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Environmental/Contextual Issues

Social, Legal, Economic and Political

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Social Environment for Collective Bargaining in the U.S.• Individualism

– Rights of individuals superior to other rights– Property rights as a derivative of individual

rights– Corporations are legal individuals

• Chartered by state• Collectivities of shareholders• Perpetual life• Limited liability

Citizens United v. FEC U.S. Supreme Court, 1/21/2010

• Justice Kennedy, Majority Opinion. “The Court has recognized that First Amendment protection extends to corporations. . . . (23 citations omitted) This protection has been extended by explicit holdings to the context of political speech. . . . (2 citations omitted) Under the rationale of these precedents,political speech does not lose First Amendment protection ‘simply because its source is a corporation’ (2 citations omitted) . . . The Court has thus rejected the argument that political speech of corporations or other associations should be treated differently under the First Amendment simply because such associations are not ‘natural persons.’” (558 U.S. _____, pp. 25-26 Opinion)

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Citizens United v. FEC U.S. Supreme Court, 1/21/2010

• Justice Stevens, Dissenting Opinion. “In the context of election to public office, the distinction between corporate and human speakers is significant. Although they make enormous contributions to our society, corporations are not actually members of it. They cannot vote or run for office. . . The financial resources, legal structure, and instrumental orientation of corporations raise legitimate concerns about their role in the electoral process.” 558 U.S. ____, p. 2 Dissent)

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The Employment Relationship

• An economic exchange transaction– Between two individuals– Basically, perceived as no different than

purchasing a commodity– No social content

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Unions and Individualism

• Collectivities– Collectivizing what we view as natural

individual economic transaction– At a disadvantage vis-à-vis those exercising

rights• Corporations – legal individuals

• Employees – actual individuals

• Skeptical About Governmental Protection

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Other Values

• Europe– Class – based collectivistic values in Europe

• Asia– Confucianism based principles of obligation

and harmony

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Implications of Social Environment for Collective

Bargaining• Strong management and employers

– Property rights– Individualism– Job provider– Resistance to unionism

• Unionism– Struggle for legitimacy– Difficulty in staying organized

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Legal Environment

• Basic Principles of Legal Environment– Accessible– Wide Coverage– Public– Mandatory Procedures

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Economic Environment• Macro-Level Focus

– Determinants of Union Growth• Shifts in Structure of Employment• Business Cycle

• Micro Level Focus– Labor and Product Markets\Firm

• skilled - hard to replace workers• inelastic demand for union product• inelastic supply of substitutes for union labor• ratio of labor costs to total costs (“importance of being

unimportant”)

– Take Wages out of Competition - Organize the Product Market

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Product Market• Successful organization of product market key to

union success during period 1945-75– Autos– Steel– Airlines– Trucking– Paper– Construction

• Union Taking Wages (labor costs) Out of Competition

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Product Market• Implications

– As entry increases, union power declines• Wages and labor costs

– If employers can remove themselves from unionized sector, union power declines

• spatial limitations– Longshoring– Public Employment

• Post 1975– Increasing foreign competition - “nonunion”

• autos: less than 5% market share in late 60’s to roughly 35% today• steel: increase in worldwide capacity

– Deregulation - airlines and trucking

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Product Market (cont.)

• Employer Removal - rubber

• Spatial Characteristics - longshoring

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Microeconomic Principles

• Consumer Welfare– Efficiency is desirable– Efficiency is determined by low prices to

consumers– Work is for the purpose of generating income

so that individuals can consume• Labor supply

– Labor an input to production

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Implications

• More competitive product markets due to entry of unorganized firms reduces union power

• Unionized employer capability of removal from union sector reduces union power

• Both happened in period 1975-2005

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Political Environment

• Political linkages– Unions – Democratic Party– Employers – Republican party

• Republican party rise over last 25 years– Favorable to Business

• Flexibility

– Reduction of Legal Constraints• Minimalist government

Political Environment (cont.)

• Legislative Gridlock– Each side can prevent other from meeting its

labor market regulatory goals– Freezes status quo

• Defaults to – NLRB– Courts of Appeals

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Linkages to Other Three Environments

• Social– Reinforces individualism Legal

– Legislation

– Appointments• Administrative

• Judicial

• Economic – Fewer constraints on business

– Willingness to let “market” work