissez-faire” was a popular phrase standing for leaving these processes alone, so the
benefits to society could be realized.
W
(Wage)
S (Supply)
D (Demand)
____________________________________
N (Number Employed)
In addition to these economic arguments, justifications for leaving matters in
employers’ hands came from other areas. “Providential destiny” was cited as an
explanation of why some were placed in positions to command and others to obey
(Gibbons, 1906: 81). People who objected to the status quo were thus questioning not
man, but God. “Social Darwinism” was offered as a “scientific” rationale (Alexander,
1979; Bannister, 1979). Under this theory, the most able and hard-working people rise to
positions of authority, and the workers should accept this “natural selection” process. On
the legal front, these philosophies supported an “employment-at-will” philosophy. In
sum, under these viewpoints, employers had many rights and owed the workers virtually
no obligations, albeit some owners felt a “paternalistic” duty to care for their workers.
Like a parent, these employers took care of their employees as if they were their children.
Reformers rejected these ideological justifications for managerial practices that
were abhorrent. The Orthodox Economists assumptions were rejected as unrealistic with
regard to labor situations by a group of people that became known as the Institutional
Economists. The Institutional Economists founded the Labor Relations field. Much of
the prosperity of the industrializing U.S. in the late 1800s benefited an elite few, while
the burden of producing this wealth fell on the workers’ backs (Litwack, 1962). The
logic of “survival of the fittest” meant nothing needed to be done about poverty, the
growth of slums, or inequities in educational opportunities. Waves of immigration
depressed wages to extremely low levels, hours were long, safety was often poor, and
child labor was prevalent. Many factors were simply left out of the Orthodox Economic
models. Human beings are different from most economic products. When wages are
reduced to bring about a new equilibrium, human beings, who often have families to
support, are quite likely to become angry. These workers motivation will decrease.
“Paternalism” sounded rather benevolent, but the exploitative rents and store
prices in company towns created debts that tied workers in place even more than poor
information and language barriers did. Jobs were hard to find and retain. Individual
workers were easy for an employer to replace. Yet, for these workers, a comparable job
was often difficult to find. This disparity in power constituted a major problem (Perlman,
1928). Those in power tended to take advantage of such situations. Protests were
brutally suppressed with evictions, blacklists, spies, strikebreakers and violence.
These harsh realities were far from the universally advantageous systems touted
by the abstract Orthodox Economic models. Contrary to the small powerless employers
described in atomism, many employers had a great deal of power. Under the “drive
system” that prevailed at the turn of the century, foremen closely scrutinized the workers,
harsh discipline was frequently doled out and favoritism in decision-making was the rule
(Jacoby, 1985). History seems to indicate when power is concentrated in the hands of a
few, abusive practices tend to follow (Stagner, 1956: 507-20).
John Commons and Selig Perlman were prominent figures in outlining the
alternative philosophy of “pluralism.” The labor problems that were apparent in the U.S.
did not stem from class conflict between rigid social stratum, and growing alienation, as
described by Karl Marx. Instead, Perlman (1928) developed the concept of “job scarcity
consciousness.” This term reflects the exit adjustment mechanism of Orthodox
Economics was flawed. Managers had little difficulty replacing low skilled workers,
while these workers had difficulty locating better jobs and switching into them. This
power disparity constituted a major problem.
The “Institutional Economists, or “Pluralists” sought to remedy these practical
problems by having the government safeguard the right to unionize and pass protective
social legislation on issues such as wages (the minimum wage, etc.), hours of work,
unemployment compensation, child labor and safety. Capitalism as a system was
accepted. Based on historic observations, these institutional adjustments were seen as
necessary. Allowing the workers to unite in a union would alleviate the power disparity
described by “job scarcity consciousness.” Whereas employers could easily replace
individual workers, replacing their entire workforce was another thing. Wages, hours and
working conditions would have to be jointly negotiated. This is often call “business
unionism.” Giving the workers voice was viewed as being consistent with the values of a
free democratic society. Protecting workers rights to organize and bargain were a critical
part of the New Deal of the 1930s.
Pluralists believe the employment relationship is one of “antagonistic
cooperation.” The parties have mutual interests, such as the survival of the operation.
However, they are also at odds over issues, such as managers tend to want to pay as little
as possible and receive maximum employee effort, while the workers tend to want to
exert far less effort and receive as much pay as possible.
These incongruous goals make conflict inevitable. Since society values the
interest of both management and labor (these are the plural interests of “Pluralism”),
some overt nonviolent conflict is see as natural and a sign of health. This shows neither
side has overwhelmed the other. As economic situations change, a strike may be needed
for the parties to bring their objectives and practices within practical bounds. The mutual
costs should bring the parties together from their extreme positions.
Pluralists believe the positive aspects of negotiating solutions to social conflicts
far outweigh the costs entailed (Barbash, 1984). Although both profits and wages are lost
in strikes, lockouts and boycotts, this is accepted as part of an overall system of checks
and balances that provides net benefits to society. Work is more than just a source of
income. Work is a critical part of the workers lives. Workers spend a great deal of their
waking hours at work. The pluralist’s institutional adjustments gave the workers more
choice and control over their lives than was previously the case. The workers were seen
as being due dignity and respect, unlike other economic products.
Normally, once a collective bargaining agreement is signed, grievances during the
life of an agreement are dealt with peacefully via arbitration by a third party neutral. A
clamor of voices and power struggles over day-to-day disputes are replaced by an
adversarial legalistic system that provides due process. It is assumed the truth will be
uncovered, and sound judgments will result, from the investigation, cross examination
and argument that takes place in the context of the collective bargaining agreement and
an evolving body of precedents (Kennedy, 1954).
The Two Faces of Unions
As union grew in legal legitimacy and practical strength after the New Deal, Labor
Relations scholars became less reform oriented and more balanced in their presentations.
In 1984, Freeman and Medoff published a book entitled What Do Unions Do? This book
outlined the two faces of unions, and it considered which face predominated. The
authors’ approach grew out of an earlier book by Albert Hirschman (1971) entitled Exit,
Voice and Loyalty. Exit was not seen as an efficient adjustment mechanism. Rather than
simply switching jobs the moment some discontent arose, a worker could voice his/her
discontent and seek an adjustment. Switching jobs involved costs for both parties. Why
not try to avoid these costs by having the employee see if the employer is willing to make
an adjustment on the matter that had caused discontent? Two problems crop up in this
process. First, there are public good aspects in this process. In other words, many
employees will remain quiet and “let Joe do it.” Second, there is the danger of retribution
being exercised by the employer. The power inequity mentioned earlier was perceived as
an inhibiting factor. There were a number of potential benefits that might be realized.
Whereas orthodox economics focused on marginal interests (those of the employees on
the cusp), group interests could become the focus. Improving voice would also allow
income distribution and equality-inequality issues to be considered. Further, political
systems may not always be efficient, but they may provide a check on abuses.
Voice Face (Union Negotiation)
(+)
Monopoly Face
(-)
Free Choice- Group Choice
(Checks and Balances Created)
Market Distortions: Union Wages Raised 15-33%,
Number employed down, Capital per Employee up
Seniority Reduces Favoritism
Lose Recognition of Individual Effort/Performance
Voice for Grievances (Arbitration)
Better Reform than Exit
Turnover Reduced
Undemocratic Autocracies
Criminal Element
Losses from Strikes/Picketing/Boycotts
Get Better Workers
Protect Poor Workers
Raise Nonunion Conditions
(spillover improvements)
Nonunion Wages Bid Down
Lower Wage Inequality
Restrictive Work Rules
Pursuit of Social Legislation
Selfish Political Ends
[Unions lower profitability toward the market rate of return.]
Overall, Freeman and Medoff concluded unions produced more positives than negatives.
A Labor Relations System
The parties (Management, Unions, Employees and the Government), operate in an
external environment composed of Economic Conditions (product market; labor market;
business cycles; etc.), A State of Technology (methods of monitoring workers have
improved; economies of scale have fallen with new technology, so one can have a
smaller plant and still be efficient; transport costs have fallen; infrastructures have been
developed elsewhere, so it is easier to move offshore, etc.), Laws (trade laws; patent
laws; labor laws; etc.) and Community Composition and Attitudes. Within this context,
labor and management negotiate and administer a contract that deals with wages, hours
and working conditions. John Dunlop has said a “web of rules” (formal and informal) is
created that determines who performs work, what the standards of discipline will be, and
how the fruits of the operation will be divided (profits and wages).
Economic
Conditions
Technology
Laws
Community
Composition
And Attitudes
Employees
Management
Wages
Union
Hours
Working Conditions
Government
(NLRB, etc.)
In 1986, Kochan, Katz and McKersie wrote a book entitled The Transformation of
American Industrial Relations. One point they made was one could think in terms of the
parties, for example management, making decisions at three levels. An employer might
have a union avoidance strategy operating at the company or global level. The managers
could accordingly have been closing older union plants and at the same time opening new
nonunion plants in the South or other countries. At the plant level, where there were
facilities with collective bargaining contracts, the managers may have sought pay/benefit
concessions and a reduction in restrictive work rules. At the work group level, the
managers might have implemented team designs that allowed more bottom-up input and
sought higher levels of productivity, quality and reduced turnover. Are these various
strategies consistent with one another? Can managers try to avoid unions on a global
scale, seek concessions at the plant level and cooperate at the workgroup level without a
hitch? When policies are inconsistent, conflict would seem to be sure to follow.