Labor relations-b-power

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Bargaining Power


Questions:

Discussion #1

During an economic recession, discuss how management’s or a union’s bargaining power might be affected. Give an appropriate business example to illustrate what you mean, support it with at least one reference.

Discussion #2

What are some advantages and disadvantages of a strike from management’s perspective? From the Union’s perspective? 

89

4

A CONCEPTUAL FRAMEWORK FOR ANALYZING THE
LABOR RELATIONS ENVIRONMENT

This chapter moves horizontally across the three-tiered framework by examining
how the external environment in which labor relations develop infl uences the
bargaining process and bargaining outcomes at the functional level. The discussion
focuses on fi ve key aspects of the external environment: the economic, public policy,
demographic, social, and technological contexts of the bargaining relationship.

The external environment affects the bargaining power of labor and management,
which determines bargaining outcomes. A union, for example, will be better able
to gain a high wage and other favorable contract terms when it has relatively
high bargaining power. It is often something in the external environment that
determines whether a union has a lot of bargaining power in one situation and
little power in another. Thus, we start this chapter with a discussion of how the
external environment infl uences bargaining power and the bargaining process.
For instance, we trace how a low unemployment rate (an aspect of the economic
environment) strengthens workers’ ability to hold out while on strike and thereby
gives a union greater bargaining power.

The role of environmental factors is well illustrated by the response of labor
and management to heightened international competition and continuing corporate
restructuring . A conceptual framework is necessary for understanding how the
external environment affected collective bargaining in recent years and in other
periods.

This book uses John Dunlop ’ s division of the labor relations environment into
three main infl uences: (1) the economic context, (2) the technological context,
and (3) the locus of power in the larger society. 1 In addition, this book considers
the infl uence of the social context and the demographic context. The
underlying theme is that labor and management can infl uence the environment
and the environment also infl uences them.

On the one hand, the external environment supplies both incentives and
constraints upon labor and management as they work to meet their bargaining

The Role of the Labor Relations
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EBSCO Publishing : eBook Collection (EBSCOhost) – printed on 2/16/2022 6:49 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS
AN: 1589152 ; Harry C. Katz, Thomas A. Kochan, Alexander J. S. Colvin.; An Introduction to U.S. Collective Bargaining and Labor Relations
Account: s4264928.main.eds

90 Part I. Introduction

goals. Thus, it is important to consider how the environment shapes the power
of the bargaining parties. On the other hand, the parties to collective bargaining
also seek to mold their environment to better serve their needs. Thus, environmental
infl uences are not entirely outside human control.

For example, since the 1920s, many employers in the textile, apparel, and other
small, soft-goods industries have migrated from the Northeast to the South, partly
(if not primarily) to take advantage of a more favorable economic environment
(such as lower labor costs).

More recently, many U.S. manufacturing fi rms have opened production facilities
overseas or established joint ventures with foreign producers, thereby contributing
to an economic environment of sluggish employment growth in the United States
in their industries. In this way, these fi rms have directly shaped the U.S. economic
environment for collective bargaining.

The ability of involved parties to infl uence their environment is even more
pronounced in the case of public policy because, quite simply, organized labor
and management are the prime lobbyists who infl uence the public policies that
regulate their own behavior. Consequently, in the long run the environment is
to some extent infl uenced by the bargaining parties. Only in the short run should
the environment be viewed as external and relatively fi xed.

BARGAINING POWER

The external environment affects the bargaining power of labor and management.
Three aspects of bargaining power come into play: the total power, the relative
power, and the political power of labor and management. Total power concerns
the total profi ts available to labor and management. The greater the profi t is, the
more is available for labor and management to divide up. Both labor and manage-
ment prefer situations with greater total power. Relative power has to do with
the relative strength of labor or management; in other words, the ability of either
side to gain a larger share of a given amount of profi t. In contrast to preference
of both sides for greater total power, the interests of labor and management
confl ict with regard to relative power. Political power concerns the ability of
labor or management to infl uence governmental actions—the public policies
governments adopt that infl uence labor relations or the actions governments take
as employers.

The Determinants of the Total Power of Labor
and Management

The total power in a given bargaining situation is heavily infl uenced by two
factors: the degree of competition an employer faces and the state of the economy.
The degree of competition is affected by the amount of competition an employer
faces from domestic and international competitors. Firms that face few competitors
and thereby exert market power earn greater profi ts and have more resources for
labor and management to divide up. In the most concentrated industries, a fi rm
will be a monopoly and will earn monopoly profi ts. In this case the total power

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Role of the Labor Relations Environment 91

of labor and management is at its maximum and bargaining is made easier by the
fact that both high wages and high profi ts can be funded out of the fi rm ’ s
monopoly profi ts.

The state of the economy infl uences total power by affecting the level of
demand (i.e., sales) and profi ts. Both labor and management prefer less competition
and a strong economy.

The Determinants of the Relative Bargaining Power of
Labor and Management

The relative bargaining power a union enjoys is heavily infl uenced by its and its
members’ abilities to withdraw their labor, usually (though not always) through
a strike. Workers are more likely to win higher wages and other gains when they
are willing and able to sustain a strike. In addition, once a strike has begun, it is
more likely to succeed when the costs of the strike to the employer are greater.
Thus, an employer ’ s relative bargaining power is heavily infl uenced by its ability
to withstand a strike. The simplest measure of relative bargaining power is the
amount of strike leverage each party holds.

Workers can also withdraw their labor through more informal actions, such
as working to rule (following rules strictly rather than pursuing effective work
practices), the “blue fl u” (large-scale worker absenteeism), and other means of
slowing production. The discussion that follows focuses on the effects of strikes
that involve workers who fully withdraw their labor. However, many of the
points raised below carry over to less extreme forms of labor withdrawal.

How Strike Leverage Infl uences Relative
Bargaining Power

The relative degree to which workers and an employer are willing and able to
sustain a strike is their strike leverage. To measure each party ’ s strike leverage,
one needs to know what costs a strike would impose on each party and what
alternative income sources are available to each party to offset any income losses
a strike will bring. The discussions of the environmental contexts that follow help
us understand what determines strike leverage.

THE ECONOMIC CONTEXT

Economic factors critically infl uence both total and relative bargaining power.
Economic factors can be separated into those at the macrolevel (across the economy)
and those at the microlevel (relevant only to a specifi c bargaining relationship).

Microeconomic Infl uences on Total Bargaining Power

Microeconomic factors infl uence the total bargaining power of an employer
or a union through the effects competitive conditions exert on a fi rm. The greater
the market power of a fi rm (i.e., the less competition it faces in the markets in
which it competes), the greater will be the profi ts that fi rm earns. When profi ts
are greater, there are more resources for the parties to divide based on their relative

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92 Part I. Introduction

power. A fi rm ’ s market power is affected by the degree of domestic and international
competition it faces.

Labor and management have a common interest that affects total power. Both
sides want the company to have market power (if other factors are held constant
that affect the relative power of labor and management). The existence of this
potential common interest explains why unions sometimes join with management
to push for government regulations that will increase the market power of their
company. For example, the United Steelworkers union frequently joined with
steel companies to lobby the federal government to restrict steel imports and to
impose higher tariffs on steel importation.

MICROECONOMIC INFLUENCES ON RELATIVE
BARGAINING POWER

Microeconomic factors are market forces that shape the amount of monopoly
power a fi rm has. They include the number of competitors in an industry and
the ease with which new fi rms can enter an industry. These microeconomic
factors infl uence the relative bargaining power of labor and management through
the ways they affect the parties’ strike leverage and the elasticity of demand
for labor (the wage-employment trade-off ).

Management ’ s Strike Leverage

The more an employer is willing and able to sustain a strike, the more likely a
union will be to settle a strike before achieving all of its goals. Employee strike
leverage derives from the how much a strike infl uences fi rm profi ts. The greater
the profi ts a fi rm loses during a strike, the more ready it will be to give in to
labor ’ s demands. During a strike, a fi rm ’ s profi ts are shaped by a strike ’ s effects
on production and sales. Figure 4.1 diagrams the principal determinants of an
employer ’ s strike leverage: the ability of workers to harm production, sales, and

PRODUCTION SALES PROFITS

Essentiality of striking
workers

Availability of substitute
workers

Alternative production
sites

Capital and other
continuing costs

Availability of inventories
Effects of the strike on

competitors

Figure 4.1. Determinants of management ’ s strike leverage

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Role of the Labor Relations Environment 93

profi ts and the ability of management to fi nd alternative ways to maintain produc-
tion, sales, and profi ts.

The effects of a strike on production: Once a strike has begun, the fi rst indicator of workers’
bargaining power is the degree to which the strike has impaired production and/or
service. Workers who succeed in halting production because there are no readily
available labor substitutes—supervisors, employees in another plant, strikebreakers, or
automated equipment—have substantial strike leverage and bargaining power. In other
words, these workers are essential to the production process. Craft workers, who are
typically very diffi cult to replace because of their skills, often have signifi cant strike
leverage. For example, the high skill levels of electricians and repair machinists help
explain why they earn so much more than production workers in the auto, steel, and
textile industries.

The effects of a strike on sales: The power of a striking work group is tempered,
however, if the halt in production does not lead to a reduction in sales. Employers
can sever or at least weaken the link between production and sales if inventories are
high or if alternative sites can be used to produce what normally would be produced
at the site of the strike. Whether alternative production is available is infl uenced by
the bargaining structure (whether the other sites are covered by the same union or
contract) and by the extent to which other workers at other sites join or support the
strike.

The effects of a strike on profi ts: Finally, even if a strike stops production and sales, the
fi rm may not necessarily experience a serious decline in profi ts. For example, fi rms
with relatively high ongoing capital or interest expenses have a harder time withstanding
a loss of income caused by a strike. This helps explain why construction workers, who
can temporarily halt costly construction projects, have so much bargaining power. In
contrast, fi rms facing a strike that also shuts down all the competitors’ operations have
an easier time withstanding strikes because their lost sales and profi ts may be largely
postponed rather than permanently forgone. Firms that have substantial savings or
alternative income sources (such as from other lines of business) can more easily absorb
the costs of a strike. Later sections of this chapter discuss how the recent growth in
employers’ nonunion operations has improved their strike leverage through this channel.

The Strike Leverage of Unions

Consider the other side—the strike leverage of unions. A union ’ s strike leverage
is determined by the ability and willingness of the work force to stay out on
strike. The longer workers are willing and able to stay on strike, the greater the
bargaining power of the union representing those workers will be and the more
likely the union will be to win favorable employment terms from an employer,
assuming that other factors are held constant.

Alternative sources of worker income: The willingness of workers to stay out on strike is
heavily infl uenced by the degree to which alternative sources of income are available
to the striking work force. Obviously, workers in unions that offer ample strike benefi ts
can better afford to stay out on strike than those in other unions can. Likewise, when
workers can more readily fi nd temporary or part-time work that supplements union
strike benefi ts or when they have accumulated substantial savings or assets, they are
more able to sustain a strike action.

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94 Part I. Introduction

Worker solidarity: Another set of factors that infl uences the strike leverage of workers
beyond the microeconomic environment is the attitude of union members. Workers’
feelings of solidarity with one another infl uence whether picket lines will be honored
and pent-up frustrations about the conditions that precipitate a strike will infl uence
workers’ willingness to stay out. In brief, strikes are highly emotional undertakings
that depend on numerous factors, not simply the microeconomic environment.

The U.S. airline industry provides a good illustration of how microeconomic
factors affect bargaining power. In recent years (see Box 4.1 ), union power in
this industry has been increased by a wave of mergers among the major airlines.
This has led to better collective bargaining outcomes for airline employees.

The Wage-Employment Trade-Off

Higher wages often bring cuts in employment. Thus, unions may in some cases
choose not to raise wages as much as they could. This is called the wage-
employment trade-off.

The key point is that there are employment effects from wage increases. Unions
sometimes take these employment effects into consideration and moderate their
wage demands. For example, unionized apparel workers received only modest

BOX 4.1
Airline Industry Consolidation Leads to Increases in Airline
Union Power and Employee Pay

A good example of how employees and unions benefi t from industry
concentration (i.e., a microeconomic factor) is provided by the U.S. airline
industry. At a recent meeting of airline company and union-side attorneys,
it was noted that the recent merger wave among airlines would likely lead
to better collective bargaining outcomes for airline unions and employees.
An attorney who represents several airline unions summed it up by pointing
out that airline consolidation gave the four remaining national carriers
(American, United, Southwest, and Delta) more “pricing power” over their
customers, which enabled them to boost profi ts and raised employees’
expectations for wage increases and benefi t improvements. Recent contract
settlements have validated this observation. For example, on November 20,
2015, United Airlines and the Air Line Pilots Association (ALPA) agreed
to a two-year contract extension that gave pilots a 13 percent pay increase
in 2016, followed by annual increases of 3 percent and 2 percent. These
increases raised the hourly base pay of United pilots above what pilots at
American and Delta airlines earn.

Sources : Larry Swisher, “Post-Merger Airlines Size Ups Pressure on Contract Talks,”
Daily Labor Report , March 11, 2016, C-1; and Michael Sasso, “United Deal Said to
Boost Pilot Pay in Bid for Labor Peace,” Daily Labor Report , November 25, 2015, A-5.

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Role of the Labor Relations Environment 95

wage increases in their collective bargaining agreements in recent years, in part
because they feared that any higher wage payments would cause apparel fi rms to
more aggressively shift production offshore or outsource production domestically
to nonunion plants or fi rms. This trade-off between wages and employment is
another important microeconomic infl uence on bargaining power and outcomes.

Marshall ’ s Four Basic Conditions

Unions are more likely to consider the employment effects that result from a
wage increase when these effects are greater. Marshall ’ s conditions explain why
a wage increase leads to large reductions in employment in one situation and to
only small reductions in employment in another is explained.

In his seminal analysis of the relative bargaining power of labor and management,
Alfred Marshall argued that unions are most powerful when the demand for
labor is highly inelastic —that is, when increases in wages will not result in
signifi cant reductions in employment in the unionized sector. 2 Marshall proposed
four basic conditions under which the demand for union labor would be inelastic:
(1) when labor cannot be easily replaced in the production process by other
workers or machines; (2) when the demand for the fi nal product is not sensitive
to changes in the price of the product; (3) when the supply of nonlabor factors
of production is not sensitive to changes in the price of the product; and (4)
when the ratio of labor costs to total costs is small. 3 Let us address each of these
conditions in turn.

The diffi culty of replacing workers: The fi rst condition, the degree to which workers are
diffi cult to replace , depends on the production technology. The more diffi cult it is to
replace workers with machines or other workers, the less apt the workers will be to
fear they will be displaced.

Unions can try to limit how easily management can introduce new technology by
raising the costs of substituting other factors of production for union labor, but they
face a dilemma when they consider that strategy. Although collectively bargained
constraints on technological change may keep unions from losing employment, slowing
the rate of technological change may also constrain the rate of productivity growth,
limiting the long-run potential for wage increases.

The demand for the product: Workers face less of an employment decline from raising
wages if the demand for the product produced by these workers is not sensitive to
the price of the product. This sensitivity (what economists call the elasticity of product
demand ) is a second key condition Marshall identifi ed. This condition is somewhat
different from the other three in that it is infl uenced by consumer preferences and
not by the actions of the fi rm or the union. The elasticity of product demand depends
on the willingness of consumers to substitute other products.

A modern-day illustration of this principle is the threat imports pose to union power.
Lower-priced imports become more attractive to domestic consumers when wages
and prices in the domestic unionized economy increase. The auto, apparel, steel, and
electrical appliance industries are all recent cases in point.

The supply of other production inputs: Marshall ’ s third condition is the responsiveness
of the price of other inputs in the production process to the demand for those inputs
(what economists call the elasticity of supply of other factors of production ). When an

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96 Part I. Introduction

employer turns to alternative inputs so it can employ less union labor, unions will be
better able to push up wages (with less fear of employment cutbacks) if the price of
other inputs rises a lot as their use increases. Thus, the more inelastic the supply curve
for alternative inputs is, the greater union power is. Whereas Marshall ’ s fi rst condition
concerns the degree to which it is technologically feasible to substitute machines or other
factors of production for unionized labor, his third condition has to do with how
costly production inputs are that can be used as alternatives to union labor.

Labor ’ s share of total costs: Marshall ’ s fourth condition is that unions are more powerful
when labor costs are only a small proportion of total costs. This condition has often
been restated as the importance of being unimportant . An employer is less likely to resist
union pressure if a given wage increase affects only a very small proportion of the
total cost of the product. Thus, a small craft unit, such as the skilled maintenance
employees in a plant, is often less likely to meet management resistance to its wage
demands than a broad bargaining unit that represents all production and maintenance
employees would. 4

Bargaining in the public sector demonstrates the diffi culties unions experience when
labor costs constitute a large proportion of total production costs. Labor costs for local
government often account for between 60 and 70 percent of the budget, and in some
jurisdictions the labor costs for occupations such as fi refi ghting run as high as 90
percent of the budget. When local government offi cials seek to control total budget
costs, they take a very hard line in collective bargaining because the wages and salaries
of public employees are their largest controllable cost.

Do Unions and Workers Care about the
Wage-Employment Trade-Off?

All of Marshall ’ s conditions are based on the assumption that workers and unions
are concerned about the employment effects of wage increases. When union
members are willing to accept a slow rate of growth in employment or a decline
in the number of union jobs as a trade-off for higher wages, the sources of power
discussed above are less important.

Perhaps the classic example of a union that ignored the employment effects
resulting from wage increases was the United Mine Workers of America (UMW)
in the 1940s. UMW president John L. Lewis demanded high wage increases
while giving employers a free hand to invest in labor-saving technology. The
result was that although mine workers’ wages increased, employment in the
industry declined sharply throughout the 1940s and into the 1950s. 5 Despite this
decline, the union ’ s leaders did not soften their demands for higher wages.

Labor relations scholars have long debated the role the wage-employment
trade-off actually plays in collective bargaining. Arthur Ross argued that political
factors rather than employment consequences shape the wage policies of unions.
Ross also claimed that workers’ wage demands are heavily infl uenced by the
comparisons they make with the wages of other workers or unions (what he
called “orbits of coercive comparisons”), a practice that gives union leaders some
leeway in defi ning their wage goals. 6 John Dunlop had a very different view of
union wage policy. He claimed that unions do consider the employment conse-
quences of their wage demands and that they may even try to maximize the
employer ’ s payroll. 7

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Role of the Labor Relations Environment 97

Concessionary bargaining from the 1980s on offers evidence that unions and
workers do consider the employment effects of higher wages, particularly when
higher wages might lead to a plant closing. Yet as Ross asserted, political factors
played an important role in shaping whether and to what extent employment
was a concern in wage bargaining. The willingness of workers to accept concessions
and what they won in exchange for those concessions was affected by many
factors, including business and union strategies.

MACROECONOMIC INFLUENCES ON TOTAL AND
RELATIVE BARGAINING POWER

Economists refer to unemployment and the growth in national product or
productivity as macroeconomic factors. The overall state of the economy affects
bargaining power through a variety of channels. A fi rm is likely to be earning
higher profi ts (greater total power) when the economy is strong and demand is
growing. Both sides prefer periods of economic growth because these periods
can sustain high wages and profi ts.

A union ’ s strike leverage depends in part on the availability of jobs—both for
the striking workers and for their spouses or other family members who might
help support the strikers. The higher the unemployment rate, the less likely
striking workers or family members will be to fi nd substitute employment and
the more likely it is that a striking worker ’ s other family members will be on
layoff. Thus, during the upswing of a business cycle (as the unemployment rate
declines), unions generally gain strike leverage. Conversely, during periods of
increasing unemployment, the relative power of unions declines. The factors at
work here include the need of striking workers for alternative income sources
and the vulnerability of employers to strikes when product demand is high.
During periods of slack demand, employers may, in fact, welcome a strike because
they can then lower their inventories and use the strike as a substitute for layoffs.

Wage Flexibility over the Business Cycle

The connection between macroeconomic conditions and bargaining power is
supported by evidence that the rate of wage increases in the economy responds
to the business cycle. Wages rise more quickly when the economy is growing
and they increase more slowly (or fall) when macroeconomic activity is
sluggish.

However, declines in product demand and increases in unemployment have
been shown to have a weaker downward effect on collectively bargained wage
increases than on wage increases in the nonunion sector. 8 Unions tend to aggres-
sively resist wage cutting, and it is harder for union employers to cut wages or
moderate the pace of wage increases during recessionary periods than it is for
nonunion employers. The fact that union wage rates are often set in multiyear
agreements (labor contracts in trucking and the auto industry, for example, have
traditionally been for three years) makes union wages less responsive than nonunion
wages to changing economic conditions.

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98 Part I. Introduction

POLITICAL POWER

The bargaining power of labor and management is infl uenced by their respective
political power through a variety of channels. As mentioned above, one illustration
of how politics matters is through the infl uence of public policies on the mac-
roeconomic policies that affect the total and relative power of labor and management.
Yet, as discussed in chapter 3 , the legal system and public policies critically shape
labor relations. The political power of labor and management matters because
that power infl uences the laws and public policies that regulate labor relations.

Public policies also directly affect income through social welfare policies such as
the minimum wage and social security pensions. This is another channel through
which political power affects the bargaining power of labor and management.
Political power also infl uences employment terms and conditions through its
effects on the roles federal, state, and local governments play as employers (see
Chapter 13 ). However, in the United States, the government does not exert
substantial direct effects on employment terms and conditions in the private sector,
especially when compared to the role of government in many other countries
(see Chapter 15 ).

THE LEGAL AND PUBLIC POLICY CONTEXT

Law and public policy infl uence the legal standing of unions, the bargaining
power of unions, and employment conditions. This section describes specifi cally
how laws do this.

The Legality of Unionism and Union Activity

Public policy determines how easy it is for unions to form and sustain themselves.
Imagine what would happen in a country where unionism was deemed to be
illegal and workers were sent to jail if they tried to form unions or to conduct
strikes. One would expect that under such a public policy there would be few
unions and that organized representatives of workers would be able to do very
little. What would be the long-term consequences of such policies, and would
such a regime be sustainable?

If unions and union activity were outlawed, one would expect workers to
have little infl uence that could provide a counterbalance to other powerful social
forces. What happened in Poland, however, reveals that such a system can lead
to confl ict between workers and the government. The Solidarity union led a
successful challenge to the Communist government in Poland. Unions were later
active in the overthrow of governments in other Eastern European countries and
in the former Soviet Union countries. Unionism in this region of the world thus
promoted more than just the improvement of the working conditions of Polish
workers. Events there and in other parts of the former Communist bloc remind
us of the role unions can play as a democratic force in society.

Banning unions is one extreme. Legally requiring union membership is the
other extreme role that public policy may play. No democratic government has
chosen to follow this course. Instead, public policies about unionism in the United
States and other democratic countries have taken a middle course. Considerable

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Role of the Labor Relations Environment 99

variation exists among democratic countries regarding the regulations about which
workers can join unions and how they can do so. In many countries, the regulation
of unions has changed much over the last twenty-fi ve years.

The NLRA ’ s Effects on Bargaining Power

The NLRA and state statutes governing public and agricultural employees in the
United States do more than just give unions the right to exist. These acts infl uence
the processes and outcomes of collective bargaining through their regulation of
the actions of workers, unions, and employers during collective bargaining. For
example, the NLRA grants unions the right to strike and obligates employers to
bargain in good faith. Without these policies, the bargaining power of unions
might be severely weakened.

The NLRA infl uences the bargaining power of workers and employers in
many ways. For instance, as discussed in Chapter 3 , the Taft-Hartley amendments
to the original NLRA made it illegal for supervisors to join unions that represent
production workers. 9 In taking away the protection of the law, this amendment
led to the demise of the numerous foreman unions that had formed.

The Effects of Direct Regulation of Employment
Conditions

In the United States, certain employment conditions are regulated in more direct
ways than collective bargaining is. Federal laws regulation overtime hours,
unemployment insurance, pensions, and many other issues. These regulations are
clearly important because they set employment terms. They also are important
because of their indirect effects on bargaining power. For instance, the fact that
workers in some states can collect unemployment insurance while they are on
strike makes those workers more able to sustain strike action and increase their
bargaining power than workers in states without this policy. 10 Unions in the
United States and other countries support legislated minimum wages and minimum
standards for other employment conditions. In recent years, unions in the United
States have been strong supporters of campaigns to raise the minimum wage and
campaigns for a “living wage” (see Chapter 6 ).

An Illustration of Government Employment Regulation:
Pensions

Pensions provide an example of how government has infl uenced employment
conditions. The Employee Retirement Income Security Act (ERISA) of
1974 has had profound effects on pensions. The act (1) specifi es minimum standards
for vesting of pension contributions; (2) requires more detailed reporting and
disclosure of information about the plan to both employees and the government;
(3) requires that all future liabilities be fully funded on an annual basis and all
past unfunded liabilities be amortized; and (4) establishes an insurance protection
program for workers affected by plan terminations. The costs of the termination
insurance are met by a tax on existing plans.

The major policy problem ERISA created is the potential risk to the government
that occurs when major multiemployer plans are terminated. Box 4.2 provides

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100 Part I. Introduction

BOX 4.2
Troubles Facing a Large Multiemployer Pension Plan and the
Infl uence of Recent Federal Legislation

In January 2016, a New Jersey–based Teamsters local pension fund became
the third multiemployer pension plan to apply for Treasury Department
approval of benefi t suspensions. The massive Central States Pension Fund
became the fi rst multiemployer plan to fi le for a rescue under the Multi-
employer Pension Reform Act (MPRA) when it fi led its application with
the Treasury Department in September 2015. The MPRA, enacted in 2014,
is a federal law designed to help fi nancially troubled multiemployer plans
avert insolvency by suspending the accrued benefi ts of plan participants.
Supporters of the MPRA had successfully argued that without the law,
some pension plans would become insolvent and the obligations of such
funds would then transfer to the Pension Benefi t Guaranty Corporation, a
federal agency established to support pension funding, and possibly bankrupt
that corporation.

Critics of the MPRA claimed that it allowed profi table companies to
escape pension obligations. CNN reported the case of a retired UPS driver
who was told that his Central States Pension Fund benefi ts would decline
from $2,903 to $1,462 a month due to cuts allowed under the MPRA. It
was noted that although UPS has earned high profi ts, it was able to withdraw
from the Central States Pension Fund in 2008 (with a payment of $6.1
billion). UPS set up its own pensions fund, but it did not include retirees.
Retirees’ pensions continued to be covered by Central States. However,
the Central States Fund has struggled in recent years to meet its obligations
to UPS and other workers under the pressure of an aging work force
(currently there are fi ve retirees for every active worker).

The MPRA gives the U.S. Treasury Department the authority to decide
if benefi t cuts are fair. The U.S. Treasury used that authority to review a
proposed rescue plan and its associated benefi t cuts with the help of Ken
Feinberg, a renowned mediator. Following Feinberg ’ s recommendation,
the Treasury Department rejected the proposed rescue plan in May 2016,
asserting that the proposed benefi t cuts were too extreme for some benefi ciaries
and that even if the proposed cuts were imposed, they would not assure
the solvency of the beleaguered pension fund. Congress did not pass legislation
that would have provided an alternative to the plan Feinberg rejected. In
the absence of an acceptable funding rescue plan, the future of the Central
States Fund is uncertain, as is the question of whether it will be able to
meet its pension obligations.

Source : David Brandolph, “Third Multiemployer Plan Files Rescue Proposal,”
Daily Labor Report , January 26, 2016, A-9; Katie Lobosco, “Why 8,737 UPS Retirees
Are Bracing for Pension Cuts,” CNN Money , October 27, 2015, http://money
.cnn.com/2015/10/27/retirement/ups-pension-cuts-central-states/ ; and David B.
Brandolph, “Treasury Rejects Central States Pension Rescue Plan,” Daily Labor Report ,
May 6, 2016, A-8.

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Role of the Labor Relations Environment 101

an account of the controversy surrounding a proposed and then rejected rescue
plan for the Central States multiemployer pension fund. As you will see, the
rescue plan was infl uenced by recent laws that allowed pension funds to lower
retiree benefi ts under certain circumstances.

ERISA is an example of government efforts to regulate pensions, a key employ-
ment condition. It also illustrates the diffi culties the federal government has faced
in its work to ensure that workers consistently receive fair treatment with regard
to pensions.

The Role of Trade Policy

Trade policy is another way that public policies infl uence the economic environ-
ment. Debates about recent proposals to further liberalize trade policies illustrate
the controversy surrounding these matters. President Obama ’ s support for free
trade sparked heated debates over trade policy as the nation faced large trade
defi cits and a loss of employment in the industries most threatened by foreign
competition and imports (see Box 14.4 ).

The Labor Movement ’ s Criticism of the NLRA

Union leaders frustrated with declining union membership and new organizing
diffi culties have begun to question the value of the NLRA. Labor leaders (and
others) argue that NLRA decisions and representation elections take place only
after enormous delays, caused in part by the lack of commitment to the original
purposes of the NLRA. These leaders allege that such delays are the result of
employer practices such as fi ling numerous challenges and requests for postponement
and that these practices thwart the original intent of the NLRA that timely and
fair elections take place. These critics argue that NLRB enforcement procedures
operate to the advantage of management and against the original purposes of the
law.

Labor leaders blame their lack of success in organizing on weaknesses in the
NLRA and management ’ s stepped-up union-avoidance tactics. They now debate
which would be better for unions and workers: making major changes in the
NLRA or eliminating it completely. 11 Adding complexity to this debate is the
fact that in some cases, U.S. unions have clearly benefi ted from the NLRA and
its administration by the NLRB.

THE DEMOGRAPHIC CONTEXT

The changing nature of the labor force has also caused many to ask whether
collective bargaining is obsolete. It is thus important to examine the nature of
those changes and to explore their implications for collective bargaining.

Changes in the demographic characteristics of workers and jobs will infl uence
the needs and expectations of workers. These, in turn, may affect an individual ’ s
interest in union membership or willingness to stay out on strike.

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102 Part I. Introduction

Labor Force Trends

Since World War II, the U.S. labor force has grown at an unprecedented rate,
largely as a result of the postwar baby boom. However, the labor force grew
more slowly in the 1990s than it had in the previous two decades as a result of
a decline in the birth rate.

This and several other factors is leading to profound changes in the composition
of the labor force in the United States. In 2012, Generation X (those born from
1965 to 1980) surpassed the Baby Boomer Generation (those born from 1946 to
1964) as the largest segment of the labor force. Only three years later, in 2015,
the Millennial generation (born from 1981 to 1997) overtook the Gen Xers. The
Millennials are expected to represent an even larger share of the work force in
the years to come as the 40 percent who are still in school begin to move into
the work force.

Will these demographic shifts affect labor relations in the United States? Some
analysts speculate that because they will have come of age in a time of precipitous
decline for unionism, Millennials will be skeptical of collective bargaining. However,
there have been some signs that they may be embracing collective action in the
workplace. A highly public vote to authorize a union by the Millennial workers
at Gawker , a new-media outlet, was soon followed by a vote for authorization
at Salon.com , another such site. These events indicate an enthusiasm for unionism
among some younger workers.

The Millennials may face divergent pressures. It is forecast that half of
them will earn a college degree. 12 Those without higher education will face an
increasingly precarious labor market in which full-time jobs will become less
common and part-time and more contingent work will increase. Those with a
college degree will enter a highly competitive labor market in which they may
be expected to change jobs frequently, a trend that may make traditional union
organizing even more diffi cult. The gap that is widening in wages between
workers with college degrees and workers with no college degrees will also likely
exacerbate income inequality and perhaps also income differentials by race unless
the current tendency for African Americans to attend college less frequently than
whites is reversed.

Any look at the changing work force of the United States must consider the
impact of immigration. Particularly signifi cant is the rising number of unauthorized
immigrants who are working in the country. In 1990, the number of unauthorized
immigrants living in the United States was 3.5 million. That number increased
steadily until 2008, when it leveled off at about 11 million. 13

A majority of immigrants are of working age, and indeed their entrance has
provided a partial solution to the problem of an ageing work force. It is estimated
that unauthorized immigrants account for 5.1 percent of the labor force. Most
labor organizations in the country are attempting to reach out to these workers,
abandoning the nativist tendencies of the past. This outreach is diffi cult, however,
partly because many immigrants work in the agricultural sector, which the NLRA
does not protect.

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Role of the Labor Relations Environment 103

IS THE U.S. ECONOMY DEINDUSTRIALIZING?

The increase in the number and share of service and part-time jobs has spurred
an intense debate. Barry Bluestone and Bennett Harrison claim that the growth
in these jobs signals a decline in the manufacturing base of the U.S. economy
(they call the process deindustrialization ). They further argue that these shifts
in job composition go hand in hand with increasing inequality in the income
distribution. The better-paying jobs such as skilled trades, steel, and auto production
jobs, they claim, are disappearing and are being replaced by lower-paying service
jobs. 14 The spread of corporate downsizing led Bennett Harrison to conclude
that American corporations are becoming “lean and mean.” These developments
may have contributed to the growing income inequality that is occurring in the
United States.

On the other side of the debate are analysts such as Robert Lawrence who
hold that the growth in the number of service and part-time jobs has been a
response to the availability and desire of workers who want those jobs and have
the right skills for them. 15 These observers see this as a sign of health in the U.S.
economy and compare the job growth in the United States in recent years to
the sluggish employment growth in Europe over the same period. 16 There is also
a middle position in this debate: some say that deindustrialization is not happening
but at the same time point to many persistent problems in the U.S. labor market. 17

The issues at stake in this debate are of enormous importance. If one decides
that the labor market is relatively healthy, there is little reason to seek government
policies to alter the outcomes in that labor market, but if one believes that the
labor market is in trouble, there is every reason to seek federal policies to redress
an imbalance. Furthermore, any answer to the questions of whether deindustrializa-
tion or income inequality are taking place will affect government policy toward
collective bargaining and many other labor market institutions.

The shift to a larger service sector and more part-time and home-based employ-
ment has two indisputable implications for collective bargaining and union
organizing. First, since part-time workers have looser attachments to a single
employer than others (they are often employed only temporarily), union organizing
among them is more diffi cult and probably requires nontraditional techniques. It
is not surprising that the labor movement has vigorously opposed the growth of
temporary and home-based work. It is unlikely, however, that labor ’ s opposition
will have any effect on the growth in these types of employment relationships.
Thus, if unions are to organize these workers, they will need to develop policies
and strategies that are tailored to their particular needs. One strategy that unions
have discussed is providing associate member status or individual forms of rep-
resentation to these workers. 18 Other solutions may be developed outside the
United States, since the growth in temporary, part-time, and home-based work
is a problem labor movements all over the globe are facing.

Second, the ease with which striking service workers can be replaced makes
it diffi cult for unions to acquire bargaining leverage through strikes in those

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104 Part I. Introduction

sectors. Several unions that represent service workers have been experimenting
with strategies for broadening support for their demands through community
groups such as churches. Service unions also have been experimenting with
working to rule and other strategies that can increase leverage against employers
without taking strike action.

THE DEMOGRAPHIC PROFILE OF
UNION MEMBERS

The average union member is more apt to be working in industries, occupations,
and regions in which the demand for labor is either declining or is growing at a
slower pace than elsewhere in the economy. In addition, women, whose labor
force participation is increasing rapidly, are underrepresented in the unionized
sector.

These developments pose many challenges for unions. The traditional constituency
of unions—male, blue-collar, manufacturing, mining, construction, and transporta-
tion workers living in the Northeast or North Central regions—is declining in
signifi cance. Current union members are on average older and less well educated
than the new entrants to the labor force. Unions may have diffi culty adjusting
to the demands of a younger, more vocal constituency.

Demographic Challenges for Unions

Demographic diversity can affect union policies. Once people join unions, they
tend to try to shape union policies to refl ect their own preferences. This process
of political representation becomes troublesome to unions when members’ views
change rapidly. The very purpose of a union is to pursue the common goals of
its members through the exercise of collective power. Thus, the more rapid the
demography changes and the more heterogeneous the union constituency becomes,
the greater the potential for internal confl ict and the more diffi culty the union
will have in trying to establish bargaining priorities.

New union members sometimes have a diffi cult time creating an effective
political base. This is a problem that sometimes confronts newly hired, younger
workers as they try to infl uence the existing, often older, union leadership.
Women, racial and ethnic minorities, and any other new group that moves into
union jobs faces the same challenge. Until these groups can establish an effective
political base and pressure union leaders, it is not likely that unions will give their
needs as high a priority as they might desire.

In short, the demographic context of union membership affects collective
bargaining, the attitudes union members have toward their jobs, and the skills
workers bring to the job. If unions do not successfully organize the new members
of the work force, their membership will decline even further. If unions do
succeed at organizing the new workers, they will face pressures for change—both
within their organizations and at the bargaining table. In any event, it is clear
that any analysis of collective bargaining must account for the demography of
the labor force.

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Role of the Labor Relations Environment 105

THE SOCIAL CONTEXT

How does the American public see the union movement? Is society supportive
of or hostile to unions? These are aspects of the social context that can affect
industrial relations.

Polls that include questions about unions reveal fl uctuations over time in the
public ’ s image of unions. Gallup polls, for example, show a decline in the share
of the population that approves of labor unions since the high in 1965 of 71
percent. However, public support for unions has improved in recent years. The
percentage of the public that approves of labor unions, according to the Gallup
Poll, increased to 58 percent in 2015 (see Box 4.3 ). Gallup polls also show that
when asked where their sympathies were in recent labor disputes, more of the
public was sympathetic to unions than to companies. Gallup polls also show that
the public views big business as a bigger threat to the country in the future than
unions.

BOX 4.3
Public Approval of Labor Unions—Evidence from Polls

Recent Gallup polls had identifi ed the following public attitudes toward
unions:

1. Do you approve or disapprove of labor unions?
58% Approve
36% Disapprove
7% No opinion

2. Would you, personally, like to see unions in the United State have more
infl uence than they have today, the same amount as today, or less infl uence
that they have today?
37% More infl uence
24% Same amount
35% Less infl uence
4% No opinion

3. In your opinion, which of the following will be the biggest threat to the
country in the future—big business, big labor, or big government?
27% Big business
8% Big labor
61% Big government
4% No opinion

Sources : Data for Questions 1 and 2 are from a Gallup poll conducted in August 2015.
Data for Question 3 are from a Gallup poll conducted in December 2005. Lydia Saad,
“Americans Support for Labor Unions Continues to Recover,” Gallup Organization,
August 2015 www.gallup.com/poll/184622/americans-support-labor-unions-continues-
recover.aspx .

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106 Part I. Introduction

At the same time, responses to other questions regularly asked in the Gallup
and other polls reveals that the level of public confi dence in organized labor (and
big business) are consistently and substantially lower than public confi dence in
the military, churches and religion, the Supreme Court, and public schools. But
although it is skeptical about union leaders, the American public has continued
to express strong approval of the functions unions perform in representing worker
interests. Polls show, for example, that a majority of the population approves of
unions in general and believes in the right of workers to join unions of their
own choosing. 19 Thus, the majority of Americans apparently accept the legitimacy
of unions as a means for protecting the economic and job-related interests of
workers.

American workers also seem to have a dual image of trade unions. On the
one hand, the majority of workers see unions as big, powerful institutions that
have signifi cant infl uence in political decision making and with elected offi cials
and over employers and union members. The majority also take a skeptical view
of union leaders’ personal motivations. On the other hand, an equally large
majority of workers see unions as helpful or instrumental in improving the working
lives of their members. Evidently, then, most U.S. workers are skeptical about
the political activities of trade unions but accept their collective bargaining
activities.

THE TECHNOLOGICAL CONTEXT

Technological change played a major role in workers’ early efforts to unionize.
It also is clear that our economy is in the midst of technological changes that
will have huge effects on future employment conditions. Yet many people still
disagree about how and why technology infl uenced early unionization and what
current technological changes imply for the future of labor relations.

The Historical Debate over the Infl uence of Technology:
Commons versus Marx

Both Karl Marx and John R. Commons believed that workers were spurred to
join unions by technological change, the shift from craft systems of production
to the hiring of wage labor, and the rise of the modern factory system. But they
disagreed sharply over exactly why changes in technology and the organization
of work had that effect.

For Marx, the critical event in industrialization was the chasm that capitalist
methods of production opened between workers and the owners of the means
of production. That chasm, according to Marx, would inevitably result in a
worsening of working conditions, a sharp decline in corporate profi ts, and the
emergence of a revolutionary class consciousness among workers. Followers of
Marx argue that the loss of control that workers experienced as a result of the
shift in production methods and ownership is what led them to form unions. To
those observers, collective bargaining was, and is, a continuing battle between
workers and managers over control of the production process. Harry Braverman

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Role of the Labor Relations Environment 107

built on this argument and claimed that technological change typically leads to
a lowering of the skills required in jobs (deskilling) as part of this battle for
control. 20

Commons, in contrast, observed that the shift in production methods was itself
a product of an expansion of the market brought about by urbanization and new
transportation methods. For Commons, as the market expanded and the ownership
of production changed, workers came up against a host of competitive menaces
such as prison labor or child labor. Workers then turned to unions to protect
themselves and to improve their standard of living. Commons and his students,
such as Selig Perlman, argued that unions and workers sought income security
and job security rather than control of the production process. 21 Thus, although
Marx and Commons differed sharply in their interpretations of unions’ objectives,
both saw the rise of capitalism as the spur to unionization.

For Clark Kerr, John Dunlop, Frederick Harbison, and Charles Myers, it was
the process of industrialization and not capitalism per se that led to changes in
the relationship between workers and employers that, in turn, led to unionization. 22
They argued that modern technology produced a need for rules that governed
relations between workers and employers. Collective bargaining and contractually
negotiated rules were a logical way to formalize and structure the rules required
in modern industry. Within this framework, specifi c technological changes are
important for collective bargaining because they bring changes in the relative
bargaining power of management or labor. In this regard, the industrialization
thesis is closer to Commons ’ s ideas than to those of Marx.

The Infl uence of Microelectronic Technology
on Skill Levels

The recent expansion in the use of microelectronic technology has reignited
the debate over the effects of technological change and the possibility that the
economy will become stuck in a perpetual state of high unemployment. To
some, this technology can open the way to less hierarchical work that requires
higher skill levels and leads to further growth in real incomes. To others, the
new technology is being used to wrest control away from the work force and
to deskill workers now just as new technology allegedly was used in the past. 23
To still others, the inevitable consequence of the microelectronic revolution is
high unemployment.

Skeptics who doubt the positive role of new technology see little evidence of
a shift away from the hierarchical forms of work organization. In fact, these
modern proponents of the deskilling thesis argue that much of the concessionary
bargaining in recent years has demonstrated the efforts of management to increase
the pace of work and use new technology to weaken workers’ bargaining leverage
and skills. The deskilling thesis proponents also predict that new technology will
lead to signifi cant employment displacement and unemployment.

Some behavioral scientists believe that new technologies serve to “unfreeze”
existing practices and introduce a variety of options for reconfi guring the organiza-
tion of work, career ladders, compensation criteria, and other aspects of the

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108 Part I. Introduction

employment relationship. 24 In this view, technology has no single effect on skills
or worker power. Instead, its effects depend on the choices decision makers make
and the way the new technology is implemented.

RECENT ENVIRONMENTAL PRESSURES ON
COLLECTIVE BARGAINING

In the face of the slow but steady economic growth in the United States as the
economy recovered from the 2008–2009 fi nancial crisis, a few unions, such as
the autoworkers and airline pilots, were able to achieve solid collective bargaining
gains. Nevertheless, changes in the external environment put unions at a distinct
disadvantage in terms of their bargaining leverage with management. Corporate
restructuring and the availability of outsourcing and nonunion alternatives continue
to put pressure on unions, and increasing globalization heightened those pressures.

Pressure from Nonunion Competition

Unions face competition from the growing numbers of domestic nonunion fi rms.
In industries such as construction, trucking, textiles, and mining, the share of
nonunion production has increased substantially. Even in traditional strongholds
of unionism such as steel and autos, nonunion fi rms are entering the industry.
Nonunion competition has become an even greater threat as employers have
become more willing and more able to shift production to nonunion sites during
strikes. As a result, unions have become less able to take wages out of competi-
tion and their bargaining power has declined signifi cantly.

Heightened International Competition

The growing penetration of imports in several key manufacturing industries and
the large trade defi cit carried the issue of the international economy straight to
collective bargaining agendas. Foreign workers have become a major competitive
threat to organized labor in the United States because it is very diffi cult for unions
to take wages out of competition when goods and investments move easily across
national and international borders. Perhaps the growth of the multinational
companies is the modern-day equivalent of the competitive menaces the Philadelphia
shoemakers faced.

Image Problems of Unions

Economic pressures are only part of the story, however. The labor movement
encountered a public that is often skeptical about the value of unions and worker
solidarity. Fellow workers often crossed the picket lines of strikers, and union
members found less support for strikes in the broader community. From the
1990s, when unions sought recourse through the NLRB or the courts to block
management practices such as the movement of operations to other sites or the
abrogation of collective bargaining contracts during bankruptcy reorganization,
they received little help.

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Role of the Labor Relations Environment 109

Signs of Innovation in the Labor Movement

The economy, public policy, ideology, and demography had all taken a turn that
would hamper the efforts of organized labor. And yet, in the face of all these
environmental pressures, the union movement was exhibiting some signs of
innovation and adaptation. There has been a broadening of the bargaining agenda
and increased union involvement in managerial decision making at some workplaces
and union coordination with various rights groups who are seeking reductions
in income inequality and an improvement in employment terms for those at the
lower end of the earning distribution (see Chapter 6 ). Moreover, the labor move-
ment has been engaged in serious soul-searching since the fi rst decade of the new
century that has led to a variety of union revitalization measures.

Summary

This chapter examined how the external environment infl uences the bargaining
process. The fi ve key aspects of the environment are economic, public policy,
demographic, social, and technological factors.

Important economic factors include those that operate at the fi rm level (the
microeconomic infl uences) and the state of the labor market and the overall
economy (the macroeconomic infl uences). The economic environment is most
important through the effects it exerts on the bargaining power of labor and
management. Bargaining power is heavily infl uenced by strike leverage and the
extent to which an increase in wages leads to a decline in employment (the
wage-employment trade-off).

Public policy shapes the rights of the parties and the procedures used in collective
bargaining. There has long been a strong preference in the United States for labor
laws that give employees, unions, and management the right to directly shape
employment terms with limited interference from the government. The most
important labor law in the United States is the National Labor Relations Act and
its amendments. In addition, some federal laws directly infl uence employment
conditions such as pensions and equal employment opportunity rights, although
we have relatively less government regulation of employment than other countries
do.

Major demographic issues include the increased labor force participation of
women that has occurred since World War II. The labor force is becoming more
diverse and unions face the challenge of altering their policies to increase their
appeal to new workers, many of whom work in the service sector.

The public continues to express support for the general purposes unions serve.
When asked about union leaders or their willingness to join unions, however,
the public ’ s responses are less favorable.

Technology infl uences employment levels and bargaining leverage. In recent
years, there has been much debate about how technology is affecting the skill
levels of workers. On the shop fl oor, labor relations play an important role in
shaping how well new technology is implemented.

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110 Part I. Introduction

How well collective bargaining serves the interests of labor and management
often depends on its ability to adapt to changes in the external environment.
Economic pressures on the U.S. collective bargaining system have steadily increased
in tandem with the expansion in international trade. There are also pressures
from the other key environmental dimensions. To help build a better understanding
of how collective bargaining could respond to these environmental challenges,
the next chapters examine how collective bargaining works.

Discussion Questions

1. Defi ne bargaining power and strike leverage.
2. Several microeconomic factors play a part in the strike leverage of both

unions and employers. Briefl y describe some of these factors.
3. Describe some of the ways the National Labor Relations Act infl uences the

bargaining power of labor and management.
4. Briefl y discuss some of the recent demographic trends in the work force.
5. Is the labor law framework that was adopted in the 1930s still

appropriate?
6. What changes in the industrial environment have placed unions at a disad-

vantage in terms of bargaining power in recent years in most industries?

Related Web Sites

United Mine Workers (UMW):

Pension Benefi t Guaranty Corporation:
http://www.pbgc.gov

Suggested Supplemental Readings

Blauner , Robert . Alienation and Freedom . Chicago : University of Chicago Press , 1964 .
Brynjolfsson , Erik , and Andrew McAfee . The Second Machine Age . New York : Norton , 2014 .
Ehrenberg , Ronald G. , and Robert S. Smith . Modern Labor Economics . 8th ed . Reading, Mass. :

Addison-Wesley , 2003 .
Harrison , Bennett . Lean and Mean: The Changing Landscape of Corporate Power in the Age of

Flexibility . New York : Basic Books , 1994 .
Osterman , Paul . Securing Prosperity: The American Labor Market—How It Has Changed and What

to Do about It . Princeton, N.J. : Princeton University Press , 1999 .

Notes

1. John T. Dunlop, Industrial Relations Systems (New York: Holt and Company, 1958).
2. Elasticity of demand refers to the slope of the demand curve for labor. The more inelastic the

demand, the more vertical the demand curve and the less responsive the demand for labor to any
change in the price of labor. A perfectly elastic demand curve would be horizontal. Alfred Marshall,
Principles of Economics , 8th ed. (New York: Macmillan, 1920), 383–386.

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Role of the Labor Relations Environment 111

3. Others have pointed out that for a low labor cost ratio to act as a source of power, as Marshall
hypothesized, the elasticity of demand for the fi nal product must be greater than the elasticity of
substitution of nonlabor inputs in the production process. See Richard B. Freeman, Labor Economics ,
2nd ed. (Englewood Cliffs, N.J.: Prentice Hall, 1979), 67–71.

4. A small bargaining unit can be affected by employers who consider the “spillover” effects of
a settlement that is negotiated with one small unit on the rest of the fi rm ’ s work force.

5. Even if the union had tried to infl uence employment levels, it might not have been successful
in the face of technological change in the industry.

6. Arthur M. Ross, Trade Union Wage Policy (Berkeley: University of California Press, 1948).
7. John T. Dunlop, Wage Determination under Trade Unions (New York: Macmillan, 1944).
8. Daniel J. B. Mitchell, Unions, Wages, and Infl ation (Washington, D.C.: Brookings Institution,

1980), 113–162.
9. Although the Taft-Hartley amendments do allow management to voluntarily bargain with a

union that represents supervisors, such bargaining is extremely rare.
10. The effects of public policies on strike leverage are discussed in Robert Hutchens, Robert

B. Lipsky, and Robert N. Stern, Strikes and Subsidies: The Infl uence of Government on Strike Activity
(Kalamazoo, Mich.: W. E. Upjohn Institute for Employment Research, 1989).

11. “AFL-CIO Will Oppose Collyer Nomination as Board Counsel,” Daily Labor Report 9 (May
1984): A-4.

12. Jonathan Timm, “Can Millennials Save Unions?” The Atlantic , September 7, 2015, http://
www.theatlantic.com/business/archive/2015/09/millennials-unions/401918/ ; Richard Fry, “Millennials
Surpass Gen Xers as the Largest Generation in U.S. labor Force,” Pew Research Center , May 11,
2015, http://www.pewresearch.org/fact-tank/2015/05/11/millennials-surpass-gen-xers-as-the-largest
-generation-in-u-s-labor-force/ .

13. Jens Manuel Krogstad, Jeffery S. Passel, and D’Vera Cohn, “5 Facts about Illegal Immigration
in the U.S.,” Pew Research Center , November 17, 2015, http://www.pewresearch.org/
fact-tank/2015/11/19/5-facts-about-illegal-immigration-in-the-u-s/ .

14. Barry Bluestone and Bennett Harrison, The Deindustrialization of America (New York: Basic
Books, 1982).

15. Robert Z. Lawrence, Can America Compete? (Washington, D.C.: Brookings Institution, 1985).
16. See, for example, Neal Rosenthal, “The Shrinking Middle Class: Myth or Reality?” Monthly

Labor Review , March 1985, 3–10.
17. See, for example, Paul Osterman, Employment Futures (New York: Oxford University Press,

1988).
18. AFL-CIO Committee on the Evolution of Work, The Changing Situation of Workers and Their

Unions (Washington, D.C.: AFL-CIO, 1985).
19. Daniel B. Cornfi eld, “Shifts in Public Approval of Labor Unions in the United States,

1936–1999,” Gallup , September 2, 1999, http://www.gallup.com/poll/24937/shifts-public-approval-
labor-unions-united-states-19361999.aspx .

20. Harry Braverman, Labor and Monopoly Capital (New York: Monthly Review Press, 1984).
21. Selig Perlman, A Theory of the Labor Movement (1928; repr., Philadelphia: Porcupine Press,

1979).
22. Clark Kerr, John T. Dunlop, Frederick Harbison, and Charles A. Myers, Industrialism and

Industrial Man (Cambridge, Mass.: Harvard University Press, 1960).
23. David F. Noble, Forces of Production (New York: Oxford University Press, 1986); Harley

Shaiken, Work Transformed (New York: Holt, Rinehart & Winston, 1984).
24. Erik Brynjolfsson and Andrew McAfee, The Second Machine Age (New York: Norton, 2014);

Barry Wilkinson, The Shopfl oor Politics of New Technology (London: Heinemann Educational Books,
1983).

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191

8

THE COMPLEX DYNAMICS OF NEGOTIATIONS

Chapter 8 examines the process by which unions and employers negotiate collective
bargaining agreements, continuing the analysis of the middle (functional) level
of labor relations activity. It includes an examination of the dynamics of negotiations
and the factors that lead to strikes.

Negotiations and strikes are the most visible parts of a collective bargaining
system. The pressures of a contract deadline and perhaps the threat of a strike
focus attention and clarify how important each party feels about critical issues
and about the need to either alter or preserve current practices. From time to
time, negotiations may produce strikes. But negotiations are not independent of
activities that occur over time at the workplace or at the strategic levels of the
bargaining relationship. The strategies and tactics each side uses in negotiations
are likely to refl ect the level of trust labor and management representatives have
for each other at the outset of negotiations, and the results of negotiations will
in turn affect the trust that carries over to the relationship of the parties during
the term of the agreement. Thus, negotiations are a pivotal event that may
reinforce or change the future relations of labor and management.

As we will see, many of the parties to collective bargaining today are attempting
to bring a new approach to negotiations, often labeled interest-based bargaining
or mutual-gains bargaining. 1 The new approaches seek to move away from more
traditional positional bargaining as a way of increasing the potential for solving
problems during negotiations. Thus, the negotiations process involves making
choices over how to bargain and tactical decisions about how to conduct negotia-
tions to best represent the parties’ separate and joint interests.

This chapter uses the framework developed by Richard Walton and Robert
McKersie to compare and contrast these two approaches to negotiations. 2 The
Walton and McKersie framework is particularly useful for identifying the wide
variety of pressures on and competing interests of the negotiators during the
negotiations process.

The Negotiations Process and Strikes

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AN: 1589152 ; Harry C. Katz, Thomas A. Kochan, Alexander J. S. Colvin.; An Introduction to U.S. Collective Bargaining and Labor Relations
Account: s4264928.main.eds

192 Part III. The Functional Level of Labor Relations

THE FOUR SUBPROCESSES OF NEGOTIATIONS

Although Walton and McKersie originally developed their framework to describe
and analyze the traditional positional approach to bargaining that was quite common
in the 1950s and 1960s, their work also served as the theoretical basis for interest-
based techniques that were developed in the 1980s. We will summarize their
framework fi rst and then discuss how the dynamics of bargaining varies depending
on the approach taken. Walton and McKersie argued that there are four sub-
processes of bargaining in the negotiation of any collective bargaining agreement:
distributive bargaining, integrative bargaining, intraorganizational bargaining, and
attitudinal structuring. Each subprocess is analyzed below, as are the interrelations
between the various subprocesses.

Distributive Bargaining

Distributive bargaining involves the aspects of negotiations in which one
side ’ s gain is the other side ’ s loss. Distributive bargaining is win-or-lose, or
zero-sum, bargaining. Examples of issues that most often are distributive in
nature include wage rates and fringe benefi ts. Labor gains more income from a
higher wage, while management gives up some profi t to pay the higher
wage. 3 Similarly, workers lose when a fringe benefi t (e.g., paid vacation time) is
reduced, while management gains higher profi ts with the reduction of paid vacation
time.

These issues lead to confl icts across the bargaining table. Determination of how
distributive issues are resolved involves the exercise of bargaining power. The
union, for example, tries to convince management to agree to its request for a
higher wage by threatening to strike if management does not give in to this
demand. Meanwhile, management may threaten the union with a lockout to be
followed by the hiring of replacement workers or with a plant closing if a strike
were to occur and might also point out to the union that a wage increase would
entail additional costs to the work force in the form of reductions in the number
of employees. Thus, the components of bargaining power, strike leverage, and
elasticity of demand for labor are the critical determinants of how distributive
confl icts are resolved.

Distributive issues are at the center of the negotiation of a collective bargaining
agreement, since disagreement about the distribution of labor ’ s product is at the
core of labor-management relations. Nevertheless, it would be a mistake to lose
sight of the fact that there are other dimensions to bargaining.

Integrative Bargaining

Integrative bargaining issues and processes are those in which a solution provides
gains to both labor and management, leading to joint gain, or win-win bargaining.
Labor and management both gain when they resolve problems that are impeding
productivity and a company ’ s performance. If the productivity of the fi rm increases,
the employees can benefi t in the form of higher compensation or shorter work
hours while the fi rm can benefi t in the form of greater profi ts.

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The Negotiations Process and Strikes 193

Numerous issues at the workplace create opportunities for integrative gains.
Work is rarely performed in the most productive way possible: cumbersome
practices and outdated work rules often stand in the way of peak performance.
Labor and management thus can improve the performance of a fi rm by addressing
such practices and changing job classifi cations or seniority rules or in other ways
creating procedures that promote high performance.

The introduction of new technology often creates an opportunity for integrative
gains. The effective use of new technology can increase productivity, which can
then provide rewards to both employees and the fi rm. Yet merely introducing
new technology on the shop fl oor or in the offi ce does not necessarily lead to
productivity increases. Typically, technology works best when it is accompanied
by changes in work practices: the number of employees might have to be reduced,
training programs might be necessary, and job assignments might need to be
adjusted. Integrative bargaining entails the negotiations about how and to what
extent productivity-enhancing work rule changes are made as a new technology
is introduced.

Why is it that the parties do not automatically make integrative changes, since
such changes hold the possibility of joint gain? In other words, why is integrative
bargaining so diffi cult? The answer to this question touches on one of the key
issues in industrial relations.

Why Integrative Bargaining Can Be So Diffi cult

Integrative bargaining is an ever-present and sometimes diffi cult component of
the negotiations process for several reasons. For one thing, although integrative
issues contain the possibility of joint gains for both sides, it is also true that both
parties are confronted with the question of how to divide up any joint gain. In
effect, any integrative bargain also prompts distributive bargaining, and the diffi culty
in resolving the distributive issue can make integrative bargaining diffi cult.

Consider, for example, what happens when a new profi t sharing plan is introduced
at a work site. If it is effectively introduced, the new plan offers the possibility
of joint gains in income to both employees and the fi rm if the new plan stimulates
the adoption of more effi cient work practices. Yet the parties involved cannot
escape the fact that if productivity goes up when a profi t sharing plan is implemented,
decisions must be made about how the increased income that technology makes
possible will be divided. Thus, every integrative bargain prompts a distributive
discussion. It can be diffi cult for the bargaining parties to agree on how to resolve
the distributive issue (how to share the integrative gain). Thus, integrative solutions
are sometimes blocked by labor and management ’ s disagreement over how they
would divide up the gains that result from problem resolution.

Integrative Bargaining and Distributive Bargaining Involve
Different Tactics

Integrative bargaining also can become diffi cult when the parties send confusing
signals and mixed messages to each other. This confusion springs from the fact
that integrative bargaining and distributive bargaining involve very different tactics

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194 Part III. The Functional Level of Labor Relations

and negotiating styles. Table 8.1 lists the different tactics used in distributive and
integrative bargaining.

Because distributive bargaining concerns issues for which one side ’ s gain is the
other side ’ s loss, negotiators often use specifi c tactics to increase their chances of
doing well. They may overstate demands, withhold information, or project a
stern and tough image. In contrast, effective integrative bargaining, involves
identifying and solving problems. The tactics that are typically effective in this
approach include the open exchange of information, listening to multiple voices,
and sharing information. Distributive and integrative bargaining styles contrast
sharply with each other.

The problem for both labor and management is that it is diffi cult to effectively
use both distributive bargaining and integrative bargaining in the same negotiations.
One side might settle into a distributive bargaining mode just at the moment
when the other side is ready for integrative problem solving. And when the latter
party confronts hard distributive tactics, it might become discouraged about the
possibility of integrative bargaining, making it diffi cult for such bargaining ever
to occur.

Another reason why integrative bargaining can be diffi cult is that the problems
that impede productivity are not always obvious to the two parties, even when
they agree about how to divide up the possible joint gains. The confl icts in these
two bargaining styles makes negotiations hard enough, but there are two other
subprocesses in the bargaining process to add to the mix.

Intraorganizational Bargaining

Intraorganizational bargaining occurs when there are different goals or prefer-
ences within either side, either the union or management. Intraorganizational
bargaining arises when the members of the union (or the union negotiating

Table 8.1 Tactics of distributive bargaining and integrative bargaining

Distributive tactics Integrative tactics

Issues Many issues Specifi c concerns
Positions Overstate real position at outset

Make demands
Focus on objectives
No fi nal positions

Use of
information

Information is power
Hold it close
Use selectively

Share information openly
Treat information as data

Communication
process

Controlled
Single spokesperson
Use of private caucuses to air

internal differences and discuss
responses

Open
Multiple voices
Use of subcommittees

Interpersonal
style

Hard bargaining
Focused on own goals and interests
Short run; not concerned about

long-term relations
Low trust

Problem solving
Concern for mutual goals
Concerned about long-term relations
High trust

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The Negotiations Process and Strikes 195

team) have different priorities about what the union should strive for during
negotiations. Senior union members may prefer that the union focus its negotiating
strategy around attainment of better pensions, whereas younger union members
may prefer wage increases. Or the craft workers in the union might be in favor
of restricting the use of outside contractors to maintain machinery in the plant,
whereas production workers might be concerned with having safer conditions
on the line.

Management may also have different preferences or opinions about what is
feasible in negotiations. Corporate management, for example, may favor strict
adherence to the seniority policies used in other plants of the company, whereas
local plant managers may prefer to negotiate for a seniority procedure that has
never been tried elsewhere in the company.

Intraorganizational confl ict also can occur when one or both of the parties
bring insuffi cient decision-making authority to the bargaining table. Nothing is
more frustrating to negotiators than to realize that they are engaging in surface
bargaining —that is, bargaining with a representative who lacks the authority
necessary to make commitments that will stick in his or her organization. For
example, on either the management or union side a person who knows or has
the authority to revise their respective side ’ s maximum offer (or maximum conces-
sion) may not be present at the bargaining table. When a negotiator has inadequate
decision-making power or authority, the probability of an impasse or a strike
increases because the opponent may to a strike to force the real decision makers
to the bargaining table. This source of impasse is especially prevalent in the public
sector or the quasi-public sector, such as not-for-profi t hospitals.

Consider, for example, the severe intraorganizational confl ict that appeared in
the dispute between a teachers’ union and a public school district that is described
in Box 8.1 . This impasse was caused primarily by intramanagement confl icts. The
union ’ s only recourse was to call an impasse, bring in a mediator, and put pressure
on the school board to resolve its internal differences and get on with the
negotiations.

This example illustrates that intraorganizational confl icts are not solely a union
phenomenon. It is true that the organizational structure of unions makes it more
diffi cult for them than for most managements to resolve internal power struggles.
However, in fi rms where the locus of decision-making power is unclear or widely
dispersed in management, open confl icts are likely to occur and carry over into
the negotiations process.

Intraorganizational confl ict is common in the public sector because of its complex
decision-making structures and numerous political constituencies. Another likely
environment for intramanagement confl icts is multiemployer bargaining structures
in industries where there is wide variation in the goals or fi nancial status of the
employers.

Attitudinal Structuring

Negotiations often involve a lot of uncertainty. Uncertainty arises from the dif-
fi culties the parties face in anticipating how much strike power they have and
the complications involved in interpreting each other ’ s intentions.

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196 Part III. The Functional Level of Labor Relations

BOX 8.1
Intraorganizational Confl ict in a School District

Three years before the negotiations in question began, the teachers had
engaged in a bitter strike. The school board president and two other members
of the current board had been members of the board at the time of that
strike and still bore extreme hostility toward the teachers. The attitudes of
the other four members of the board were less antagonistic attitudes toward
the teachers.

The board ’ s professional negotiator was also a carryover from the strike.
The relationship between him and the union was one of mutual and extreme
distrust and antagonism. Thus, as the new negotiations got under way, the
board and the teachers were still locked in a hostile relationship.

Shortly before negotiations began, the board hired a new superintendent
of schools. Repelled by the animosity between the teachers and the board,
he sought to take a more conciliatory stance toward the union. Before long,
bitter confrontations had developed between the board ’ s negotiator and the
new superintendent.

During the summer months, the superintendent held informal talks with
the union president and together they worked out a tentative agreement
on a contract settlement, subject to the approval of the board and the union
membership. The board refused to approve the agreement, partly because
of objections the board ’ s negotiator made. Throughout the course of the
negotiations, the superintendent tried to persuade the board to dismiss the
negotiator.

Because these events transpired over several months, the teachers pressured
their union leaders to call an impasse and began to engage in slowdowns
and other forms of job actions short of a strike. During the months that
the superintendent and the school board ’ s negotiator were at loggerheads,
each arranged separate meetings with union representatives, one trying to
work through a mediator and the other trying to keep the mediator out of
the process. Meanwhile, both the superintendent and union leaders were
lobbying members of the board to obtain the swing vote necessary to win
the power struggle.

Obviously, no progress was made in negotiations until the internal dispute
was resolved. The superintendent ultimately emerged as the victor in the
power struggle and the board dismissed its negotiator. The superintendent
then brought in a new management negotiator with whom he could work,
and a contract was successfully negotiated.

Source : One of the authors observed the events described in this box in the negotiations
in a public school district in the northeastern United States.

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The Negotiations Process and Strikes 197

Negotiations also can be extremely emotional. The stakes involved are usually
high, and the tactics often used in traditional negotiations—threats, bluffs, grand-
standing for one ’ s constituents, exaggerated anger—are hardly conducive to building
rapport among the parties to the process. Add to these the fact that any single
round of negotiations typically is part of a larger and longer-term power struggle
between parties separated by an inherent confl ict of interests. One can readily
see why hostile attitudes can, and sometimes do, develop in a bargaining relationship
and why they can constrain effective negotiations.

Consequently, attitudinal structuring (the degree of trust each side feels or
develops toward the other side) is another subprocess in bargaining. If labor and
management have a high degree of trust in one another, then it should be easier
for the parties to engage in integrative bargaining, since trust can make it easier
to identify problems and solutions. In contrast, interpersonal mistrust can make
it diffi cult to move from initial bargaining positions to compromise settlements.
Mistrust hampers communications between the parties and can lead both parties
to hold back on concessions they might otherwise be willing to make. Obviously,
intense hostility can get in the way of serious discussion of the substantive merits
of the issues.

Labor and management can try to build trust by meeting prior to or during
negotiations in forums that facilitate an open exchange of views and concerns. If
union leaders and managers are working together to build trust, share information,
develop employee participation processes, and consult on critical issues on an
ongoing basis, the trust that develops from these activities may carry over to the
negotiations process. Alternatively, actions that demonstrate a lack of trust to the
rank and fi le, union leaders, or managers during the term of a contract will likely
carry over to infl uence negotiations as well.

Personality traits of negotiators also play a role in building trust. Some personality
traits, such as excessive authoritarianism, have been found to hinder the compromise
that is necessary to bring about negotiated settlements. 4 A recent study showed,
for example, that the negotiators’ “perspective-taking ability,” that is, their ability
to see the other party ’ s point of view, increases the likelihood of a negotiated
agreement. 5 Those who are philosophically opposed to unions, however, or those
who are opposed to the role managers play in a capitalistic society may see bargaining
issues as matters of great principle and thus fi nd compromise diffi cult. Acceptance
of the legitimacy of the other side ’ s point of view can facilitate confl ict resolution.
The absence of such acceptance in negotiations increases the probability of an
impasse.

MANAGEMENT ’ S OBJECTIVES IN NEGOTIATIONS

The formation of management ’ s wage objectives (or targets) is a critical part
of the negotiations process. Negotiators often have limits for bargaining, or the
bottom-line terms they would accept short of taking a strike. The development
of these wage targets is the heart of the internal management planning process
that takes place before or during the early stages of negotiations.

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198 Part III. The Functional Level of Labor Relations

While wages are important to management, they are not the only critical issue
a labor agreement addresses. However, how management creates targets for other
bargaining issues occurs is not very different from the process it uses to create
wage targets. Thus, the discussion that follows has general applicability.

Since top management is responsible for approving or authorizing any wage
target in bargaining, the negotiating team must recommend targets that refl ect
top management ’ s goals for the organization. If the negotiating team recommends
a wage target that is too high, top management might reject the recommendations
and the negotiating team would lose infl uence. On the other hand, these targets
play a pivotal role in the negotiations process once they are established because
they indicate the negotiator ’ s latitude for compromise.

Thus, the labor relations staff needs to develop bargaining targets that are
realistic and achievable. The range of criteria that go into this decision-making
process are discussed below. Management also must take the union ’ s preferences
into account when setting targets for bargaining. Unless management is powerful
enough to totally dominate bargaining, the management team must consider how
acceptable its wage offer will be to the union.

THE UNION ’ S TARGETS

Unions will usually establish their own targets for wage bargaining. In setting
those limits, union leaders employ two basic criteria for evaluating a proposed
settlement: (1) the potential effects of the settlement on the real wages of the
membership (the wage adjustment minus any increase in the cost of living); and
(2) a comparison between the proposed settlement and settlements with other
bargaining units or with other employees.

Comparisons with other units are important to unions for both economic and
political reasons. Remember, the union ’ s economic goal is to take wages out of
competition. This leads unions to favor wage increases that maintain pattern
bargaining. Union leaders also face pressure from their members to compare their
negotiating proposals with the settlements other unions have achieved with the
settlements achieved by other unions. 6 Rank-and-fi le union members often evaluate
their leaders by comparing their own settlement to settlements achieved by leaders
of other unions or granted by other employers.

Comparisons are especially relevant when one or more rival unions might
potentially challenge another union for the right to represent a group of employees.
This has been an important consideration in bargaining among mechanics in the
airline industry in recent years. Two different unions, the International Association
of Machinists (IAM) and the Aircraft Mechanics Fraternal Association (AMFA),
have been competing to represent these employees at various airlines.

A union will try to induce a company to accept a higher fi gure than it might
otherwise do in the wage-setting portion of bargaining. A union ’ s bargaining
power will determine the extent to which management takes the union ’ s preferences
into account.

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The Negotiations Process and Strikes 199

Local Labor Market Comparisons

One factor an employer considers when setting its wage targets is the prevailing
wage level in the local labor market. If the employer ignored the local labor
market and allowed wages inside the fi rm to fall lower than wages at the other
employment sites, high employee turnover might follow. Low wages also might
produce a dissatisfi ed work force and diffi culty in recruiting workers with the
skills needed to perform a job effectively. Conversely, setting wages too high
relative to the local labor market invites an excess of qualifi ed job applicants and
unnecessary costs.

This does not mean that the employer will try to pay the lowest wage possible
that will attract workers to a given job. In the context of the local labor market,
the employer must choose the quality of employees it wishes to hire. It must
decide if increasing the wage level will attract employees of suffi ciently high
quality and whether it will decrease indirect personnel costs (such as training,
turnover, and supervision).

Labor market comparisons are more likely to be used in bargaining relationships
where the union is weak. Where unions are strong, they will use their bargaining
power to do better than the local labor market and gain what they consider to
be a fair wage.

Product Market Factors

Product market comparisons play an increasingly important role in management
decision making. The ability of current or potentially new competitors to compete
on the basis of lower labor costs has been the dominant factor in management ’ s
drive to hold down or reduce wages, particularly the wages of employees in
entry-level and low-skill jobs. Threatening to outsource such work has also
been an important part of management ’ s approach to negotiations in recent
years.

The Firm ’ s Ability to Pay

The effects of wage adjustments on the profi ts of the fi rm also infl uence manage-
ment ’ s wage target. Employers in the process of setting a target wage examine
their ability to pay wage increases.

A union generally is reluctant to give a fi rm a lower settlement on ability-to-pay
grounds unless the fi rm can demonstrate that a serious economic crisis would
result otherwise. Union leaders and union members often must be convinced
that their wage proposal would lead to considerable employment loss before they
will agree to a lower settlement. For example, in 1979, it took the threat of
bankruptcy plus government pressure to convince the UAW to agree to give
Chrysler wage concessions below the level that had been set by pattern bargaining
in the auto industry. Ability-to-pay considerations have become more important
in recent years. In response to heightened competitive pressures, management
has preferred to shift away from externally driven wage criteria in favor of criteria
that connect wages more closely to the performance of a fi rm or its workers.

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200 Part III. The Functional Level of Labor Relations

Thus, management has tried to shift away from factors such as wages in the
industry or increases in the cost of living and toward the fi rm ’ s ability to pay.

Internal Comparisons

Every negotiation is carefully watched by a fi rm ’ s other employees. Management
must consider how a wage settlement might infl uence the expectations and
demands of other employees in the fi rm regardless of whether those employees
are represented by unions. Management, for example, often considers whether
wage increases for unionized hourly workers will lead to pay increases for supervisors
and other white-collar employees outside the bargaining unit. One reason manage-
ment give pay increases to white-collar employees is such increases weaken these
employees’ potential attraction to unionization.

The Dynamics of Management ’ s Decision-Making Process

So far we have painted a rather static picture of management ’ s decision making.
Yet the actual process of decision making over the course of a bargaining cycle
(from the pre-negotiation planning stage to the signing of the fi nal agreement)
is a dynamic one. The process is replete with ambiguities over who has the
authority to set policies, confl icts among decision makers over the appropriate
weight to be attached to different goals, and power struggles among competing
decision makers.

The process by which management establishes bargaining strategies involves
extensive intraorganizational bargaining that is every bit as intense as the bargaining
between the union and management. Because the successful resolution of internal
differences is a prerequisite to a smoothly functioning bargaining process, it is
important to understand how fi rms prepare for negotiations.

To provide a more complete picture of how management prepares for collective
bargaining, Box 8.2 describes a typical case. This fi rm is preparing to negotiate
a contract with the major bargaining unit in its largest manufacturing facility.
The contract traditionally sets the pattern for the economic settlements with
several smaller units at other locations.

Before negotiations (or very early in negotiations), the labor relations staff tries
to predict as closely as possible what it will take to get a settlement. But ultimately
the staff is ready at all times to revise its estimates based on new or better information
about the union ’ s position as the negotiations proceed.

The case in Box 8.2 illustrates the diversity of interests that exists in the different
levels of any modern company. It shows that the development of a company
strategy for negotiations is a highly political process, one in which the different
goals of various groups must ultimately be accommodated. Although the labor
relations staff serves as a key participant in the development of the strategy, the
concerns of operating management, fi nancial staff, and other interest groups in
the corporation are also integral to any fi nal decision.

It is interesting to examine how preparations for traditional negotiations compare
to preparation for an interest-based bargaining process. Box 8.3 draws on the
experiences of the same fi rm as it prepared for a recent round of interest-based

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The Negotiations Process and Strikes 201

BOX 8.2
Management ’ s Preparations for Negotiations in a Typical Firm

Stage One: Input from the Plants

The fi rst step in the process of preparing for negotiations takes place at the
plant level. 7 The plant labor relations staff holds meetings with plant supervisors
to discuss problems they have experienced in administering the existing
contract. From these discussions, the staff compiles a list of suggested contract
changes. At the same time, the staff also conducts a systematic review of
the grievances that have arisen under the current contract and collects
information on local labor market conditions and on the wages in other
fi rms in the community.

The staff then holds a meeting with the plant manager, who raises the
industrial relations problems the company has confronted in the plant. The
concerns of management are classifi ed into two groups: contractual problems
and problems that should be addressed outside the negotiating process.
In addition, the staff asks the plant manager to rank suggested contract
changes based on their potential for making a signifi cant improvement in
plant operations.

Stage Two: Input from Higher Levels of the Firm

Next, a series of meetings is held at the division level that involves the
division labor relations staff, operations managers at the division level, and
the corporate labor relations director and staff. From time to time, outside
industrial relations consultants sit in on these division-level meetings. Here
the concerns of the various plants are evaluated against two criteria: (1) the
operational benefi ts expected from proposed contract changes; and (2) the
likelihood that the desired changes can be achieved in the negotiations
process.

The corporate labor relations staff plays a vital role in these division-level
discussions, since the expected benefi ts of different contractual changes can
be a matter of dispute across the various plants. In addition, the division
labor relations staff is responsible for carefully examining the contract language
that exists in the various local agreements for inconsistencies or problems
that could be removed by clauses that refl ect corporate labor relations
preferences. Sometimes the plant labor relations representatives object to
changes suggested at the division level because they do not correspond to
the priorities of the plant offi cials and because the existing “discrepancies”
may be serving a useful purpose in the plant.

The corporate labor relations staff works closely with the vice-president
for fi nance to develop wage targets. Information on plant labor costs,
corporate earnings, and the long-term fi nancial prospects of the company
and the industry are built into the wage target the corporate staff ultimately
recommends.

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202 Part III. The Functional Level of Labor Relations

Stage Three: Input from Research

A research subgroup in the labor relations staff of the company also conducts
background research that is used in management ’ s preparations for negotiations.
At least a year and a half before the opening of formal negotiations, the
research staff begins to prepare the background information necessary for
developing the company ’ s proposals.

The researchers use a database on the demographic characteristics of
employees and analyze personnel statistics such as turnover, absentee, and
grievance rates. They also monitor internal union developments, specifi cally
resolutions the union has passed at its conventions, union publications, and
union leaders’ statements about the upcoming negotiations. In addition, they
survey plant managers for their views on their relations with the union and
the problems they would like to see addressed in the negotiations. The staff
also consults plant labor relations staff members to obtain their suggestions.
This fi rm probably invests more resources and assigns more authority for
bargaining preparation to its research staff than do most other corporations.

The research staff is ultimately responsible for putting together a summary
report that goes to the vice-president of industrial relations and the corporate
director of compensation. These executives then work with the manager
of the research and planning department to develop targets for bargaining.

Stage Four: Final Preparations

The fi nal step in management ’ s preparation for negotiations is a meeting
that includes the corporate labor relations staff, the chief executive offi cer,
and the board of directors. At this meeting, the corporate labor relations
director presents the proposed wage targets and other proposed contract
changes for board approval and states the reasons for seeking the proposed
changes. Sometimes this meeting does not take place until after the fi rst
negotiations session with the union. The industrial relations director might
prefer to wait until then because it may be useful to hear from the union
before he or she makes a fi nal recommendation to top management. This
helps the industrial relations director identify the relative importance the
union is likely to give to pay issues and the intensity of the union ’ s concern
about other areas of the contract.

One labor relations director described to us how he presents his recom-
mendation to top management in this way:

I always number my proposed target settlements as proposed settlement target
number 1. Someone once asked me what that meant. I said that this is what I
think it will take to get a settlement but I number it because I may have to
come back to you at some point with my proposed settlement number 2 or
even my proposed settlement number 3, et cetera.

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The Negotiations Process and Strikes 203

BOX 8.3
Preparing for Interest-Based Bargaining: One Management-Side
Bargainer ’ s Account

The shift to a new approach to negotiations was a gradual and natural
outgrowth of our employee involvement (EI) process. We took some steps
in this direction in negotiations 10 years ago and more in our most recent
round of bargaining. All of us—union and management representatives—have
been training in the EI problem-solving tools and we essentially asked each
other: Why can ’ t we apply them in negotiations?

As in the past, we would keep a list of issues and problems that came up
during the term of the agreement in a fi le and start preparations by reviewing
this list and interviewing plant managers for their concerns. But this time,
when we brought this material together and met with the top division
executives, the director of industrial relations said he didn ’ t want to take a
laundry list of issues into negotiations only to discard some or many of
them. Instead, he asked his colleagues: “What are your critical problems?
What are their root causes? What are the costs involved? If we can agree
on these things, then let ’ s go into negotiations and fi x them.”

Paring the list down and agreeing on what we needed to achieve to solve
our problems (which were severe at that particular time) involved tough
internal discussions and negotiations. Eventually, the chief executive offi cer
had to decide on a couple of key points since these could conceivably affect
the long-term future of the operations and, if we took the hardest line
being advocated by some managers, would jeopardize the future of the
labor-management relationship.

As a result, we brought about eight or nine issues to the table and the
union only brought 15 or 16. In the past we would have both had a lot
more.

We had much smaller bargaining committees than in the past as well.
We had one representative each from legal, fi nance, manufacturing, and
labor relations, along with the industrial relations director who chaired the
committee.

We set up a big round table for bargaining, in a room complete with
fl ip charts and all the other supports needed for brainstorming and problem
solving. In the actual negotiations, from time to time we brought in specialists
with expertise on particular issues such as the way the transfer language in
the contract actually worked. Instead of simply exchanging proposals and
working from each other ’ s lists, we scheduled times to take up issues and
problems. When we did so, we asked: Why is that a problem? Who ’ s
affected? What might we do about it? How would it affect things? Can we
live with the solutions proposed?

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204 Part III. The Functional Level of Labor Relations

We still had discipline at the table. We had chief spokespersons. In fact,
we got very upset and disappointed when at one point the process broke
down. When we started talking about overtime, we had already done some
joint staff work looking at some pilot programs we had started in a couple
of settings to let the union handle how overtime is distributed. This is
always a big problem and headache for management, and [it is] a costly
issue. The staff had pretty much agreed privately to extend the pilot approach
to the whole bargaining unit, but when the issue came up for discussion,
the manufacturing representative on our team said: “We ’ d never agree to
that!” We read him the riot act later in private for springing this on us, but
it essentially killed discussion of this issue, and we never did get the job
done on this issue.

As we got into the tough economic issues, bargaining took on more
traditional features. These were very tough and the union leaders needed
to be able to demonstrate to their constituents [that] they squeezed us as
hard as they could to get the best deal possible. We understood this.

Still, there was better communications, and we never worked past 8 p.m.

bargaining. While much of the background research and information gathering
is similar, some of this is done jointly with the union. In this case, the problem-
solving processes that had been put in place in the company-union relationship
at the workplace provided the foundation for taking a problem-solving approach
to negotiations.

UNIONS’ AND WORKERS’ PREPARATIONS FOR
NEGOTIATIONS

This section reviews the common procedures unions and workers follow during
the negotiation of a collective bargaining contract. This material parallels the
discussion of the procedures used by management in preparing for negotiations
described above.

The Role of the Union Negotiating Committee

The union is represented by a negotiating committee in negotiations with manage-
ment. The makeup of the union negotiating committee varies across unions,
although it typically includes some union offi cers, support staff (such as members
of the local or the national union ’ s research staff or both), and elected worker
representatives. Often the leaders of the union ’ s negotiating committee are the
highest elected offi cers of the union that is covered by the collective bargaining
agreement under negotiation. Some unions, such as local construction, hotel and
restaurant, or trucking unions, tend to rely on hired business agents to lead their
negotiations.

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The Negotiations Process and Strikes 205

The negotiating committee will meet several times before the start of negotia-
tions to formulate the union ’ s list of demands and to begin to establish expecta-
tions about what the union can win in negotiations. Before these meetings,
the negotiating committee will solicit demands from union members, either
directly through meetings called to discuss the upcoming negotiations or through
polls. In the UAW, for example, elected representatives from the local unions
meet in a convention and vote on bargaining resolutions during preparations for
companywide bargaining. The UAW leadership also consults union members
during the negotiation of plant contracts that supplement the companywide
agreements.

A union negotiating committee typically also receives information and
advice from the national union ’ s research staff during its preparations for
bargaining. The information provided frequently covers the fi nancial perfor-
mance of the company, forecasts the future performance of the company and
the economy, and summarizes recent settlements in other unions or the pay
improvements unorganized workers in the same city, fi rm, or industry have
received.

Some unions, such as the Air Line Pilots Association (ALPA), do extensive
research and analysis of economic developments in their industry and of the
fi nancial situation of each company. Prior to entering negotiations, the ALPA
research staff conducts extensive briefi ngs with the bargaining committee of an
airline and in some cases, such as at Continental Airlines, meets with company
representatives to compare fi nancial data and analysis. It is not uncommon for
union and company research staff to share information with each other if for no
other reason than to avoid debates over some of the basic facts each side needs
to prepare their team for negotiations.

Many unions now use surveys, focus groups, and/or direct interviews with
rank-and-fi le members to gather information about their concerns and their priorities
for negotiations. This serves as a two-way communications process. It both provides
data on the priorities of rank-and-fi le members and begins to engage the rank
and fi le in the negotiations process by informing them of some of the issues that
may come up.

Acquisition of Strike Authorization If an Impasse
Is Reached

If the union comes to an impasse with management during the negotiations and
is considering going on strike over unresolved disputes, two steps occur. In local
contract negotiations, the union ’ s constitution typically requires the local to seek
strike authorization from the national union. Strike approval is an important
process because, among other things, it enables striking workers to receive strike
benefi ts from the national union ’ s strike fund.

A union considering a strike will also typically poll its members. The strike
vote serves a dual purpose: it tells the union leadership whether the union ’ s
members support such an action and it helps rally the workers around the purpose
of the strike.

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206 Part III. The Functional Level of Labor Relations

Contract Ratifi cation

When an agreement is reached between the union ’ s negotiating committee and
management ’ s representatives, the union proceeds through its contract ratifi cation
procedures. Here there is much variation in the exact procedures unions use.
The fi rst step some unions take is to send a proposed agreement to a council
made up of lower-level union offi cers. This council includes local union offi cers
when a companywide agreement is negotiated (as in the steel and auto industries).
Union constitutions typically also require that the workers covered by a negotiated
agreement vote on any proposed settlement.

There are some notable exceptions to the normal pattern of union members
voting on proposed contracts. But in the usual case, workers must approve contract
settlements, often by majority vote. This sort of voting is an example of participatory
democracy in this critical aspect of union decision making.

The Role of Union Leaders in Shaping Strategies

The actual bargaining demands of unions refl ect more than just an averaging of
their members’ preferences. Several factors combine to produce the complex
process by which union leaders arrive at their bargaining objectives.

First, in addition to considering the preferences of their members, union leaders
must evaluate how likely it is that objectives can be attained. Unrealistic goals
must be discarded during pre-negotiation planning sessions or early on in
negotiations.

Second, union leaders must take into account the varying political infl uence
of subgroups within the union. Older or more skilled workers, for example, may
be more politically infl uential than other members. Thus, the objectives leaders
ultimately select may refl ect some workers’ goals more than others.

Third, union leaders must also be concerned about the long-term survival of
the union and must take steps to preserve those interests. However, there is always
the risk that union leaders will emphasize union security at the expense of
member preferences.

Finally, a central job for union leaders, like all leaders, is to lead! Union leaders
must weigh strategic options, make decisions, and secure the ongoing support of
their members for the decisions they make.

One of the keys to union leadership is effective internal communication. Union
leaders need regular upward communication from the rank and fi le and from
local union offi cers. Effective union leadership also requires that decision makers
communicate their activities and decisions back to the members. Unions use such
techniques as opinion surveys, satellite hookups, television advertising, and the
Internet to communicate with their members. Indeed, the Internet is becoming
a key resource in bargaining today. Union leaders are learning that they must
develop the skill to use this tool to communicate with members, for it is certain
that rival groups in the union will have those skills. In one case, ALPA found
that the tentative wage agreement it had reached with Delta Airlines was criticized
on a rival group ’ s website before the union team could even describe its terms
to union members! Thus, the means of communication in unions and the role

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The Negotiations Process and Strikes 207

of communications in negotiations in general are changing rapidly in the age of
the Internet.

THE CYCLE OF TRADITIONAL NEGOTIATIONS

Negotiations often proceed through a cycle in which the four subprocesses of
bargaining emerge and interrelate. 8 A typical cycle for a traditional negotiations
process is described below.

The Early Stages

In the initial stage of a traditional negotiation, the parties present their opening
proposals. This stage often involves a larger number of people than will be involved
in the negotiations of the fi nal agreement. The union, for example, may bring
in representatives from various interest groups and several levels of the union
hierarchy. These people participate in developing the initial proposals and later
become involved in securing ratifi cation of any agreement. The involvement of
all these different representatives can smooth the process of intraorganizational
bargaining in the union.

The union then presents proposals that cover the entire range of its concerns.
Some of the proposals will be of critical importance and will be at the heart of
the discussions as the strike deadline approaches. Some are important but may
be traded off at the last minute. Some may be translated into more specifi c
demands at a later stage of bargaining or may be issues to which the union will
assign a high priority in some future round of negotiations. Other issues are of
low priority and will be dropped as negotiations proceed into the serious decision-
making stages.

The Presentation of a Laundry List

The union ’ s presentation of a laundry list of issues serves several purposes. It
allows union leaders to recognize different interest groups by at least mentioning
their proposals. Some unrealistic demands will be aired, the problems underlying
these demands can be explored, and the employer can then reject these demands.
This process takes the pressure off union offi cers who might otherwise appear to
have arbitrarily nixed some group ’ s pet proposal. In a laundry list, either side also
could introduce issues that it hopes will be pursued in future negotiations.

Presenting a long list of proposals and infl ated demands as a fi rst step might
also be a useful way to camoufl age the real priorities of the union. Or a long list
of proposals could be helpful in integrative bargaining by facilitating trades across
issues.

Behavior of the Employer in the Early Phase

The behavior of employers at the outset of bargaining varies considerably. Some
employers will present a set of proposals to counterbalance the union demands.
Other employers will receive the union demands and promise a response at a
future negotiating session. Many management representatives prefer to delay

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208 Part III. The Functional Level of Labor Relations

making any specifi c proposal on wages or other economic issues until well into
the negotiations process. Because the wage issue can be emotional and divisive,
management often tries to resolve nonwage issues fi rst.

Management may also initially try to camoufl age its bottom-line position, and
it, too, may have unresolved internal differences at the start of negotiations. In
some fi rms, a decision on the bottom line is not made until after the union offers
its initial proposals and gives some preliminary indication of its priorities.

In the early stages, the speakers for each side will argue strongly and often
emotionally for the objectives of their constituents to determine how strongly
the opponent feels about the issues at stake. It should be no surprise that these
initial stages are the forum for a good deal of grandstanding by both parties. Such
grandstanding may also be a part of intraorganizational bargaining.

The Middle Stages of Negotiations

The middle stages of negotiations involve more serious consideration of various
proposals. The most important tasks performed in the middle stages of bargaining
are (1) developing an estimate of the relative priorities the other side attaches to
the outstanding issues; (2) estimating the likelihood that an agreement can be
reached without a strike; and (3) signaling to the other side which issues might
be the subject of compromise at a later stage of the process.

Often the parties choose to divide the issues into economic and noneconomic
issues. Separating issues into these categories may facilitate problem resolution
and integrative bargaining. During these intermediate stages, any obstacles to a
settlement may begin to surface.

The Final Stages of Negotiations

The fi nal stages of bargaining begin as the strike deadline approaches. At this
point, the process both heats up and speeds up. Off-the-record discussions of the
issues may take place between two individuals or small groups of representatives
from both sides, perhaps with a mediator present. These discussions serve several
purposes: they help representatives save face with their constituents, they allow
each party to more fully clarify their positions, and they enable both sides to
explore possible compromises. At this point the negotiators have a better idea of
their opponent ’ s bottom-line positions and they may have private discussions
over what it will take to reach a settlement. In these fi nal stages before a strike
deadline, each party is seeking to convince the other of the credibility of its threat
to strike or lockout. Each side also is trying to get the other side to change its
bottom line to prevent a strike, and each party is trying to accurately predict the
other side ’ s real positions on the issues to avoid backing into an unnecessary
strike. At this stage, therefore, usually only a small number of decision makers is
involved in the process.

Even if the key bargainers may agree on how a bargaining settlement could
be reached, agreement is not yet assured. If the negotiators are unable to sell a
settlement to their constituents, the agreement might still not be reached without
reaching an impasse (see Chapter 9 ).

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The Negotiations Process and Strikes 209

INTEREST-BASED BARGAINING: AN ALTERNATIVE
TO TRADITIONAL NEGOTIATIONS

The traditional approach to negotiations has often been criticized for its limited
potential for solving problems. Critics view the dominance of distributive issues
and tactics, the tendency of both sides to overstate demands, and the tactical use
and withholding of information as ways that traditional bargaining reinforces
rather than overcomes adversarial tendencies in labor-management relations. As
an alternative, some researchers and a growing number of practitioners have
suggested using interest-based or mutual-gains bargaining techniques.

Interest-based bargaining is essentially an effort to use integrative bargaining
principles from the Walton and McKersie model in the negotiations process. This
approach to bargaining was fi rst popularized by Fisher and Ury ’ s best-selling book
on negotiations, Getting to Yes. In interest-based bargaining, parties are encouraged
and trained to (1) focus on their underlying interests; (2) generate options for
satisfying these interests; (3) work together to gather data and share the information
they need to evaluate options; (4) evaluate the options against criteria that refl ect
their interests; and (5) choose options that maximize their mutual interests.

Consider how using these principles alters the typical negotiations process
described above. Instead of each party beginning bargaining with a laundry list
of infl ated demands, each party separately produces a list of problems that need
to be addressed in negotiations to address their core interests. In some cases, the
parties may even frame the problems jointly by building on the reports of labor-
management committees set up to collect data and study vexing problems
such as safety and health hazards, the costs of quality of health insurance, and so
forth. A subcommittee might then be formed to collect the additional information
needed to generate options that the full negotiating teams can consider. Ideally,
options are generated through brainstorming (a free-fl owing discussion in which
members of a group are encouraged to generate ideas without committing themselves
to a fi xed position and without criticizing the ideas others suggest). Analysis of
the root causes of problems and extensive data sharing are also encouraged at this
pre-bargaining or early stage of the negotiations process. As bargaining proceeds
to a decision-making phase, each bargaining team develops standards or criteria
to evaluate options. The goal then is to choose options that do the best job of
serving the interests of both parties.

In theory, an interest-based process does not differentiate between distributive
and integrative issues. Instead, by focusing on basic interests and problems that lie
in the way of achieving those interests, the parties attempt to use problem-solving
or integrative strategies to address the full range of concerns each party brings to
the table. However, experience has shown that some issues are harder to resolve
through pure interest-based techniques, since they do involve clear trade-offs.
When such situations arise in interest-based negotiations, the parties may resort
to more traditional tactics and thus mix the two approaches to negotiations.

Interest-based bargaining requires a high level of trust among the negotiators
and between the negotiators and their principals and constituents. Thus, it is

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210 Part III. The Functional Level of Labor Relations

diffi cult to make this process work when there are signifi cant intraorganizational
confl icts in one party or the other. How management bargainers in one company
prepared for an interest-based approach to bargaining is described in Box 8.3 .

When should the parties consider using interest-based techniques and how
should negotiators go about trying them out? Most experts agree that both
negotiating teams need to be trained in these techniques well in advance of the
start of negotiations. Some further recommend that in order to overcome con-
stituents’ suspicion, rank-and-fi le union members and managers who are not on
the negotiating team should participate in the training, in gathering data, and in
the deliberations of subcommittees. Often a specially trained facilitator (as opposed
to a traditional mediator) is also brought in to coach and assist the parties in
interest-based negotiations.

While the record of interest-based bargaining to date is still modest and some
cases of failure have been reported, it is clear that the growing complexity of the
problems labor and management face are pressuring them to fi nd better ways to
produce “win-win,” or mutual gains, solutions.

STRIKES

In recent years, the number of strikes have declined; they occur in only about 5
percent of all labor-management negotiations. But in many negotiations, the threat
of a strike continues to play a key role in motivating the parties to move toward
an agreement. We explore the role of the strike and the strike threat in this
section.

How the Strike Threat Infl uences Negotiated Settlements

In negotiations, the bargaining parties are unlikely to settle on terms that differ
substantially from whatever terms they think would settle a strike if one were to
occur. Consequently, strikes are an important determinant of both parties’ bargaining
power.

During negotiations, both labor and management negotiators formulate expecta-
tions about what might happen if the negotiations were to reach an impasse and
a strike were to follow. At the same time, both sides have a strong incentive to
avoid a strike because both sides lose income during a strike.

During a strike, workers give up wages. They try to make up for those lost
earnings by possibly taking a short-time job. Workers also turn to union strike
benefi ts, the earnings of a spouse, or savings to support themselves and their
families during a strike.

Firms lose profi ts during a strike. They try to decrease the amount of profi ts
lost through tactics such as bringing in replacement workers for the strikers,
making sales out of any available inventories, or shifting production to an alternative
site. The fi rm relies on assets or the earnings from other lines of business to meet
any fi nancial obligations (such as equipment expenses) during a strike. In service
businesses such as airlines, where business lost during a strike cannot be made up
through selling inventory or post-strike deliveries, strikes are especially costly.

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The Negotiations Process and Strikes 211

This is one reason why more extensive efforts are made to avoid strikes in these
settings, as we will see when we discuss dispute resolution procedures and proposals
for reform in the airline industry in the next chapter.

The Hicks Model of Strikes

The material below examines the role the strike threat plays in the negotiations
process and identifi es the factors that lead to strikes. John R. Hicks developed a
very insightful model for analyzing the role strike leverage plays in shaping negotiated
outcomes. 9 Figure 8.1 diagrams the Hicks model of strikes. To simplify the
discussion, assume that the parties are negotiating only over wages (or assume
that all items in dispute can be reduced to monetary terms and represented by a
simple wage).

In the Hicks model, bargainers form an expectation of what they would eventually
agree to if there was a strike. In case A in Figure 8.1 , both parties expect that if
there is a strike it will be ended with a wage settlement of w(es). If a strike occurs,
however, both labor and management will absorb income losses during the strike.
Workers will forgo earnings during the strike and management will lose profi ts
because production has stopped.

Because they are aware of these potential income losses, the parties should be
able to fi nd a negotiated wage settlement during the negotiations that they prefer
over the wage settlement they would end up with at the end of a strike, w(es).

The income that management would lose during a strike would amount to an
hourly wage cost to management of w(m). Because management expects a strike
to end with a wage of w(es), they should be willing during negotiations to agree
to a wage as high as the expected strike outcome plus the cost to management
of the potential strike, or w(es) + w(m) .

Labor in this case also expects a strike to end with a wage of w(es). The income
workers would lose during a strike would amount to an hourly wage cost to
labor of w(u). Therefore, during negotiations, the workers should be willing to

Expected strike wage
plus cost of strike to

management

Expected strike wage
minus cost of strike to

union

Expected strike wage

Contract zone

Union’s expected strike wage

Union’s expected strike wage
minus cost of strike to union

Management’s expected strike wage
plus cost of strike to management
Management’s expected strike wage

w(es) + w(m) w(esu)

w(es)

w

w(es) – w(u)

w(esu) – w(u)

w(esm) + w(m)

w(esm)

CASE A: A LARGE CONTRACT ZONE CASE B: NO CONTRACT ZONE

Figure 8.1. The Hicks model of strikes

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212 Part III. The Functional Level of Labor Relations

accept a wage as low as the expected strike outcome minus the hourly cost of
the strike to labor, or w(es) − w(u) .

The difference between what management is willing to accept during negotiations
and what labor is willing to accept during negotiations creates a contract zone
of potential settlements. Both sides should prefer to reach settlements in the
contract zone during negotiations rather than going on strike and ending up with
the strike wage outcome and income losses during the strike.

It is, of course, possible that there is no contract zone. Case B in Figure 8.1
diagrams such a situation. In this case, management expects a very low wage if
a strike were to occur w(esm), while the union expects a very high wage if a
strike were to occur w(esu). Even in the face of the expected strike costs, w(m)
and w(u), there is no contract zone because w(esuyes) − w(u) is greater than
w(esm) + w(m) .

The important point that Hicks noted is that in this framework, there is no
contract zone only if the parties have very different expectations of the strike
outcome. The fact is that there is some true strike outcome. When the expectations
of both labor and management diverge from the strike outcome, one or both of
the parties makes miscalculations in their prediction of the strike outcome.
When there is no contract zone, one or both of the parties must be excessively
optimistic about what it thinks will settle a strike.

Hicks concluded that strikes occur only when one or both sides have miscal-
culated. The key point is that since a strike imposes costs on both sides, it should
be less attractive than a negotiated settlement.

Strikes can occur even when there is a contract zone, but in the Hicks framework
this also requires miscalculation. Hicks argued that there may be situations where
the settlement the parties anticipate is not located in the zone, even though a
contract zone exists. This occurs because the parties are unable to fi nd the negotiated
settlements they both would prefer over the strike outcome, because of bluffi ng
or intransigence.

In the Hicks model, negotiators have great latitude to further the interests of
their side. It is in management ’ s interest to reach a settlement at the lowest wage
in the contract zone, and it is in labor ’ s interest to reach the highest wage settlement
in the contract zone.

In addition, during negotiations it is in each side ’ s interest to attempt to change
the other side ’ s expectation of the strike outcome. Management would like to
convince labor that the potential strike outcome is a very low wage, and labor
has an interest in convincing management that the potential strike outcome is a
very high wage. The risk the parties face is that in their efforts to change the
other side ’ s expectation of the potential strike outcome, they might engage in
tactics (such as bluffi ng or threats) that result in miscalculations, a strike, and the
loss of income.

Some of the Sources of Miscalculation

Negotiators may have expectations of the potential strike outcome that are different
from those of their constituents. Orley Ashenfelter and George Johnson posited

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The Negotiations Process and Strikes 213

that strikes occur because union members have unrealistic expectations. 10 They
argued that both management and union leaders have accurate expectations of
the strike outcome, but union members are overly optimistic about what can be
achieved in a strike. Under these conditions, strikes are a device to lower union
members’ expectations. Although it is diffi cult to justify why union members
alone have unrealistic expectations, the Ashenfelter and Johnson framework
highlights that strikes may occur when union members and leaders have diverging
expectations of the strike outcome.

Hicks ’ s model is a very useful starting point for analyzing the negotiations
process. Building on his approach requires an understanding of the factors that
infl uence the willingness and ability of either side to engage in a strike. These
factors determine the wage the parties expect they will end up with at the end
of a strike. The Hicks framework also suggests the need to uncover the factors
that lead either side to be overly optimistic about a potential strike outcome or
to miscalculate in other ways during negotiations.

The Behavioral Model of Strikes

Behavioral factors such as the degree to which labor is integrated into the sur-
rounding community may be one source of miscalculation that leads to strikes.
In a classic study, Clark Kerr and Abraham Siegel analyzed strike data across
countries and industries and found that strike rates were consistently higher in
certain industries such as mining and longshoring. 11 The authors proposed that
behavioral factors peculiar to certain industries were at least partly responsible for
the higher strike rates. This is known as the behavioral model of strikes.
Workers in longshoring and mining often have their own subculture, they are
distant from major population centers, and their work involves harsh physical
labor. Kerr and Siegel argued that workers in these industries are comparatively
poorly integrated into society and express their frustrations and isolation by
instigating relatively frequent strikes.

In Hicks ’ s terminology, Kerr and Siegel identifi ed a set of factors—social and
geographic isolation—that contribute to the likelihood of miscalculation in bargain-
ing. Kerr and Siegel also emphasized that strike occurrence may have very little
to do with the issues on the bargaining table.

Militancy as a Cause of Strikes

Strikes also may occur as a result of the militancy of a work force or a union.
Marxist theorists have noted that there is a strong statistical association between
strike frequency rates and the business cycle. Over time (and across countries),
strikes tend to occur more frequently during business upturns. This association
is diffi cult to explain with the Hicks model, which predicts that wage settlements
should be higher during business upturns, but not strike frequency. 12

Marxist theorists argue that the fact that strikes occur more frequently when
the economy is strong demonstrates that confl ict is a product of the bargaining
power of labor. This bargaining power model of strikes focuses on the fact
that strikes are typically initiated by the union and the work force. Thus, during

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214 Part III. The Functional Level of Labor Relations

periods when the union ’ s bargaining power is relatively weak, the union is less
likely to press its demands and is less likely to resort to a strike when seeking
more favorable contract terms.

The bargaining power thesis also recognizes that strikes are frequently initiated
by workers on the shop fl oor who are upset by management ’ s actions or by
offi cial union policy (these sorts of strikes often would be categorized as unauthor-
ized, or wildcat, strikes). Workers are less likely to engage in this sort of shop-fl oor
action when labor markets are slack and workers worry about the possibility of
layoff.

Negotiations involve many issues, what will actually occur in a strike is highly
uncertain, and labor negotiations typically occur repeatedly between the same
parties. These factors make it extremely diffi cult to predict the settlement point
or the causes of an impasse in any given negotiations.

STRIKE ACTIVITY

Strikes occur infrequently. The total work time lost due to strikes has averaged
well below one-half of 1 percent per year. In 2015, there were twelve major
work stoppages each involving 1,000 or more workers. Historically, strike rates
have been higher than this in the United States. For instance, in 1971 there were
298 major work stoppages that involved a total of 2.5 million workers. 13 The
low frequency of strikes is consistent with Hick ’ s prediction that both parties
usually have strong incentives to avoid strikes. It also appears that the ability of
unions to engage in a strike has declined in recent years as a result of increased
international and domestic competition and decreasing union coverage in and
across industries, lending support to the bargaining power thesis noted above.

Whereas strikes in other periods seemed to provide a positive return to union
members, strikes in recent years have frequently appeared to be defensive weapons
that unions fi ghting for their continued existence use only as a last resort. The
strikes that did take place were often more hostile, violent, and emotional than
the earlier strikes. Since the strikes were so bitter, they entailed greater costs to
both sides, and, consequently, both labor and management had incentives to
avoid their occurrence.

Many strikes in recent years occurred when labor and management could not
agree on how to respond to the increasing cost of health care benefi ts. Many
fi rms were seeking concessions in contract negotiations that would either require
increased employee payments to cover health care cost increases or reductions in
health care benefi ts. Box 8.4 describes how health care benefi t modifi cations have
become a central issue at GE for both union and nonunion employees.

Another issue that has become extremely contentious in recent collective
bargaining is the outsourcing of work. A recent strike at Verizon Communications
(see Box 8.5 ) received a lot of attention because the unions at Verizon appear
to have made gains in limiting management ’ s ability to outsource work.

Even though the strike weapon has had reduced potency for many unions in
recent years, some unions (and employees) retained sizable strike leverage. The

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The Negotiations Process and Strikes 215

BOX 8.4
Health Care Benefi ts Are a Central Issue in Labor Relations at
General Electric

Health care benefi ts for current and retired workers have been a central
issue in recent labor relations at General Electric (GE). Events at GE are
representative of the central role that issues related to health care have played
in some labor-management relationships.

At the start of recent negotiations, GE requested signifi cant reductions
in the health benefi ts its current unionized workers would receive. For a
while, it looked as though this demand would lead to a strike. These
negotiations involved unions that represent some of GE ’ s U.S. employees
(the United Electrical, Radio and Machine Workers of America [UE], the
International Union of Electronic, Electrical, Salaried, Machine, and Furniture
Workers–Communications Workers of America [IUE-CWA], the United
Auto Workers [UAW], the International Association of Machinists and
Aerospace Workers [IAM], and the International Brotherhood of Electrical
Workers [IBEW]). However, the parties compromised and on June 30,
2015, a four-year contract was ratifi ed with the UE and IUE-CWA, the
unions that represent 12,780 GE employees. The new contract includes
modest increases in employee premiums for health insurance, but over its
four-year period, it provides about $15,000 more in compensation. Similar
terms were later accepted in negotiations involving the other unions that
represented other GE workers.

The new contracts did not, however, settle all disputes at GE concerning
health care benefi ts. A federal district court decision issued on June 5, 2015,
ruled that disgruntled GE non-union retirees (former executives and other
white-collar employees) can proceed with claims that GE misled them about
their post-retirement health benefi ts, which are slated to end in 2015. The
retirees allege that GE ’ s summary of its health plan in 2012 misleadingly
stated that the company “expects and intends” that retiree benefi ts would
continue indefi nitely.

The leadership of the UE and others initially praised the four-year agree-
ments mentioned above for protecting post-65 health care benefi ts for
unionized GE retirees. But in July 2015, GE announced that it would
unilaterally terminate health care benefi ts to former production workers
and their spouses older than 65 who were eligible for Medicare. In response,
a coalition of nine unions fi led a class-action suit seeking to reverse the
cancellation of these health care benefi ts. The unions claimed that these
benefi ts were vested and that GE ’ s termination of the benefi ts violated the
collective bargaining agreements GE had with its unions.

Sources : Rhonda Smith, “UE, IUE-CWA Ratify Four-Year Contracts with General
Electric for 12,780,” Daily Labor Report , July 1, 2015, A-10; “General Electric Can ’ t
Dodge Allegations of Improperly Axing Retiree Health Benefi ts,” Daily Labor Report ,
June 8, 2015, A-3; and Carmen Castro-Pagan, “GE Hit with Class Action for Lifetime
Health Benefi ts,” Daily Labor Report , November 13, 2015, A-10.

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216 Part III. The Functional Level of Labor Relations

BOX 8.5
Long Strike Ends at Verizon with Claims of Union Gains

According to the U.S. Bureau of Labor Statistics, 47,000 workers went out
on strike in 2015 in the United States. This puts into perspective the
magnitude of the 2016 strike at Verizon Communications, in which 40,000
workers (mostly customer service workers and technicians) participated in
a strike that lasted six-and-a-half weeks. This strike was also noteworthy
because the unions at Verizon made several important gains. This contrasts
with the experiences of most striking workers since the mid-1990s.

The strike was organized by the two major unions that represent Verizon
employees, the Communications Workers of America and the International
Brotherhood of Electrical Workers. The strike followed months of contentious
negotiations. Verizon ’ s current business model creates inherent diffi culties
for its unionized workers. The company still maintains a large landline
network, which is installed and serviced by unionized employees, while
continually expanding its wireless services, which are serviced by nonunionized
employees. Much of the company ’ s growth and current profi ts derive from
its wireless business. The union members in the shrinking landline segment
are threatened by Verizon ’ s perpetual efforts to decrease labor costs in the
landline segment and focus its investments on the more profi table wireless
services.

This tension framed the major disputes in contract negotiations. Although
there were some disagreements about pension caps and health care coverage,
the key source of the impasse was the company ’ s insistence on decreasing
the proportion of customer service calls that would be handled by unionized
employees. (Verizon outsources a signifi cant proportion of its customer
service calls.) Obviously, this presented a major threat to union workers’
job security.

Despite Verizon ’ s initial claim that the strike would not affect its revenue
signifi cantly, their chief fi nancial offi cer later admitted that the strike had
led to a decreased capacity to provide installations, which in turn impeded
company growth and lowered profi ts. The size of the strike, both in terms
of numbers and national economic impact, prompted both the U.S. secretary
of labor and the Federal Mediation and Conciliation Service to become
involved.

Many observers felt that the settlement provided clear wins for the unions.
The settlement included a higher wage increase (10 percent over four years)
than the 6.5 percent increase Verizon had initially offered; the company
withdrew its demand that it be allowed to cap pensions; and it withdrew
a proposal to allow it to relocate employees anywhere on the grid for a
period of two years. In return, the unions accepted the restructuring of
some of the provisions in their health care plan. A compromise that benefi ted
both sides was reached regarding the major issue, the redirecting of customer

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The Negotiations Process and Strikes 217

service calls. The company could redirect a greater proportion of the calls
away from the initial region, but only to other unionized employees elsewhere
on the grid, instead of to nonunionized workers in or out of the country.
The union ’ s position was that as long as the work was being done by its
members somewhere, they had no complaint, while the company claimed
that this change allowed for greater effi ciency.

Another key union gain in the settlement was contract terms for seventy
retail wireless workers in a handful of stores who more than a year earlier
had voted for union representation. These are the fi rst Verizon customer
service workers to gain the benefi t of a union contract, something Verizon
wireless managers had been aggressively trying to prevent for years (see
Chapter 6 ). It remains to be seen if this will lead to greater union success
at organizing workers in other parts of Verizon ’ s wireless business and, more
generally, whether the Verizon strike settlement will inspire other workers
to be more aggressive in negotiations and during strikes.

Sources : Noam Scheiber, “Verizon Strike to End as Both Sides Claim Victories on Key
Points ,” New York Times , May 30 2016, http://www.nytimes.com/2016/05/31/business/
verizon-reaches-tentative-deal-with-unions-to-end-strike.html ; United States Department
of Labor, “Work Stoppages Summary,” Bureau of Labor Statistics, February 10, 2016,
https://www.bls.gov/news.release/wkstp.nr0.htm .

players in the major sports in the United States (football, baseball, basketball, and
hockey) are represented by unions, and, as Box 8.6 describes, there have been
frequent strikes over the last twenty-fi ve years when negotiators for those unions
and the respective leagues have reached impasse. It is not exactly clear why strikes
are such a frequent occurrence in sports collective bargaining. Perhaps it is because
players have high strike leverage that derives from the fact that there are no
substitutes for superstar players. If this is the explanation for the high strike rate,
then it provides an illustration of the militancy theory of strikes discussed above.
Or perhaps strikes are so common in sports because both the team owners and
the players are so inexperienced in labor relations and there is so much intraor-
ganizational disagreement (between stars and utility players on the player side and
between rich and fi nancially strapped teams on the owner side) that miscalculation
if frequent during bargaining. If the latter explains the high strike rate, then it
supports the miscalculation theory of strikes discussed above.

Collective bargaining in baseball is noteworthy because it is the union that has
pushed for increased reliance on the market to set players’ salaries, while team
owners want greater revenue sharing between teams (to promote competitive
balance) and limited player movement (to limit players’ salaries). For example,
baseball players won free agency in 1975 through a decision of a grievance
arbitrator, which helped produce a sharp rise in players’ salaries. See Box 9.3 for

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218 Part III. The Functional Level of Labor Relations

BOX 8.6
Frequent Strikes in Professional Sports

There have been frequent strikes when representatives of U.S. players and
owners have reached an impasse in their collective bargaining over the last
twenty-fi ve years. For example, a National Basketball Association (NBA)
players’ strike in the fall of 1998 led to the cancellation of much of their
season as players and owners squared off in a prolonged dispute that centered
on the terms of the NBA ’ s free agency system and how the two sides would
divide the increasing revenue of the NBA.

Strikes can be initiated by management in sports, just as in other sectors.
This sort of impasse is referred to as a lockout. A lockout occurred in the
National Hockey League (NHL) that led to the cancellation of the 2004–2005
NHL season. The NHL players and team owners disagreed about how to
set players’ salaries. NHL hockey fi nally resumed in the 2005–2006 season
after a salary cap and other new procedures were added to the NHL ’ s
collective bargaining agreement.

Collective bargaining in sports hasn ’ t always led to a strike. For example,
in August 2002, baseball players and team owners settled contract negotiations
without resorting to a strike. Apparently, both players and owners feared
that a strike at that point would particularly upset fans and potentially lead
to long-term damage to the game (and their own incomes). Fans had a
strong negative reaction to the 1994 baseball strike, which had led to the
cancellation of that year ’ s World Series, and in 2002 both labor and manage-
ment feared even greater damaging effects if another strike occurred.

Sources : Robert C. Berry, William B. Gould, and Paul D. Staudohar, Labor Relations in
Professional Sports (Dover, Mass.: Auburn House, 1986); Alex Remington, “Lockouts,
Strikes and Labor Politics in Professional Sports,” Footnote 1 , June 5, 2013, http://
footnote1.com/lockouts-strikes-and-labor-politics-in-pro-sports/ .

a description of the salary arbitration procedure now used to set baseball players’
salaries.

Professional sports is an example of a sector where, perhaps surprisingly, collective
bargaining is playing an increasingly visible role because of the publicity surrounding
player conduct. In recent years, there has been much controversy surrounding
the penalties assessed on players, including some long suspensions, in response to
accusations that the players were using banned performance-enhancing drugs or
were perpetrators of domestic violence. Box 8.7 describes the central role of the
grievance procedure that is included in the various sports league ’ s collective bargain-
ing agreements in recent cases where league commissioners have punished various
players.

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The Negotiations Process and Strikes 219

BOX 8.7
The Role of Collective Bargaining in Settling Disputes about
Drug Use and Personal Conduct in Professional Sports

In some ways, the collective bargaining agreements that regulate all four
major sports in the United States (football, baseball, basketball, and hockey)
are similar to other labor agreements: they cover the same issues of wages,
benefi ts, and work rules. However, because of the celebrity status of athletes
and other factors, sports bargaining agreements feature personal conduct and
drug abuse policies that are paired with interesting enforcement mechanisms.

To understand how these policies are implemented, it is important to
understand the structure of professional sports leagues in the United States.
Each individual team, which employs and pays its players, is part of a
respective league and is subject to league rules and discipline. Typically,
owners or team representatives vote on or in other ways have infl uence on
the policies the league adopts. However, personal conduct matters and the
specifi c disciplinary actions taken against players are determined by the
commissioner of each league, who serves at the pleasure of the owners.

Each of the four major sports leagues in the United States have detailed
drug policies. These cover both recreational drugs and performance-enhancing
drugs. For example, as of 2015, Major League Baseball had recognized and
banned seventy-four performance-enhancing substances. The league and
players’ associations often have similar views on the regulation of performance-
enhancing drugs and about the regulation of other drugs. They also agree
about penalties for players who perpetrate domestic violence. Thus, there is
a lot of common ground in the positions of players and the leagues. In the
NFL in 2015, for example, forty-nine players were suspended for violating
the drug policy. The suspensions ranged from a single game to the entire
season based on the number of times players had failed drug tests in the past.

The leagues’ personal conduct policies are far less structured. The leagues
have a long list of many types of personal conduct violations. Players who
violate these rules create a lot more news and negative publicity than other
employees would. Several major events in the last few years have generated
national news and outrage. This was caused both by the events themselves
and the responses of the leagues.

In most cases, there are no specifi c guidelines regarding the appropriate
penalties for specifi c events, so it typically the commissioner ’ s discretion
determines the penalty. In 2015, eleven NFL players were suspended because
they had violated the league ’ s personal conduct policy. The suspensions
ranged from one game to six, which is almost half a season. Probably the
most publicized case was a domestic violence complaint against former
Texas Ravens running back Ray Rice. Rice allegedly knocked his wife
unconscious in a casino elevator and was eventually brought before the
commissioner. He was suspended for the fi rst two games of the season.

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220 Part III. The Functional Level of Labor Relations

Then a video of the incident surfaced and caused national outrage over
what now seemed like a lax penalty. The league responded by suspending
Rice indefi nitely, but Rice argued that he had been punished twice for the
same incident, which isn ’ t allowed under the NFL ’ s agreement. Eventually,
the Rice suspension was amended to a year, but no team has signed the
former all-pro since the incident.

Players often appeal both drug and personal conduction violations through
the grievance procedure in their collective bargaining agreements. The
players can use the legal system to appeal disciplinary actions. Perhaps the
most controversial court involvement in a player suspension is the recent
case involving New England Patriot quarterback Tom Brady. This case,
which concerns accusations that Brady knew about and/or obstructed an
investigation into a plot to defl ate footballs used in the 2015 American
Football Conference championship game, illustrates the critical role the
specifi c language in a collective bargaining agreement can play. In this case,
the language in the parties’ collective bargaining agreement proved decisive,
and a three-judge panel of the United States Court of Appeals upheld NFL
Commissioner Goodell ’ s four-game suspension of Brady in a decision issued
on April 25, 2015. The Second Circuit Court of Appeals affi rmed that
Goodell had broad discretion to suspend players according to the collective
bargaining agreement with the players’ union.

Interestingly, in their decision, the judges admitted that they did not
consider the underlying facts of the case, including the science of football
defl ation, but instead looked solely at whether Goodell, as arbitrator, had acted
in the spirit of the collective bargaining agreement. The court concluded,
“We hold that the commissioner properly exercised this broad discretion
under the collective bargaining agreement and that his procedural rulings
were properly grounded in that agreement and did not deprive Brady of
fundamental fairness.”

The judges went on to say that despite the protestations of Brady and
the NFL Players Association, Goodell was merely acting on the powers the
league and the union had agreed to in their labor contracts, the latest of
which was signed in 2011. The judges acknowledged that the management-
union pact in which the person who penalizes players (the league commis-
sioner) also listens to appeals of those penalties might be unconventional,
but they would not get in the way of a long-standing and transparent
contract. The court stated, “In their collective bargaining agreement, the
players and the league mutually decided many years ago that the commissioner
should investigate possible rule violations, should impose appropriate sanctions,
and may preside at arbitrations challenging his discipline.”

Sources : Ken Belson, “N.F.L. Wins Appeal, and Tom Brady Has Little Recourse,” New
York Times , April 25, 2016, http://www.nytimes.com/2016/04/26/sports/tom-brady-
defl ategate-new-england-patriots-suspension-reinstated.html?emc = eta1 .

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The Negotiations Process and Strikes 221

The Role of Replacements for Striking Workers

One of the most controversial strike issues is whether a fi rm will hire temporary
or permanent replacements when workers go on strike. Under U.S. labor law,
management has the right to hire temporary replacements and can hire permanent
replacements if it notifi es the union and the newly hired employees that it is
doing so. The threat of hiring permanent replacements, therefore, is often taken
as a signal of management ’ s intent to bargain hard and even to eliminate the
union if it goes on strike.

Alternative Collective Strike-Like Actions

As the traditional strike leverage of unions has declined as management has
threatened to use permanent replacements, outsourcing, or other tactics, unions
in recent years have more frequently used other forms of collective action to
increase their bargaining leverage. The sickout by Detroit public school teachers
described in Box 8.8 is one example of this sort of strike-like action.

THE ROLE OF MANAGEMENT AND UNION
STRATEGIES ON NEGOTIATIONS

Management strategies have a major effect on the negotiations process and on
the likelihood of a strike. For one thing, management ’ s investment and product
decisions affect its bargaining power and negotiations strategies. For example,
whether management chooses a low-cost, high-volume product strategy instead
of a high-quality, high-innovation strategy shapes the extent to which the employer
is concerned with lowering wage costs. In addition, a company ’ s human resource
strategy affects negotiations, particularly in terms of how that strategy affects the
attitudes of employees.

Union strategies also affect the course of collective bargaining. Whether and
how a union seeks support from community groups or other unions in an effort
to pressure a particular employer often become critical issues in labor
negotiations.

The recent evolution of collective bargaining in three cases—auto company-
UAW, Boeing-IAM, and U.S. postal service (USPS) bargaining with the three
unions that represent its employees—illustrate the dynamics of bargaining.

Negotiations between Auto Companies and the UAW

In the fall of 2015, the UAW reached contract settlements with each of the Big
Three auto companies (GM, Ford, and Fiat-owned Chrysler) where the union
represents all blue-collar workers. The three contracts gave contract gains to the
UAW that refl ected both economic recovery in the auto industry and the effects
of that recovery on the union ’ s bargaining power. The 2015 contracts also refl ect
the strategic decision of the UAW to use their renewed strength to reverse some
of the effects of concessions the union had made during the 2008 fi nancial crisis.
A key feature of the 2015–2019 collective bargaining agreements is that they
provided substantial wage increases to lower-tier (“in-progression”) workers and

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222 Part III. The Functional Level of Labor Relations

BOX 8.8
Mass Sickout by Teachers Closes Detroit Public Schools

Most of Detroit ’ s public schools (64 out of 100 schools in the city) closed
on January 11, 2015, in the face of a “sickout” by teachers who protested
what they called unsafe, crumbling, vermin-infested, and inadequately staffed
buildings and the failure of state lawmakers to agree on a plan to rescue a
system teetering on the edge of insolvency. Because of the school closings,
31,000 of the 46,000 students in the district missed a day of instruction,
which cost the district more than $1 million in state funding based on
attendance.

The Detroit school district is beleaguered. It consistently has had the
lowest test scores among large school districts in the United States. The
district has lost more than two-thirds of its enrollment in fi ve years, which
has led to the closing of many of its schools. The district has been running
large defi cits, including $1.3 billion in unfunded retiree benefi ts and hundreds
of millions of dollars in other obligations.

Before the strike, teachers had been staging periodic smaller-scale sickouts
for a month. The sickouts, which the Detroit Federation of Teachers did
not endorse, were organized by Steve Conn, who was ousted in August
2015 as president of the union but still has an ardent following in the union.
Mr. Conn had been an activist in the union at odds with other union
leaders—and the district administration—until February 2015, when teachers
elected him president. Seven months later, the union ’ s executive board
removed him over charges of misconduct.

Events in the Detroit public schools illustrate the important role that a
collective pressure tactic can play. The political infi ghting in the teachers’
union also illustrates intra-organizational differences.

Source : Richard Perez-Pena, “ ‘Sickout’ by Detroit Teachers Closes Most Public Schools,”
New York Times , January 11, 2016, https://www.nytimes.com/2016/01/12/us/sickout-
by-detroit-teachers-closes-most-public-schools.html .

wage increases to upper-tier (“traditional”) autoworkers. To understand the strategic
choices the UAW made and the how recent increases in the union ’ s bargaining
power contributed to these recent contract gains, it is helpful to review the prior
diffi culties of labor and management in the auto industry.

The bargaining power of the UAW declined sharply beginning in the 1980s
due in part to the growing proportion of U.S. auto production that was taking
place in nonunion “transplants” (assembly plants in the United States owned by
foreign-based auto companies). Transplant workers produced over 40 percent of
cars and trucks assembled in the United States. Although the UAW has launched
various organizing drives in unorganized transplants in recent years, none of these

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The Negotiations Process and Strikes 223

drives has been successful. The UAW ’ s efforts to organize the Volkswagen plant
in Tennessee have been particularly noteworthy. The UAW launched extensive
efforts to organize that plant with the support of Volkswagen management, which
declared that it was neutral toward union organizing. To the union ’ s disappoint-
ment, a majority of workers did not vote in favor of union representation, although
the union continues to try to organize the plant.

The UAW ’ s bargaining power had also been negatively affected by the fact
that imported cars and trucks had captured a growing share of vehicle sales.
Imports accounted for a growing share of the U.S. market, rising from a postwar
low of 5 percent in 1955. The proportion of imports surged in the 1980s, then
declined in the 1990s as Japanese, Korean, and German companies increased their
North American production capacity. Then the import share rose again, and it
is now more than 50 percent.

As import and transplant vehicle sales increased, the total bargaining power of
labor and management at the Big Three auto companies decreased. In addition,
the relative bargaining power of the UAW was weakened by the ease by which
the companies could move production offshore and the erosion of strike leverage
due to excessive production capacity during the industry ’ s periodic sharp cyclical
downturns.

The fringe benefi t package in the Big Three–UAW collective bargaining contracts
came under particular pressure as the popular press and corporate managers criticized
the “legacy costs” associated with pensions and retiree health. These costs were
high in part due to the large number of retirees relative to the number of active
workers, given the decreases that had occurred in the size of the Big Three work
forces. The legacy costs in the U.S. auto industry were identifi ed as the key
source of the competitive cost disadvantage the Big Three faced vis-à-vis the
transplant companies. The latter were advantaged by more limited benefi t plans,
younger current work forces, and very few retirees.

Economic pressures on labor and management at the Big Three became especially
severe during the 2008 fi nancial crisis as sales and then production of autos
plummeted. By June 2009, two of the Big Three American car manufacturers
(GM and Chrysler) had fi led for bankruptcy and had emerged as new companies
with signifi cant government ownership. Shortly thereafter, Fiat became a co-owner
of Chrysler. Ford managed to avoid similar bankruptcy and government ownership
only because it had arranged large private loans before the fi nancial collapse.
Under pressure from the U.S. government to bring labor costs to the lower levels
found in the transplants and fearing the potential liquidation of GM and Chrysler,
the UAW agreed to unprecedented concessions. These concessions included a
lower wage for new hires ($14 per hour compared to the $28 per hour received
by previously hired UAW workers).

When labor and management entered company-level collective bargaining in
the fall of 2015, the economic environment had rebounded and auto sales and
company profi ts were up. The fall 2015 contracts refl ected the corresponding
increases in labor and management ’ s total power and auto management ’ s desire
to avoid potentially disruptive and costly strikes. The 2015 contracts stipulated

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224 Part III. The Functional Level of Labor Relations

that over an eight-year period, the hourly wage of lower-tier workers would
increase from $19 to $29, which was close to the $32 hourly wage “traditional”
workers earned. And although the fringe benefi ts package for lower-tier workers
was worth signifi cantly less than the benefi ts traditional workers received (whose
benefi t package costs the companies $25 per hour and includes “30 and out”
defi ned benefi t pensions), the 2015 contracts also improved the health care and
other benefi ts lower-tier workers received. The lower-tier work force now amounts
to 45 percent, 20 percent and 28 percent, respectively, of the Chrysler, GM and
Ford work forces. Other provisions of the 2015 contracts that helped win the
support of upper-tier workers were base wage increase of 3 percent in both the
fi rst and third years of the new contracts and 4 percent lump sum bonuses in the
second and fourth years of the contracts. In addition, sizeable “signing bonuses”
were gained ($8,000 per worker at GM) and there were also improvements in
various fringe benefi ts for traditional workers.

Although UAW members and leaders were very pleased with the gains won
in their 2015 contracts, they continued to be disturbed by the amount of work
moving out of the United States to countries that had lower labor costs. (The
fact that the 2015 contract gains gave the Big Three increased incentives for such
movement is an illustration of the wage-employment trade-off.) See Box 8.9 for
a discussion of the UAW ’ s complaints about the movement of work abroad.

Labor Relations Involving the Boeing Corporation
and the IAM

Labor relations at The Boeing Company are interesting because Boeing has been
so economically successful and because for many years the company ’ s white- and
blue-collar work forces used collective bargaining to share in Boeing ’ s success.
At the same time, there has been much recent acrimony in Boeing ’ s labor-
management relationship and strategic maneuvers by Boeing management that
might eventually severely reduce the bargaining power of the unions that represent
Boeing ’ s employees.

Boeing manufactures commercial aircraft including wide-body planes such as
the Dreamliner, the 747, and the new 777. Boeing has 45 percent of the world ’ s
commercial jet market and is a sizeable defense contractor. Its only signifi cant
competitor in the commercial wide-body plane market is Airbus, a European-based
consortium. The production of wide-body planes is highly profi table and contributes
much to Boeing ’ s stature as the largest exporting company in the United States
by dollar volume. Much of Boeing ’ s wide-body plane production is concentrated
in the Seattle metropolitan area, where machinists represented by the IAW
manufacture key parts and assemble planes. Unusually for a U.S. private sector
employer, many of Boeing ’ s professional employees—engineers and middle-level
managers—are represented by a union, the Society of Professional Engineering
Employees in Aerospace (SPEEA).

Over the years, both blue- and white-collar employees at Boeing have used
collective bargaining to gain favorable wages and a variety of fringe benefi ts.
These gains illustrate the unions’ relative power (due in large part to its strike

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The Negotiations Process and Strikes 225

BOX 8.9
UAW President Complains about Work Leaving the United
States

Three months after the United Auto Workers ratifi ed new four-year agree-
ments with Detroit-area automakers in early 2016, UAW president Dennis
Williams accused the auto companies of shifting signifi cant car production
to low-wage countries such as Mexico and China. The new agreements,
discussed above in the text, provided substantial wage increases, particularly
to newly hired auto workers in the United States, but also allowed the auto
companies to move production.

Williams believes that the companies are making ample profi ts from auto
production in the United States. However, he says, “The fact of the matter
is, companies continue to run to low-wage countries.” In 2016, Fiat Chrysler
announced that it will stop making its Dodge Dart compact and Chrysler
200 in the United States and Ford said that it will stop building its Focus
compact in Michigan and move that work to Mexico. (Mexican autoworkers
earned $8.24 an hour in 2013, compared with the $37.62 U.S. autoworkers
earned that same year.) Williams also complained about GM ’ s announcement
that it intends to import the Buick Envision SUV from China. (Williams
said that union members have nicknamed that vehicle the “Invasion.”) He
also argued that the carmakers should be loyal American taxpayers because
the U.S. government had bailed out GM and Chrysler in 2009 (see text
above).

However, the auto companies have continued to make sizeable investments
outside the United States. In April 2016, Ford announced that it would
invest $1.6 billion in a new small-car factory in Mexico, which drew
additional criticism from the president of the UAW. Ford noted in response
that it has been manufacturing cars in Mexico since 1925 and that from
2011 to 2015, it had invested more than $10 billion in the United States
and added 25,000 jobs in the United States.

Source : David Welch, “UAW President Bemoans Work Moving to Mexico,” Daily
Labor Report , February 5, 2016, A-3; Keith Naughton, “Ford Plan for Mexico Plant
Draws Trump-Like Barb from UAW,” Daily Labor Report , April 5, 2016, A-7.

leverage) and the high total power it derives from Boeing ’ s strong market positon
and solid profi ts. Frequent strikes have occurred over the past twenty-fi ve years
as part of contract negotiations at Boeing, including a 58-day strike in 2008.

In the winter of 2011 , after Boeing and the IAM had reached an impasse in
their negotiation of a new multiyear contract covering Seattle-area work, IAM
members rejected a proposed settlement. After the national offi ces of the IAM
intervened and ordered a second vote, Boeing workers voted to accept a new

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226 Part III. The Functional Level of Labor Relations

four-year contract. Although the company had all along agreed to provide sizeable
wage increases and lump-sum signing bonuses, many Boeing workers apparently
were upset that the company was demanding that the company ’ s defi ned benefi t
pension plan be replaced with a defi ned contribution plan. As discussed in Chapter
8, in recent years many unions have grudgingly accepted such a switch, but
Boeing workers were emboldened by the company ’ s fi nancial strength and their
bargaining leverage.

The contract terms that workers eventually accepted included Boeing ’ s com-
mitment to produce a future generation of wide-body planes, the 777, in the
Seattle area. Apparently, this guarantee of future investments and the implied
employment that would follow helped mollify enough workers to generate a
majority vote in favor of the revised offer. Perhaps, in addition, Boeing workers
worried that a continuing contract impasse might lead Boeing to accelerate the
development of production capacity at the nonunion Boeing plant in Charleston,
North Carolina, or at other nonunion U.S. or international sites.

Labor relations were infl amed again in May 2014 when a top Boeing executive
essentially said that unless workers at Boeing ’ s Seattle plants reduced their propensity
to strike, Boeing would move its production to other parts of the United States
and the world. The NLRB general counsel began an investigation when the
IAM fi led an unfair labor practice complaint over that statement that claimed
that it was inconsistent with the right to strike enshrined in the NLRA. Eventually,
the IAM dropped its NLRB complaint after Boeing management agreed to make
various investments in Seattle-area plants.

In 2009, to expand its production capacity so it could meet a large back order
for its popular Dreamliner wide-body plane and to gain greater relative power
in their labor negotiations, Boeing transformed a former small-scale airline parts
plant into a Dreamliner assembly complex in Charleston, South Carolina. Although
the IAM has tried to organize that plant, to date they have not succeeded, and
in April 2015, it called off a scheduled representation election, apparently because
of weak employee support for unionization.

In March 2016, Boeing announced plans to cut 4,000 jobs from its commercial
airplanes division as part of an effort to reduce costs in the face of intense competi-
tion from the Airbus Group, which also manufactures wide-body airplanes. Boeing
earned a record $96 billion in 2015, but that fi gure was a 13 percent decrease
from earnings of the previous year. Although the company was employing 161,400
employees at the end of 2015, the size of its work force had decreased for the
third consecutive year. 14

Labor Relations at the U.S. Postal Service

Labor relations at the United States Postal Service (USPS) are an interesting case
not only because of the large number of employees affected but also because the
postal service is an industry facing massive technological change and intense
competition. The 500,000 employees who work for the USPS are represented
by four unions—the American Postal Workers Union (APWU), the National
Association of Letter Carriers (NALC), the National Rural Letter Carriers

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The Negotiations Process and Strikes 227

Association (NRLCA), and the National Postal Mail Handlers Union (NPMHU).
In addition to representing the individuals who sort and deliver the mail, these
unions represent clerks, mechanics, vehicle drivers, custodians, and some
administrators.

The Internet has led to major shifts in the demand for postal services. On the
one hand, the Internet has led to declines in the volume of regular (fi rst class)
mail, which has led to sharp declines in USPS revenue. At the same time, the
increased commerce that is taking place over the Internet has increased the volume
of package deliveries, although a host of private companies, such as UPS, FedEx,
and DHL, compete with the USPS for this package business.

The USPS is also undergoing a regulatory transition as it is being transformed
from a public enterprise, which had been heavily regulated by the U.S. Congress,
to a quasi-private enterprise, which is now expected to survive without government
subsidies. Yet Congress still regulates key aspects of USPS business such as the
price of stamps and the commitment to delivery service in costly rural areas. The
fi nancial pressure that has followed this regulatory shift has led the management
of the USPS to look for ways to cut operational costs and to seek concessions
from the unions who represent postal workers.

The USPS bargains using standard-looking collective bargaining agreements
with the various unions, but it does so under rules that Congress has set that
make strikes illegal and state that if the parties reach impasse in contract negotiations
either side can request binding arbitration. In recent years, the parties have often
made use of binding interest arbitration to set new contract terms. In the 2011
round of collective bargaining, the APWU and the USPS negotiated a four-and-
a-half-year contract. However, the other unions and the USPS went to impasse
and chose to make use of binding arbitration. The arbitrators (a three-person
panel) then issued awards that closely followed the terms of the 2011–2016
APWU-USPS contract. Interestingly, the 2011 arbitration award for the NRLC
also introduced a lower (by 10 percent) starting wage for new hires and lowered
(by 20 percent) the starting wage of so-called noncareer part-time employees.

In the next bargaining round, in July 2016, an arbitrator set the terms of the
APWU ’ s 2015–2018 contract after that union had negotiated to impasse with
the USPS. This 40-month agreement provided a base pay increase of 3.8 percent
and continued a no-layoff provision for career employees. Infl uenced by the
USPS ’ s demand, the arbitrator gradually reduced the USPS share of employee
health insurance premiums (by 1 percent per year, from 75 percent to 73 percent).
The arbitrator made clear in his 50-page arbitration award that he was heavily
infl uenced by the principle of pay comparability and by the collective bargaining
agreement the NRLCA and the USPS negotiated in 2015.

Political lobbying also plays a critical role on postal service business strategies
and labor relations. For example, the four postal unions have periodically lobbied
Congress in an effort to block USPS proposals to close some post offi ces and
eliminate Saturday delivery of fi rst-class mail. Meanwhile, the four unions and
the USPS have made joint efforts to get Congress to relax current rules that
require the current funding of the health care costs of future retirees. 15

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228 Part III. The Functional Level of Labor Relations

CULTURAL ISSUES IN NEGOTIATIONS

Given the increased internationalization of the U.S. economy and the heightened
role multinational corporations play, it is important to consider the role of cultural
differences in negotiations. Cultural differences can affect the course of negotiations
and can make settlement more diffi cult when people from different parts of the
world negotiate with each other. One study found that agreements took longer
and were less likely to be reached when Chinese and Americans negotiated with
each other than when the negotiating pairs came from the same country. Chinese
negotiators tended to put a higher emphasis on process considerations and preferred
to allocate more time to building relationships with their negotiating counterparts,
whereas American negotiators wanted to move more quickly to discussion of the
substantive issues involved. Paying attention to these cultural differences and their
effects on negotiating style is critical to the success of cross-cultural negotiations. 16

Jeanne Brett provides a comprehensive assessment of the role cultural issues
can play in negotiations. 17 Below we provide a summary of the fi ndings in Brett ’ s
research on negotiating globally.

It is fi rst important to defi ne culture. Culture is the distinct character of a social
group that emerges from the patterned ways people in that group interact socially.

It is valuable to have a “cultural interpreter,” someone who not only knows
the language but also can interpret the body language and the strategic behavior
being exhibited across the negotiating table. The presence of such a person can
help negotiators avoid mistakes and correctly interpret the behavior and signals
of their negotiating partners. A cultural expert can also help negotiators understand
the cultural context of the negotiation, for example, the institutional environment
in which the negotiation is embedded.

One key thing to avoid is confusing a cultural prototype (a central tendency)
with a cultural stereotype (the idea that everyone in a culture is the same; that
there is no distribution around the mean). This is inappropriate because there is
always variation in a culture.

Two key elements of cultures that are particularly important for negotiations
are the degree to which a culture values collectivism over individualism and the
degree to which a culture values egalitarianism over hierarchy. In individualist
cultures, social, economic, and legal institutions promote the autonomy of individu-
als, reward individual accomplishment, and protect individual rights. In collective
cultures, institutions promote the interdependency of individuals with the others
in their families, fi rms, and communities by emphasizing social obligations. In a
collectivist culture, individual accomplishment refl ects back on others with whom
the individual is interdependent. Legal institutions support collective interests
above individual interests.

When a negotiator comes from a culture that highly values individualism, that
may affect his or her interests, goals, and strategic choices. For example, indi-
vidualistic cultures promote and condone self-interest, which may be refl ected
in a negotiator ’ s preference for confrontation and/or face saving. In hierarchical
cultures, social status determines social power and social power generally transfers

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The Negotiations Process and Strikes 229

across situations. For example, in hierarchical cultures, social inferiors are expected
to defer to social superiors, who have an obligation to look out for the well-being
of lower-status parties. No such obligations exist in egalitarian cultures. In egalitarian
cultures, social boundaries are more permeable and social status may be both
short-lived and variable across situations.

Western cultures, especially Northern European nations, tend to be egalitarian.
As you move south from North America to Central and South America, culture
tends to be more hierarchical. Asian cultures are usually classifi ed as hierarchical.

Norms (i.e., standards of appropriate behavior) regarding directness or indirectness
of communication are also important when negotiating globally. When people
communicate indirectly, for example, the same words take on different meanings
depending on the context in which they are spoken. Cultures favoring indirect
communication tend to be collectivist in nature. People in direct-communication
cultures, in contrast, understand each other because they share a vocabulary.
Direct-communication cultures also tend to be individualistic.

Research does not support the idea that negotiators from some cultures primarily
use integrative strategies and those in other cultures primarily use distributive
strategies. Research also shows that there is a substantial variation in cultures in
the ability to use integrative strategies.

Summary

The structures and processes of negotiations vary considerably across countries,
refl ecting differences in the stage of development of labor law, the ideologies and
strategies of employers and labor organizations, shifting bargaining power, and
national cultures and institutions. While most well-developed labor relations
systems seek to regularize negotiations processes as a way of limiting strike activity,
breakdowns in negotiations still generate strikes from time to time.

Once it is clear that a negotiations process is called for, the parties need to
develop skills and abilities to adapt negotiations practices as conditions change
over time. These skills and abilities include:

• Separating distributive (confl icting) issues from integrative issues (those where
the parties share common goals) and using modern negotiations tools to
avoid miscalculating each other ’ s bottom lines on distributive issues and
missing opportunities to pursue their shared interests in integrative issues.

• Building positive, constructive relationships with counterpart negotiators to
generate trust in each other ’ s statements as negotiations proceed toward either
an agreement or an impasse.

• Adapting the structure of bargaining as competitive conditions and or the
mix of employers or unions change over time.

• Exploring new ways to negotiate, such as using interest-based bargaining
processes or using other ways of improving problem solving in negotiations.

• Building ongoing processes for implementing and administering agreements
reached in negotiations and for resolving disputes during the term of the
agreement.

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230 Part III. The Functional Level of Labor Relations

• Recognizing and appropriately adapting to any cultural issues that might be
prevalent in a negotiation.

In summary, negotiations processes are the central activity at what we refer to
as the middle tier of the three-tiered labor relations framework introduced in
Chapter 1 . They need to be supported and complemented by effective mediation
and arbitration or other dispute resolution processes, topics we turn to in the
next chapter.

Discussion Questions

1. Describe the four subprocesses of negotiations according to Walton and
McKersie.

2. What are the key aspects of the three stages of a typical negotiations cycle?
3. Describe the Hicks model of strikes.
4. Describe how management strategy infl uenced the course of a recent negotia-

tion or strike.
5. How do traditional bargaining and interest-based bargaining differ?

Related Web Sites

Boeing workers:
www.boeingworkers.com

UAW auto bargaining:

USPS labor relations:
https://about.usps.com/manuals/elm/html/elmapdx_009.htm

Suggested Supplemental Readings

Clark , Paul , Ann Frost , and Howard Stranger , eds . Contemporary Collective Bargaining in the
Private Sector . Champaign, Ill. : Industrial Relations Research Association , 2013 .

Fisher , Roger , and William Ury . Getting to Yes: Negotiating Agreement without Giving In . New
York : Penguin Books , 1981 .

Rosenblum , Jonathan D. Copper Crucible: How the Arizona Miners’ Strike of 1983 Recast Labor-
Management Relations in America . Ithaca, N.Y. : ILR Press , 1995 .

Walton , Richard E. , and Robert B. McKersie . A Behavioral Theory of Labor Negotiations . New
York : McGraw-Hill , 1965 .

Walton , Richard E. , Joel Cutcher-Gershenfeld , and Robert B. McKersie . Strategic Negotiations:
A Theory of Change in Labor-Management Relations . Boston : Harvard Business School Press ,
1994 .

Notes

1. See Edward Cohen-Rosenthal and Cynthia Burton, Mutual Gains: A Guide to Union-Management
Cooperation (Boston: Pitman, 1987); Roger Fisher and William Ury, Getting to Yes (Boston: Houghton

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The Negotiations Process and Strikes 231

Miffl in, 1981); and Richard E. Walton, Joel Cutcher-Gershenfeld, and Robert B. McKersie, Strategic
Negotiations: A Theory of Change in Labor-Management Relations (Boston: Harvard Business School
Press, 1994).

2. Richard E. Walton and Robert McKersie, A Behavioral Theory of Labor Negotiations (New York:
McGraw-Hill, 1965).

3. It is, of course, possible that there is some joint gain associated with a higher wage rate if labor
productivity increases when wages are raised. This might result from the greater motivation workers
feel when their pay goes up or from the fact that the fi rm can recruit better-qualifi ed workers when
it offers a higher wage. We ignore such considerations in the text discussion.

4. For evidence on the role of personality traits in bargaining, see Jeffrey Z. Rubin and Bert T.
Brown, The Social Psychology of Bargaining and Negotiations (New York: Academic Press, 1975),
1583–1596; and Max Bazerman, Judgement in Managerial Decision Making (New York: John Wiley,
1986).

5. Margaret A. Neale and Max H. Bazerman, “The Role of Perspective-Taking Ability in
Negotiating under Different Forms of Arbitration,” Industrial and Labor Relations Review 36 (April
1983): 378–388.

6. Arthur M. Ross, Trade Union Wage Policy (Berkeley: University of California Press, 1948),
45–74.

7. This case is a real fi rm we encountered in our fi eld work. The fi rm preferred not to be identifi ed
by name.

8. This cycle is discussed in Carl M. Stevens, Strategy and Collective Bargaining Negotiations, (New
York: McGraw-Hill, 1963), 41–46.

9. John R. Hicks, The Theory of Wages (New York: Macmillan, 1932), chapter 2 .
10. Orley Ashenfelter and George E. Johnson, “Bargaining Theory, Trade Unions, and Industrial

Strike Activity,” American Economic Review 59 (March 1969): 35–49.
11. Clark Kerr and Abraham Siegel, “The Inter-Industry Propensity to Strike,” in Industrial

Confl ict, ed. Arthur Kornhauser, Robert Dubin, and Arthur M. Ross (New York: McGraw-Hill,
1954), 189–212.

12. Economists have also constructed models that involve “asymmetric information” to explain
strike occurrence. These models rely on the notion that management knows the profi tability of the
fi rm, whereas the union must guess profi tability and use wage offers to get the fi rm to reveal its
true profi tability. See, for example, Joseph S. Tracy, “An Investigation into the Determinants of
U.S. Strike Activity,” American Economic Review 76 (June 1986): 423–436.

13. Bureau of Labor Statistics, U.S. Department of Labor, “Major Work Stoppages in 2015,”
News Release USDL-16-0272, February 10, 2016, Table 1, https://www.bls.gov/news.release/
pdf/wkstp.pdf .

14. Paul Shukovsky, “IAM Members Approve by Wide Margin Contract with Boeing Offering
Job Security,” Daily Labor Report , December 8, 2011, A-1, Paul Shukovsky, “IAM Members Agree
to End Pensions to Ensure Boeing Doesn ’ t Move Jobs Away,” Daily Labor Report , January 6, 2014,
AA-1; Julie Johnson and Tyrone Richardson, “Boeing to Cut 4,000 Jobs from Commercial Airplane
Unit,” Daily Labor Report , March 30, 2016, A-5.

15. “APWU Members Vote to Ratify Contract; Will Raise Wages by 3.5% over Term,” Daily
Labor Report , May 11, 2011, A-11; Louise C. LaBrecque, “Arbitration Panel Issues 4.5 Year Contract
Covering U.S. Postal Service, Letter Carriers,” Daily Labor Report , January 17, 2013, A-5; “We
Have a New Contract,” APWU news article 140–2016, July 8, 2016, www.apwu.org/news/web-
news-article/we-have-new-union-contract .

16. Anne Liu, Leigh, Ray Friedman, Bruce Barry, Michel Gelfand, and Zhi-Xue Zhang, “The
Dynamics of Consensus Building in Intracultural and Intercultural Negotiations,” Administrative
Science Quarterly 57 no. 2 (2012): 269–304.

17. Jeanne Brett, Negotiating Globally , 2nd ed. (New York: John Wiley and Sons, 2007).

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