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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 1955: ~35% workers unionized Today: 12%

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Why study labor relations
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

    • 1955: ~35% workers unionized

    • Today: 12%

    • But nearly half of Fortune 500 orgs have some unionized workforces

  • Labor relations is value-laden topic

    • 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
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 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

        • 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
“New Deal” Employment Relations System

  • NLRA (1935) established collective bargaining as preferred method of setting wages, hours, working conditions

  • Today, growing sectors of economy are largely non-union

  • 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 system1
“New Deal” Employment Relations System

  • Are interests of Ers and Ees opposed or the same?

  • “New Deal” system struck bargain:

    • Unions would have role in setting wages, hours, working conditions

    • Mngt would retain initiative re: strategic decisions

  • “Job control unionism”

    • 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
Auto Industry

  • Big Three had 59% of light-vehicle market in 2004, down from 75% in 1980

    • 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.

      • 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 industry1
Auto Industry

  • Health and retirements costs per vehicle

    GM $1,360

    Ford $734

    Chrysler $631

    Toyota $180

    Honda $107

    • Includes active and retired ees

    • For Toyota and Honda, U.S. plants only

      • Source: Business Week, 9/22/03

Case study the auto industry


Case Study: The Auto Industry


The objectives of the employment relationship

  • Efficiency

    • Economic performance-the effective use of scarce resources (competitiveness, productivity, quality, economic prosperity)

      • Efficiency equals Pareto optimality

        • No one can be made better off without making someone else worse off

  • Equity

    • Fair employment standards--fair outcomes and treatment (justice)

  • Voice

    • Meaningful input into decisions (discretion, industrial democracy)

Labor relations
Labor Relations


examines how employee representation, typically through independent labor unions, contributes towards achieving a BALANCE between efficiency, equity, and voice.




U.S. labor law protects union activity to promote efficiency, equity, and voice.

Thickness of u s union contracts

Local Supplement

( 3/8”)

National Agreement



Contemporary UAW-General Motors Contract (circa 2000)

Contemporary UAW-Saturn Contract

(circa 2000)

First UAW-General Motors Contract (1937)

Thickness of U.S. Union Contracts

State of unions today
State of Unions Today

  • Membership

    • 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

    • Private sector: 7.2%; public sector: 37.4%

    • Transportation and public utilities: 22.2%

    • Construction: 14.5%

    • Manufacturing: 10.9%

    • Mining: 8.6%

State of unions today1
State of Unions Today

  • Distribution by Gender

    • 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

      • E.g., UAW represents bargaining unit of curators, educators, librarians at Museum of Modern Art in NYC, faculty at Carroll College (WI)

  • Distribution by Race

    • White: 12.1%; black: 13.9%; Hispanic: 10.2%

  • Geographic Distribution

    • 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 today2
State of Unions Today

Source: U.S. Department of Labor, Bureau of Labor Statistics, January 2009.

State of unions today3
State of Unions Today

  • Evidence of Union Decline

    • Membership

    • NLRB Elections

      • Number of elections declining

        • 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 today4
State of Unions Today

  • What Workers Want

    • More say at workplace than they now have

      • 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

      • 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

        • Source: Freeman and Rogers (1999)

State of unions today5
State of Unions Today

  • Reasons for Decline

    • Economic Factors

      • Union strength was in decaying industrial sector, forced to become more competitive

    • Shift in Mngt Tactics

Characteristics of american labor movement
Characteristics of American Labor Movement

  • Limited Goals

    • Seeks greater share of wealth for its members

  • Central Role of Collective Bargaining

    • 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 movement1
Characteristics of American Labor Movement

  • Support for Industry

    • 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)

  • Limited Role in Plant Mngt

    • Evolving to some extent today

  • Decentralization

    • 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

Ethics in action honda s restrictive hiring policy in indiana
Ethics in Action: Honda’s Restrictive Hiring Policy in Indiana

  • 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?

United states
United States Indiana

One example of an attempt to balance the rights of labor and capital, and balance efficiency, equity, and voice…but there are alternatives...

Mexico Indiana

Representative of other developing countries: labor relations controlled by the state; growing tension as independent labor movements emerge and international competitive pressures intensify

European union
European Union Indiana

  • 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

Great britain
Great Britain Indiana

Illustrates drawbacks of a voluntary system?

Germany Indiana

Generally representative of northern European countries, but is the system flexible enough for the 21st century?

Australia Indiana

Is decentralization and deregulation the answer to international competitive pressures?

Japan Indiana

A model for the 21st century? Or the domination of labor?

Labor and religion
Labor and Religion Indiana


    • "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."

      • American Baptist Churches Resolution, 1981

Labor and religion1
Labor and Religion Indiana


    • "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 religion2
Labor and Religion Indiana


    • "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."

      • Urban Bishops Coalition of the Episcopal Church, 1982

Labor and religion3
Labor and Religion Indiana


    • "When you hire, compensate the workers and treat them fairly."

      • Prophet Mohammed, The Holy Qur'an

Labor and religion4
Labor and Religion Indiana


    • "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 religion5
Labor and Religion Indiana


    • "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 religion6
Labor and Religion Indiana


    • "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."

      • Seventh-Day Adventists and Labor Unions by W. Melvin Adams

Labor and religion7
Labor and Religion Indiana


    • Operates largest Protestant nonprofit health care system in U.S., w/ 38 hospitals in 10 states, 23 nursing homes, and 44,000 ees

      • 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