Why Study Labor Relations?


While unionized proportion of labor force declining,
understanding of labor relations not less important
Unions facing most serious challenge to their power and
influence since passage of Wagner Act 75 years ago
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1955: ~35% workers unionized
Today: 12%
But nearly half of Fortune 500 orgs have some unionized workforces
Labor relations is value-laden topic

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Professionals in field believe in seeking balance between interests of
mngt, Ees, and society as whole
Pro-NLRA position: Ees have protected right to organize and bargain,
Ers have right to resist, actions of both regulated by law
Importance of Employment Relations


Investments in advanced technology alone are
not enough
Auto industry case suggests that
implementing advanced technology
wo/complementary changes in HR strategies
did NOT produce significant improvements in
quality or productivity


Alternative of NUMMI
Helps to involve Ees in early stages of design and
implementation
“Toyota Set to Close California
Factory”

Toyota pulled plug on plant it owned jointly w/ the former
GM; first time Toyota involved in closing a factory in U.S.


(Will re-open as Toyota-Tesla joint venture production facility)
Plant had mostly been money-loser since Toyota and GM set
up partnership in 1984

GM abandoned its ownership in NUMMI in July 2009, as part of
bankruptcy
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Plant had 4,700 UAW-represented workers
NUMMI last auto plant in CA still in operation
Toyota needs to cut excess production capacity and end losses
Co expected to report for second year in a row

Source: Wall Street Journal, 8/31/09; www.wikipedia.com
“New Deal” Employment Relations
System

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NLRA (1935) established collective bargaining as
preferred method of setting wages, hours, working
conditions
Today, growing sectors of economy are largely nonunion
More socially and politically acceptable for mngt to
embrace “union-free” preference than at any point
since WWI
NLRA expected to give Ees freedom of choice, mngt
expected to confine opposition to legal means

Not clear that is case
“New Deal” Employment Relations
System

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Are interests of Ers and Ees opposed or the same?
“New Deal” system struck bargain:
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“Job control unionism”
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Unions would have role in setting wages, hours, working conditions
Mngt would retain initiative re: strategic decisions
Highly formalized contracts, grievance procedure to resolve disputes,
wage rate attached to job, seniority rules
System grew out of “scientific mngt” (note: MNGT 305 vocabulary)
Concern today w/reality of global competition, need for mngt
flexibility, Ee desire for job security
Business strategy question: low-cost vs. differentiation?

Global compensation costs
Auto Industry

Big Three had 59% of light-vehicle market in 2004, down
from 75% in 1980

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Projected to decline to 52% by 2008
Foreign-owned nonunion competition increasing in remaining highly
profitable segment – pickups and SUVs (at least, prior to increase in
gas prices)
GM (most profitable of Big Three at time) earned $700/vehicle in
N.A. in 2002, Toyota $1200/vehicle in N.A.

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Big part of story is benefits costs – foreign-owned workforces younger,
pay less in pension and health-care benefits
GM had 2.5x as many retirees as active workers in 2002
First six months of 2005, GM lost $1227/vehicle produced; Ford lost
$139/vehicle
UAW membership half of 1980 level of 1.4m

Source: Wall Street Journal, 9/8/03; Detroit Free Press, 8/30/05
Auto Industry

Health and retirements costs per vehicle
GM
$1,360
Ford
$734
Chrysler
$631
Toyota
$180
Honda
$107
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Includes active and retired ees
For Toyota and Honda, U.S. plants only

Source: Business Week, 9/22/03
Case Study: The Auto Industry
Then…
Now…
Journal of Labor Research (Fall 1999)
THE OBJECTIVES OF THE
EMPLOYMENT RELATIONSHIP
•
Efficiency
•
Economic performance-the effective use of scarce
resources (competitiveness, productivity, quality,
economic prosperity)

Efficiency equals Pareto optimality

•
Equity
•
•
No one can be made better off without making someone else worse
off
Fair employment standards--fair outcomes and treatment
(justice)
Voice
•
Meaningful input into decisions (discretion, industrial
democracy)
11
Labor Relations
VOICE
LABOR RELATIONS
examines how
employee
representation, typically
through independent
labor unions,
contributes towards
achieving a BALANCE
between efficiency,
equity, and voice.
EFFICIENCY
EQUITY
U.S. labor law protects union activity to promote efficiency, equity, and voice.
12
Thickness of U.S. Union Contracts
Local
Supplement
( 3/8”)
First UAW-General
Motors Contract
(1937)
National
Agreement
(2”)
(1/16”)
Contemporary
UAW-General
Motors Contract
(circa 2000)
Contemporary
UAW-Saturn
Contract
(circa 2000)
13
State of Unions Today

Membership
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In 2009, 12.3% of employed wage and salary workers
were members of unions (up from 12.1% in 2007)
15.3 million workers were members of unions, another
1.6 million were represented by a union but not a member
Distribution by Industry

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Private sector: 7.2%; public sector: 37.4%
Transportation and public utilities: 22.2%
Construction: 14.5%
Manufacturing: 10.9%
Mining: 8.6%
Declining Union Membership
State of Unions Today

Distribution by Gender
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Males: 13.3%; females: 11.3%
Gap was 10 percentage points in 1983
In 1962, 19% of union members were female, in 2009, 45%
2/3 of new union members are female
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Distribution by Race
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White: 12.1%; black: 13.9%; Hispanic: 10.2%
Geographic Distribution
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E.g., UAW represents bargaining unit of curators, educators, librarians
at Museum of Modern Art in NYC, faculty at Carroll College (WI)
25.2% of workforce unionized in NY, 3.1% in NC
IN: 10.6%, IL: 17.5%, KY: 8.6%
Earnings Differential
State of Unions Today
Source: U.S. Department of Labor, Bureau of Labor Statistics, January 2009.
State of Unions Today

Evidence of Union Decline
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Membership
NLRB Elections
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Number of elections declining
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However, some unions adopting other methods for obtaining
Er recognition – ‘card checks’
Political Power
Public Image

Some 80% believe Ees should have right to join
union, while about one-half of non-union Ees say they
would join union if one existed at their workplace (up
from 30% in 1984)
State of Unions Today

What Workers Want

More say at workplace than they now have

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Both to improve quality of work life and to make firms more
productive
More participation as individuals and as part of group as
well
Some degree of independence in dealing with mngt, but…
Cooperative relations w/mngt
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Believe workplace organization can only be effective if it has
mngt participation and support
Believe mngt resistance is primary reason for lack of desired say
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Source: Freeman and Rogers (1999)
State of Unions Today
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Reasons for Decline
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Economic Factors

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Union strength was in decaying industrial sector,
forced to become more competitive
Shift in Mngt Tactics
Characteristics of American Labor
Movement
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Limited Goals

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Central Role of Collective Bargaining

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Seeks greater share of wealth for its members
Union bargaining power comes from ability to strike
Power of strike determined in part by extent to which Ees
organized
Traditionally opposed gov’t involvement in settling
bargaining disputes
Working with Existing Political Parties

Legislative goals supplement bargaining demands (e.g.,
minimum wage)
Characteristics of American Labor
Movement
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Support for Industry
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Limited Role in Plant Mngt
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Unions better able to achieve goals when industry in
strong economic position
“The worst crime against working people is a company
that fails to operate at a profit” (Samuel L. Gompers, first
president of American Federation of Labor)
Evolving to some extent today
Decentralization
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Local unions more important in U.S. than elsewhere
AFL-CIO has little control over members, doesn’t play
significant role in organizing or bargaining
New Directions?
Ethics in Action: Honda’s Restrictive
Hiring Policy in Indiana
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Why do foreign auto companies focus on
operating union-free in the U.S.?
Why do you think Honda implemented its
restrictive hiring policy at its Greensburg
plant? Is it discriminatory?
Should Honda’s restrictive policy be illegal?
Is it ethical?
Global Snapshot of Labor Relations
United States
One example of an attempt to balance the rights
of labor and capital, and balance efficiency,
equity, and voice…but there are alternatives...
26
Mexico
Representative of other developing countries:
labor relations controlled by the state; growing
tension as independent labor movements emerge
and international competitive pressures intensify
27
European Union
27 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
28
Great Britain
Illustrates drawbacks of a voluntary system?
29
Germany
Generally representative of northern European
countries, but is the system flexible enough for
the 21st century?
30
Australia
Is decentralization and deregulation the answer
to international competitive pressures?
31
Japan
A model for the 21st century? Or the
domination of labor?
32
Labor and Religion
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AMERICAN BAPTIST

"We reaffirm our position that workers have the
right to organize by a free and democratic vote of
the workers involved. This right of organization
carries the responsibility of union leadership to
protect the rights of workers, to guarantee each
member an equal voice in the operation of its
organization, and to produce just output labors for
income received."
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American Baptist Churches Resolution, 1981
Labor and Religion

CHRISTIAN REFORMED CHURCH OF
AMERICA

"Church membership and membership in a labor union
are compatible as long as the union does not warrant or
champion sin in its regular activities. Church members
should discontinue membership in any unions whose
common practices are clearly in conflict with the
principles of the Word of God. Christian conscience
cannot condone membership in a union if it continues in
sinful practices in spite of protests against them."
Labor and Religion

EPISCOPAL CHURCH

"We reaffirm the right and desirability of workers
in the United States to organize and form unions.
...We decry the growing wage of anti-unionism
mounting in the nation today which asks people
to forget the struggles that led to this form of
negotiation as a just way to settle differences."
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Urban Bishops Coalition of the Episcopal Church, 1982
Labor and Religion
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ISLAM

"When you hire, compensate the workers and
treat them fairly."
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Prophet Mohammed, The Holy Qur'an
Labor and Religion

JUDAISM

"Jewish leaders, along with our Catholic and
Protestant counterparts, have always supported
the labor movement and the rights of employees
to form unions for the purpose of engaging in
collective bargaining and attaining fairness in the
workplace."

Preamble to Workplace Fairness Resolution, Annual
Convention of the Central Conference of American
Rabbis, 1993
Labor and Religion
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ROMAN CATHOLIC

"Among the basic rights of the human person
must be counted the right of freely founding labor
unions. These unions should be truly able to
represent the workers and to contribute to the
proper arrangement of economic life. Another
such right is that of taking part freely in the
activity of these unions without fear of reprisal.”

Pastoral Constitution of the Church in the Modern
World, Second Vatican Council, 1965
Labor and Religion

SEVENTH-DAY ADVENTIST

"A Seventh-Day Adventist cannot either join or
support a labor union because: 1) His allegiance
to Christ forbids it. 2) The Scriptures do not
permit it. 3) The Law of God rejects it. 4) The
Spirit of Prophecy counsels against it. 5) The law
of service does not harmonize with it. 6) It is
contrary to baptismal vows. 7) The Seventh- Day
Adventist Church clearly exhorts otherwise."
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Seventh-Day Adventists and Labor Unions by W.
Melvin Adams
Labor and Religion

SEVENTH-DAY ADVENTIST

Operates largest Protestant nonprofit health care
system in U.S., w/ 38 hospitals in 10 states, 23
nursing homes, and 44,000 ees

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No ees are in U
Has argued that NLRB has no jurisdiction because
hospital was religious institution and to force it to
recognize or bargain w/ U would violate First
Amendment and Religious Freedom Restoration Act

NLRB disagreed

Source: New York Times, 10/9/06