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COLLECTIVE BARGAINING, EMPLOYMENT PROTECTION/

CREATION AND COMPETITIVENESS IN THE

UNITED STATES: THE IMPACT OF A POLICY OF INDIFFERENCE

AN THE ABSENCE OF STRUCTURES

Presented by

Richard N. BlockSchool of Labor and Industrial Relations

Michigan State University

Funded by the International Labor Organization

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Co-Authors

• Peter Berg

• Michael Moore

• Mike Polzin

• Dale Belman?

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How Does the Collective Bargaining System in the United States Address Competitiveness and Employment

Protection?• No formal structures in the United States

that focus on these issues• Little governmental involvement in

substance of collective bargaining in U.S.• Is the formal, written, fixed duration

collective agreement the best vehicle for determining how CB addresses competitiveness and employment protection/creation?

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Importance of the Employer

• Employer is now key actor in the IR system– past 20 years

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Context

• Legal

• Institutional

• Joint and Governmental

• Economic

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Legal Context

• Most Important– accessible– public– coverage– coercive

• Establishes basic structure– who must negotiate and for whom– meaning of “negotiate”– about what must parties negotiate?– what happens if parties can’t agree

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Basic Legal Principles• No presumption that CB “normal”

– default is employer determination

• Legal bargaining (election) units– representation rights limited to these units

• Bargaining is unit-by-unit, workplace-by-workplace– multi-unit bargaining only by continuing consent of all

parties involved

• Minimal government involvement in process or outcomes

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Implications for Competitiveness and Employment Security/Creation

• Employers often have competitiveness options away from union

• multiple-union firms• no obligation to agree to employment security or

matters that will link employee welfare and competitiveness

• no system for encouraging cooperation unless both parties agree

• systems protects right of either party not to agree on TCE

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Obligation to Bargain• meet at reasonable times • no obligation to agree• limited to “terms and conditions of

employment” (TCE)– not all er decisions that that affect employment a

TCE– changes in capital structure or product mix of firm

for the purpose of increasing firm competitiveness generally not considered to be TCE

• basic changes in nature of business not TCE

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BASIC POINTS

• Law indifferent to use of CB system for competitiveness and job creation/protection– enables CB system to be so used if both parties

wish it– enables CB system to not be so used if one

party does not wish it

• Treats these matters no differently than any other subject of bargaining

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BASIC POINTS (CONT.)

• The focus of the law is not on problem-solving or on linking the issues of competitiveness and job security.

• The focus of the law is on the individual employer decision and whether or not the employer has the right to make that decision without negotiating with the union about the decision.

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Institutional Context

• Employer Institutions– No overarching er structures that encourage CB

as a vehicle for competitiveness and job protection creation

– Employers are competitive firms first and employer’s second

– Employer Institutions tend to be lobbying or partisan research and education organizations

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Institutional Context

• Union Institutions– mixed– IU can encourage or force locals to do

something, but locals must implement– locals fundamentally autonomous– competition among locals

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Joint and Governmental Structures/Context

• Not many – Collective Bargaining Forum– a group of union and employer executives

under auspices of USDOL– In April, 1999, issued a report entitled

“Principles for New Employment Relationships”

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“Principles of New Employment Relationships” (1999)

– (a)cceptance . . . by union leaders and members of their responsibility to work with management to improve the economic performance of their enterprises in ways that serve the interests of workers, consumers, shareholders, and society

• (a)cceptance by corporations of employment security, the continuity of employment for its workforce, as a major policy objective that will figure as importantly in the planning process as product development, marketing, and capital requirements

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“Principles . . .”

• National Association of Manufacturers refused to sign

• Indicates decentralization on employer side

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Economic Context• Laissez Faire with respect to employment and

competitiveness• Full employment not even discussed as a policy issue• Monetary policy - minimize inflation

– job security - wage increase link?

• Fiscal Policy - none• Trade Policy - open markets, with exceptions• REINFORCES TENDENCY TOWARD

VARIATION

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Incidence: CB and Competitiveness

• Voos-Eaton, 1992– up to 79% had participatory programs– app. 40% had profit sharing

• Industry analyses– high incidence: steel (National Steel), auto

assembly, aerospace, telecommunications, paper (forced)

– low incidence: auto parts, meatpacking, trucking, textiles

• Gray, Gray, Myers, 1999 - 14.8% of agreements

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Incidence: CB and Employment Protection/Creation

• IRRA Studies– very little

• GGM– 1-3% of agreements

• Well developed systems in auto assembly and National Steel

• In general, employment security in the U.S. is market-based rather than administered

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Empirical Results on Impact

• CB and Organizational Performance– no evidence that CB, per se, reduces

productivity; actually can enhance it– gains do not necessarily go to shareholders in

unionized firms– profits and rates of return generally lower in

unionized than nonunion firms• supercompetitive profits in nonunion firms or

undercompetitive in unionized firms?

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Empirical Results on Impact (cont.)

• CB and Competitiveness– capability of firm to maintain a reasonable market

share through selling its product or service at a competitive price

– special efforts by labor and management to address issues of competitiveness may improve product quality and productivity, but their effects may not be large. Rarely is labor relations the bases or one of the major bases, on which the firm maintains its position in the product . Labor relations a contributor, but not a major determinant of competitiveness.

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Four Case Studies

• GM-Lansing, Michigan and UAW

• Alcoa-Rockdale, Texas and Steelworkers

• Lear-Elsie, Michigan and UAW

• Sparrow Hospital (Lansing, Michigan) and Michigan Nurses Association

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GM-Lansing and UAW

1999 Oldsmobile Alero

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GM-Lansing and UAW(continued)

• Four Divisions– Worldwide Facilities– Sheet Metal – Powertrain– Assembly (small car)

• about 8600 hourly and 2500 salary

• History– Hometown for Oldsmobile from turn of century

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GM-Lansing and UAW Local 652: Competitive Environment

• Declining Market Share• Corporate Reorganization

– nameplates became marketing divisions only– Lansing must now compete for work

• Nature of Product – small cars, losing money

• Nature of Production Process in Lansing– trucking bodies

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GM-Lansing and UAW Local 652: Noncontractual System

• Pervasive Jointness– “star system”

• Unitary labor relations in a multidivisional system; consistency

• Movement across all four divisions provides job security when a redundancy in one division– “affiliated corporations”

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GM-Lansing and UAW Local 652: Noncontractual System

• Examples– small car profit– signs in Sheet Metal– camshaft line in Powertrain– no contractual prohibition on subcontracting,

but an informal prohibitions

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Alcoa-Rockdale, Texas and United Steelworkers Local 4895

• Aluminum(Aluminium) extracted from other substances via process of smelting– Bauxite

– Alumina from bauxite

– Alumina decomposed into aluminum and oxygen via an electrolytic process

– Aluminum then cast into ingots (large bars) or “hogs” (small bars) suitable for melting or casting

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Alcoa-Rockdale, Texas and United Steelworkers Local 4895

• smelter– produces aluminum and aluminum powder– major customer is an Alcoa flat-rolled plant in

Iowa– other customers are ordinance, rocket fuels,

lithographic, paint, and personal care industries

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Collective Bargaining

• History– Generally harmonious consistent with Alcoa

corporate philosophy– one national strike in 1986– resulted in reduced job classifications

• Basic characteristics– trust– information sharing

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Competitive Threats• Market pressure on price of aluminum due

to increases in supply– volatility from $1/lb. to $.58/lb. in two years

• Information Flows– London Metal Exchange

• Environmental Regulations– emissions– strip mining

• Expense of coal vis-à-vis hydro

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Collective Bargaining and Competition

• Plant must make money at $.50/lb.

• Contract Changes– reduction in rate of increase in base wages– increase length of contract– reduce number of job classifications

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Collective Bargaining and Competition

• Noncontractual Changes– Partnership Team on directive from corporate and

Int. Union• plant manager• LR staff• department heads• bargaining committee

• Examples– recycle scrap metal– yard work– janitorial work

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Conclusions on Alcoa-Rockdale

• Mature Relationship

• Trust

• Partnership Teams

• Simultaneous Focus on– Competitiveness– Job Protection

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Lear and UAW 1660

• Description– automotive components - seat systems– about 500 ees in plant– Ownership changes

• private from 1966-73

• ITT in 1973

• Lear in 1997

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Employment Issues

• Variation in employment– 1991 - 305– 1995 - 900– 1996 - 290

• Associated with specific work brought in and out

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Competitiveness Issues

• Major competitors– Bertrand Pfaume– Johnson Controls– Mariner– Several left market since 1990

• Customers– GM, Ford, DaimlerChrysler, Saturn, Toyota

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Change in Ownership/Corporate Strategy Issues

• ITT– Corporate Strategy - maximize short-run rate of

return

• Lear– Corporate Strategy - maximize market share in

automotive interior components market

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Production Process

• Production Teams/Cells for each customer– Employees can see a customer come and go by

examining the plant– no cell, no employment; a cell, employment

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Noncontractual CB Responses for Competitiveness

• Planning Team– high level union and manage

• Joint Steering Team– Union and Management reps

• Design and development teams

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Job Security

• Not administered

• Directly linked to competitiveness

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Conclusions on Lear-Elsie

• Importance of Corporate Strategy

• Visibility of Customers

• Focus on Competitiveness

• Job Security a Derivative of Competitiveness

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Sparrow Health Systems (Hospital) and Michigan Nurses

Association• Largest health care system in Lansing,

Michigan area

• about 5600 employees

• 1600 members of PECSH

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Competitive Environment

• Competition from non-hospital health care providers

• 3rd party payers - insurance companies

• Strong competitors through consolidation

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Mutual Gains Committee

• Patient Focused Care Implementation

• Hiring

• Awards for ees in short staffed areas

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Overall Conclusions

• No system in place that focuses on CB, competitiveness, and job protection/creation– left to legalities and the parties

• Competitiveness fairly common issue in CB

• Much of this outside formal agreement structure

• Administered Job Protection rare– job security is market-based, on competitiveness,

rather than administered