Labor Relations
Chapter 2
Labor Unions: Good or Bad?
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Learning Objectives
Explain the four distinct schools of thought about the employment relationship.
Understand how different views of labor unions are fundamentally rooted in the basic assumptions of these four schools of thought.
Discuss various roles of labor unions in the employment relationship and in society.
Identify alternative methods for making workplace rules.
Compare employee representation through labor unions to other methods of workplace governance.
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Introduction
Popular stereotypes of labor unions
Once useful, but no longer needed.
Good for members, but bad for business, nonunion workers, consumers, and investors.
Essential to understand how different views on unions are rooted in alternative schools of thought
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The Labor Problem 1
Today’s critical issues in human resources and industrial relations
Growing labor market disparities.
Problems of low-wage workers trying to move out of poverty and support families.
Corporate pressures for cost control, quality, and flexibility to compete in a global, information-rich economy.
The need to educate individuals as lifelong learners because of ever-changing technologies.
Problems of work–life balance, especially for working mothers.
But what were the key challenges 120 years ago?
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The Labor Problem 2
The critical human resources and industrial relations issue in the early 1900s was the labor problem
Undesirable outcomes of inequitable and contentious, or oppressive and exploitative, employment relationship.
Important dimensions of the labor problem
Long hours, low wages, unsafe conditions, and insecurity.
Labor was frequently viewed as:
A production input.
No different from machines or raw materials.
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The Labor Problem 3
The poor conditions of the labor problem were a problem for two broad reasons:
The societal or human perspective.
People should have better lives.
Workers should be able to afford decent housing, clothing, food, and the like.
The business perspective.
Absenteeism and turnover were costly.
But how to solve the labor problem?
Depends on beliefs about causes / schools of thought.
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Four Schools of Thought 1
The Neoliberal School.
The Human Resource Management School.
The Industrial Relations School.
The Critical Industrial Relations School.
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The Neoliberal School 1
Focuses on the economic activity of self-interested agents.
Efficiency, equity, and voice achieved through free-market competition.
Idealized, prefect competition results in the optimal allocation and pricing of resources.
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The Neoliberal School 2
The conditions of the labor problem are not seen as exploitation
Rather, employees are paid their economic value.
Employees are free to quit if they feel they are being exploited.
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The Neoliberal School 3
Solution to the labor problem?
Ensure competition.
Macroeconomic stimuli to reduce unemployment.
Remove unnecessary government regulation.
The best protection an employee has against his or her current employer are other employers.
As long as there is (perfect) competition, employment outcomes are not seen as a problem.
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The Neoliberal School 4
View of labor unions in the neoliberal school of thought
Unions are seen as labor market monopolies that interfere with the invisible hand of free market competition; distort efficient outcomes.
Strike threat is used to raise wages above their competitive levels.
Restrictive work rules interfere with the discipline of the market by protecting lazy workers.
To those who believe in perfect competition
Labor unions are bad.
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The Neoliberal School 5
The Primacy of Free Labor Markets in the Neoliberal School
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Human Resource Management School 1
Believes that the labor problem stems from poor management
Poor selection, motivation, training, supervision.
Solution to the labor problem?
Better management.
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Human Resource Management School 2
Human resource management philosophy
Align the interests of workers and the firm via better management.
Create motivated and efficient workers.
Firms should design and implement better supervisory methods.
Selection procedures.
Training methods.
Compensation systems.
Evaluation and promotion mechanisms.
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Human Resource Management School 3
The Centrality of Shared Interests and Managerial Practices in the HRM School
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Human Resource Management School 4
View of unions in this school of thought
Unions are unnecessary “outside, third parties”.
If a company has well-designed HR practices, workers will be satisfied and will not support a union.
Independent labor unions are also seen as adversarial, a barrier to cooperation.
But companies get the union they deserve.
If a company is practicing bad management, workers will seek unionization to combat these poor practices.
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Human Resource Management School 5
Nonunion collective voice such as a nonunion representation plan might be embraced, but not independent labor unions that are legally and functionally independent of employers and governments
Independent labor unions can elect their own leaders, collect and spend their own dues money, establish their organizational objectives and strategies, and strike.
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The Industrial Relations School 1
Key belief: The labor problem stems from unequal bargaining power between corporations and individual workers
The IR school accepts corporations as efficient, valuable organizations
So not opposed in principle to markets or corporations.
But sees labor markets as destructively competitive.
Need institutional checks and balances to achieve equity and voice.
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The Industrial Relations School 2
Institutional labor economists believed that there were many labor market imperfections
Persistent unemployment.
Company towns dominated by a single employer.
Lack of worker savings and other safety nets.
Compared to the other schools of thought, the causes of the labor problem are different
So the solutions are different.
Labor unions and other government policies (for example, minimum wage laws) to help increase worker power to better balance employer power.
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The Industrial Relations School 3
The Employment Relationship as a Bargained Exchange in Which a Balance is Best
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The Industrial Relations School 4
View of unions in this school of thought
Unions are important as a way to better balance corporate power in the labor market.
Can provide meaningful voice to employees by being independent rather than controlled by companies.
Independent labor unions can elect their own leaders, collect and spend their own dues money, establish their organizational objectives and strategies, and strike.
So based on the assumptions and beliefs of the IR school, unions are important for striking a balance between efficiency, equity, and voice
This school of thought provides the intellectual foundations for United States labor law and supporters of labor unions.
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The Critical Industrial Relations School 1
Grows out of earlier “Marxist industrial relations” school, and also referred to as a radical perspective
The “critical” label comes from being critical of existing societal institutions and social orderings.
The critical school
Emphasizes that capitalist institutions do not simply exist but are created by society.
Focuses on how dominant groups design and control institutions to serve their own interests.
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The Critical Industrial Relations School 2
The causes of labor problem
Employers’ dominant power in the workplace, and reinforced by significant influence over other societal institutions (for example, legal system and law enforcement).
The solutions to the labor problem
Restructuring the nature of capitalism.
For some: replacing capitalism with socialism.
For others: significant changes in power structures and influence.
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The Critical Industrial Relations School 3
The Deeply Unequal Employment Relationship in the Critical Frame of Reference
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The Critical Industrial Relations School 4
View of unions in this school of thought
Strong, militant unions can benefit workers.
Fighting for improved compensation, better working conditions, and greater control over workplace decision making.
Mobilizing and raising working class consciousness.
Emphasis is on aggressive, labor movement activism that links workers across industries, occupations, and regions.
Adherents to this school of thought are critical of the pragmatic, collective-bargaining focus of many United States unions.
Believe that they do enough to challenge capital’s power in the workplace and society.
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Four Schools of Thought 2
The schools reflect alternative perspectives on the fundamental assumptions of human resources and industrial relations
Is labor just a commodity?
Are employers and employees equals in competitive labor markets?
What is the nature of conflict between employers and employees?
Essential for understanding views of labor unions (plus views of HRM and other work-related institutions)
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Importance of Views on Empl. Rel. Conflict 1
Unitarism (HR School)
Employees and employers have a unity of interests so effective management policies can align these interests for the benefit of all.
Conflict is not an inherent or a permanent feature of the employment relationship (rather, it’s a manifestation of poor HR policies or specific interpersonal clashes).
Pluralism (IR School)
Employees and employers have some inherent conflicts of interests and some mutual interests.
All interests are legitimate (similar to a pluralist political system) so cannot always prioritize employer or employee interests.
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Importance of Views on Empl. Rel. Conflict 2
Class-based (Critical IR School)
Emphasizes inherent and antagonistic conflicts of interest between employers and employees.
But not limited to clashes over terms and conditions of employment (pluralism).
More of a social conflict of unequal power relations in many aspects of society.
Again, essential for understanding alternative views of labor unions (plus views of HRM and other work-related institutions)
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Competing Views of Labor Unions
Table divided into two columns summarizes four schools of thoughts. Column 1 represents "In each school of thought" and column 2 represents "Labor Unions are…"
| In Each School of Thought… | Labor Unions are… |
| Neoliberalism | Bad: monopolies that benefit a few at the expense of everyone else. |
| Human Resource Management | Unnecessary: effective management policies are best. Also, unions add unproductive conflict. |
| Industrial Relations | Important: necessary to counter corporate bargaining power and to balance efficiency, equity, and voice in democratic, capitalist societies. |
| Critical (Marxist) Industrial Relations | Important but inadequate: An important mechanism for the struggle against capitalists and for protecting workers, but with systemic imbalances, need greater socio-political changes for true reform. |
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Continued Relevance of the Labor Problem 1
To understand labor unions and labor relations it is imperative to understand the beliefs of the different schools of thought
These provide the keys to a reasoned rather than a stereotypical or naïve understanding of labor unions.
More generally, these four schools of thought continue to be the key frameworks for analyzing all aspects of the employment relationship in the 21st century and for thinking about how to improve employment issues
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The Intellectual Foundations of the Options for Governing the Workplace
The Intellectual
Foundations of the
Options for
Determining
Employment Terms and
Conditions
Access the text alternative for slide images1.
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Continued Relevance of the Labor Problem 2
Neoliberal
Current global era of free trade, deregulation, privatization, personal responsibility, etcetera
Neoliberal
Pre-1930s: lack of significant employment standards; primacy of free markets
Pluralist
1930s: New Deal featuring government promotion of labor unions, social insurance programs, and minimum labor standards
Unitarist
Mid-century rise of nonunion HR policies and employment law focused on individual rights (fairness, but typically only if offered)
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What Do Unions Do? 1
So…are unions good or bad?
Are the stereotypes accurate?
Approach 1: Conceptual
Depends on which school of thought one believes in.
Recall Table 2.2.
Approach 2: Empirical
Evaluate the research evidence on what unions tend to do.
On balance, are these things beneficial or harmful, and to whom?
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What Do Unions Do?...Efficiency
Table divided into two columns summarizes the effect of efficiency on the U.S. Unions. The column headers are marked as: Dimension and estimated effect of U.S. Unions.
| Dimension | Estimated Effect of United States Unions |
| Job Satisfaction | Union workers are less satisfied on average, but probably due to their working conditions |
| Turnover | Reduced turnover |
| Productivity | Mixed evidence; controversial effects. Some evidence of a shock effect (the presence of a union shocks managers out of complacency) |
| Profits | Reduced profitability (even when positive, productivity effects are not large enough to offset increased compensation costs) |
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What Do Unions Do?...Equity
Table divided into two columns summarizes the effect of equity on the U.S. Unions. The column headers are marked as: Dimension and estimated effect of U.S. Unions.
| Dimension | Estimated Effect of United States Unions |
| Wage Levels | Higher wages (union wage premium is 15 percent, on average) |
| Wage Distribution | Compressed (less unequal) wage structure |
| Benefits | Increased likelihood of benefits being offered |
| Just Cause Discipline and Discharge | Nearly universal in union contracts; rare elsewhere |
| Public Policies | Assistance with exercising rights (for example, workers compensation) |
| Seniority | Increased importance of seniority provisions in personnel changes |
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What Do Unions Do?...Voice
Table divided into two columns summarizes the effect of voice on the U.S. Unions. The column headers are marked as: Dimension and estimated effect of U.S. Unions.
| Dimension | Estimated Effect of United States Unions |
| Collective Negotiations | Management is required to bargain with a certified union |
| Grievance Procedures | Nearly universal presence of formal grievance procedures in union contracts; few nonunion procedures with same level of due process and representation |
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What Do Unions Do? 2
So…are unions good or bad?
Approach 1: Conceptual
Approach 2: Empirical
Evaluate the research evidence on what unions tend to do.
On balance, are these things beneficial or harmful, and to whom?
But requires using one of the schools as a frame of reference to evaluate!
For example, is the union wage premium good or bad?
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More Broadly, What Do Unions Do? 1
A labor movement is a social movement
Workers and unions from multiple workplaces join together to pursue common interests.
Unions are not purely workplace institutions.
The labor movement provides a voice for workers in the political arena
Endorse candidates for political offices.
Mobilize get-out-the-vote efforts.
Campaign on behalf of candidates.
Lobby and make donations to lawmakers.
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More Broadly, What Do Unions Do? 2
Extending the I R view
A democratic society is seen as a pluralist society in which numerous groups have common and conflicting interests.
The labor movement represents workers in the political.
Unions are seen as balancing the economic power of employers in the workplace, and as balancing the political power of employers in the political arena.
Labor unions can also be important organizations in civil society where individuals gather to socialize, discuss issues, pursue charitable goals, and form a sense of community.
Often with a much greater diversity of individuals than when people gather with friends and others outside of the workplace.
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More Broadly, What Do Unions Do? 3
From a pluralist perspective, the labor movement makes important contributions in the political and civil arenas in contemporary democratic societies.
A healthy, balanced democratic society is one that includes a vibrant, independent labor movement.
The intellectual foundations of the United States system of labor relations come from the industrial relations school of thought.
But other views are possible
Be sure to appreciate the connections with the relevant schools of thought.
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In-Class Exercises
Note to instructors. For an in-class exercise, consider the following:
Delete the earlier slides with the four pieces of line art (figures 2.1 to 2.4) from the slides shown in class.
Lecture about the four schools of thought (frames of reference) without the pictures.
Make photocopies and distribute the four pictures that follow this slide, and (in pairs) have students try to match pictures with each school of thought. Do not let them use their textbooks.
Discuss and de-brief.
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Accessibility Content: Text Alternatives for Images
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The Intellectual Foundations of the Options for Determining Employment Terms and Conditions 1 - Text Alternative
Return to parent-slide containing images.
These four options are as follows: competitive labor markets, human resource management, socialism, and government regulation.
In the mainstream economics school of thought, the following assumptions are made: labor is just a commodity, and employers and employees are equals in competitive markets. Then, the appropriate workplace governance mechanism based on these assumptions is established via reliance on competitive markets.
In the human resource management school of thought, the following assumptions are made: labor is not just a commodity, employers and employees are not equals in competitive labor markets, and there is no inherent conflict of interest (or unitarist interest) between employers and employees (unitarist). Then, the firm should decide whether or not its employees’ voices are important in the formulation of its workplace rules. If the firm decides that its employees’ voices are not important, then the governance in the workplace is established via H R M policies. But if the firm decides that its employees’ voices are important, then the governance in the workplace is established via H R M with employee consultation or participation.
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The Intellectual Foundations of the Options for Determining Employment Terms and Conditions 2 - Text Alternative
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In the industrial relations school of thought, the following assumptions are made: labor is not just a commodity, employers and employees are not equals in competitive labor markets, and there is an inherent conflict of pluralist interest between employers and employees. Then, the firm should decide whether or not its employees’ voices are important in the formulation of its workplace rules. If the firm decides that its employees’ voices are not important, then the governance in the workplace is established via government regulation. But if the firm decides that its employees’ voices are important, then the governance in the workplace is established via collective bargaining.
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The Intellectual Foundations of the Options for Determining Employment Terms and Conditions 3 - Text Alternative
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In the critical industrial relations school of thought, the following assumptions are made: labor is not just a commodity, employers and employees are not equals in competitive labor markets, and there is an inherent conflict of class interest between employers and employees. Then, the firm should decide whether or not its employees’ voices are important in the formulation of its workplace rules. If the firm decides that its employees’ voices are not important, then the governance in the workplace is established via socialism. But if the firm decides that its employees’ voices are important, then the governance in the workplace is established via worker control.
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