This Instructor's Manual, to accompany

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At one level this is an easy lecture to give. Spend the introductory part describing bargaining structure and defining terms with many potential examples of each alternative. Then discuss the determinants of bargaining structure and the role of informal bargaining structure (i.e., pattern bargaining). The exciting part of the lecture concerns the recent decentralization occurring in bargaining structure. I think this is one of the most important recent changes occurring in collective bargaining. It is occurring because of all the environmental pressures confronting the unionized sector. Through decentralization the parties are trying to respond to these pressures and in this way, increased decentralization is associated with the many other changes occurring in the bargaining process and outcomes addressed in more detail later in the course.

The difficult aspect of bargaining structure (which you may want to avoid in an introductory course such as this) is that there is no simple explanation of why the parties settle on one bargaining structure versus another. The problem is that bargaining structure is both a cause and a consequence of bargaining power. On the one hand, the parties use bargaining structure to exercise and shape their power. On the other hand, the bargaining structure the parties end up with is also, to a large degree, a function of how much power each side exerts based on factors other than bargaining structure. I have never found this issue adequately addressed in the research literature, and when I attempt to get into this level of discussion in class, the discussion sometimes becomes confused. I recommend telling students that bargaining structure and bargaining power are intertwined and leaving a full account of the relationship between the two to a more advanced course.

The Negotiations Process
I. The Subprocesses of bargaining -- Walton and McKersie
A. Distributive bargaining -- win-lose, zero-sum, e.g., wage or fringe benefits.
B. Integrative bargaining -- problem solving, joint gain, e.g., technological change.
C. The difficulties in accomplishing integrative bargaining.
1. Problem identification and resolution.

2. Every integrative gain also requires a decision on the distribution of gain, e.g., longshoring mechanization, typesetting (hot to cold).

3. Tactical conflicts -- confusing signals; see Exhibit 8-1.
a. Distributive tactics -- overstate demands, information is power to be closely held, arm's length communication, low trust.

b. Integrative tactics -- focus on specific problems, share information, multiple voices and problem solving, high trust.

c. The task confronting the negotiator is to engage in both distributive and integrative tactics where appropriate yet not get wrapped up in only one approach.
D. Intra-organizational bargaining
1. Differences between union leaders' and workers' interests, leaders want large organizations and may have more information, workers can be self- interested and more militant

2. Differences across workers -- e.g., old v. young, craft v. production, preference and ideology variation.

3. Similar differences across and within management -- individuals may disagree concerning what is possible and what is feasible, e.g., CEO v. IR Staff, or corporate v. plant management where corporate is more concerned with maintaining corporate uniformity, while local management wants to innovate or pursue local options.
E. Attitudinal structuring -- trust building
1. To convince the other side of intentions in the face of uncertainty, e.g., short- v. long-run implications, the parties are ever worried that change will come back to haunt them; each worries if the other side is well-intentioned.

2. Trust can facilitate integrative bargaining.

II. The negotiations framework also can be used to understand all sorts of bargaining.

A. International relations -- countries have distributive as well as integrative issues; the penalty for disagreement is a costly war, analogous to the role of strikes.
B. Trust building arises wherever bargaining occurs on a repeated basis; frequent on the job in the business world.
III. New Interest-based Bargaining
A. The integrative vs. distributive framework can be used understand what “win-win” bargaining is all about.
B. There are key differences in the method and style of bargaining in interest-based vs. traditional bargaining.
C. The difficulties of sustaining win-win bargaining.



This lecture can be supplemented with discussion of a recent negotiations that is described in the press or through reference to the students experiences in mock bargaining if that exercise has been conducted before this lecture. They key is to give examples, or have the students come up with example, of instances of the various four sub-processes of bargaining.

If mock bargaining is scheduled sometime after this lecture (this is the way I prefer) then one of the purposes of this lecture is to help students understand what goes on in bargaining and help them understand how to carry out bargaining.


Private Sector Mock Bargaining Exercise

At this point in the course I commonly use the D.G. Barnhouse mock bargaining exercise contained in Appendix A in the text. In a later section of this manual are provided detailed instructions for that exercise and my suggestions for its use. I usually devote two class sessions to mock bargaining and one class session after actual bargaining to class discussion (debriefing) of the exercise.

The Causes of Strikes
I. Strike-related facts to be explained
A. Strikes occur in only a small percentage of negotiations.
B. Strikes occur in relatively greater frequency during periods when labor has greater bargaining power (i.e., the strike rate moves procyclical­ly).
C. Strikes sometimes occur over apparently trivial issues.
II. Miscalculation as a cause of strikes -- the hicks model (see Exhibit 8-2, cases A and B in figure).
A. Case A -- how strike costs create a maximum contract zone when there are common expectations of the strike outcome.
B. Case B -- how extremely divergent expectations can lead to the absence of a contract zone.
C. The sources of miscalculation.
1. When are divergent expectations of the strike outcome likely? Uncertainty due to new relationship, changing economic conditions, etc.; these events make it difficult for the parties to predict what will happen if a strike occurs.

2. What factors might make it difficult for the parties to find settlements in a contract zone that does exist? Poor negotiator skills, the confusion caused by bluffs, etc.

D. Can miscalculation explain the three strike facts? It can explain facts A and C but not B, i.e., -- the Hicks model cannot explain why strike rates move procyclically; the model predicts that wage settlements will be higher during boom periods, but both sides should understand this and strike frequency should not be higher.
E. The role for mediation -- it can reduce miscalculation and help the parties find settlements in a contract zone.
III. "Behavioral" theories of strike causes
A. Strikes may be an expression of anger and isolation --Kerr-Siegal cross industry data -- mining, longshoring, and lumbering have high strike rates across time and countries.
B. Strikes as a learning device -- they are used to teach either workers or top executives what is possible.

C. Strikes can be an organizing device used to create the union. In this case, strikes may be used to raise (and not lower) worker expectations.
D. Note: each of the above can be interpreted as an aspect of miscalculation.
IV. Strikes are a reflection of bargaining power
A. Militance leads to labor power and strikes; this can explain fact B.
B. Management likes the status quo; it takes labor's initiative to change employment conditions.
C. Is management regularly miscalculating when labor's bargaining power improves?


I think a critical part of the introductory course is helping students gain an understanding of why strikes occur. Strikes are a key aspect of collective bargaining. Furthermore, explaining why strikes occur is a topic where analytic reasoning leads one to question surface explanations. This is an area where one's gut reactions are not often correct. I spend a good deal of effort using Exhibit 8-2. For some students this is a difficult figure to swallow because it requires taking into account the role that expectations play during the negotiations process.
I also like this topic because it is one that illustrates the legitimacy of three very different perspectives. I contrast the three strike theories described above and then discuss the extent to which each, in one way or another, includes aspects of miscalculation to explain strike occurrence.
Students may find it useful to refer back to the discussion in Chapter 3 concerning the determinants of strike leverage. The discussion in Chapter 3 describes the factors that influence the strike wage outcome. The material in this lecture (and Chapter 8) considers why strikes occur.
Impasse Resolution Procedures
I. Mediation
A. Nonbinding, avoidance of miscommunication and miscalculation.
B. Does it favor either side? Either side can ignore or fire the mediator.
C. Fact-finding in public sector can follow mediation, and be followed by further mediation.
II. Interest arbitration
A. Differences with grievance (rights) arbitration
B. Private sector usage
1. Examples -- ENA (steel), baseball (final offer), Australia.

2. Why so rare?

a. Negotiators like their role and power.

b. Either side may feel or worry that interest arbitrators would yield outcomes that are worse than what they could negotiate.

C. Public sector experience
1. Define conventional v. final offer.

2. Concern over high use rates, chilling, narcotic effect -- review empirical evidence (modest usage, not much chilling, not consistent narcotic effect, although studies differ).

3. Is it biased? Research reveals that wage (and other contract outcomes) are moderately higher where arbitration is available and that arbitration tends to yield greater standardization across jurisdictions.
III. Public policy effects on strike frequency and outcomes
A. Social costs of strikes motivates public purpose
B. Higher strike costs to parties (strike tax) -- reduce likelihood of no contract zone.
C. Effects of penalties or subsidies (e.g., welfare or UI) on expected strike outcome and strike costs -- might shift the expected strike outcome and/or the size and shape of the contract zone.
The above outline is relatively short because I spend part of this class reviewing the previous lecture on the causes of strikes. I review the Hicks model and respond to the questions of students who are having a hard time grasping this model and the other explanations of strike occurrence.
The instructor has to decide how far in this lecture to discuss the use of interest arbitration in the public sector. Discussion of the particular details and laws regulating public sector bargaining is contained in Chapter 13. I do explain that interest arbitration is used commonly in the public sector and get into some of the controversies regarding its use (see IIC above) even though full consideration of public sector bargaining comes later in the course.

The Grievance Procedure
I. Principles of American grievance procedures
A. Management moves and the union grieves -- Bethlehem Steel case (1948); compare to U.K., where adherence to custom and practice and wildcats is the norm.
B. Court deferral to arbitration
1. Court is reluctant to overrule arbitration except if issue is nonarbitrable or arbitrator is blatantly capricious and arbitrary (Steelworkers' Trilogy, 1960).

2. Arbitration ability should be broadly defined. Arbitration is implicitly being traded for a no-strike pledge.

C. The union owns the grievance, not the individual; compare to government-funded labor courts common in Western Europe (and U.K.).
II. Grievance administration
A. Union uses the grievance procedure strategically
1. Case load builds prior to negotiation.

2. Competing interest groups within union -- which

cases to press?

3. Duty of fair representation constrains union and

management choice.

4. Fractional bargaining by work groups on the shop floor -- there is also a lot of action outside the

grievance procedure.
B. What happens after the grievance is resolved?
1. What happens to grievant and his or her

supervisor -- evidence of negative consequences.

2. Does management learn from the process?
III. Nonunion complaint procedures
A. Types

1. Open door policies.

2. Appeal to a higher level manager.

3. Management appeals committees.

4. Peer review panels.

5. Nonunion arbitration.

6. Ombudsman -- internal mediation and problem solving.

B. What is management's purpose?

1. Employee voice and workforce performance.

2. Union avoidance – especially associated with peer review panels for union substitution.

3. Litigation avoidance – especially for nonunion arbitration.

C. Use is infrequent -- evidence of retribution (see Lewin and Peterson), varies by type of procedure – more frequent with non-management decision-makers (peer review and nonunion arbitration).
IV. Employment-at-will doctrine
A. Erosion in certain states where there is either an implied contract or a public purpose (e.g., whistle-blowing).
B. Comparison with other countries -- use of labor courts elsewhere where the individual owns the grievance (e.g., Germany, France).
V. The Gilmer Decision and the Spread of Employment Rights Arbitration.
A. Court decision to allow employment rights to be privately arbitrated without subsequent recourse to the court system.

  1. Arguments for and against mandatory arbitration.

C. Development of a Due Process protocol to attempt to enhance fairness in employment arbitration procedure.

The grievance procedure is an area of the course where it is valuable and important for the student to gain an understanding of how the procedure actually works. In the lecture outlined above, I focus on conveying some of the boilerplate material concerning the evolution of the American grievance system. I also like to contrast the American system with practices in other countries. Our grievance procedure is quite unusual -- it gives management the initiative, provides for relatively little court review, and gives the union, rather than the individual, control.
I also note how unusual is our country's absence of any legal due process rights in the nonunion sector. The latter is a good topic for class discussion -- should we have a law that provides all employees with due process and complaint rights?
I now also discuss the Gilmore decision and the spreading use of arbitration to settle employment rights disputes. Note, the wide diversity in procedures found across firms and the existence of multiple procedures in many firms.
Movies or student write-up and/or presentation of mock grievance arbitration opinions can be used to convey to students a better sense of how the grievance procedure actually works (see my recommendations for Lecture 14).

Exercises Concerning Grievance Arbitration

To help students get a better understanding of how the American grievance and arbitration system works I recommend the following exercises.

I show and discuss the video “Arbitration III: The Proof of the Matter: A Dramatic Story of Drugs and Drug Testing in the Workplace.” I like this video because it involves allegations of drug use and does so in a very contemporary and informative manner. The video presents the events surrounding alleged drug use, a discharge, and the subsequent grievance hearing. The movie ends with the challenge, you be the arbitrator. The tape comes with a long thoughtful “mock” arbitration award written by the experienced arbitrator, Laurence Corbett. A second tape shows the deliberations of the mock arbitration panel considering the grievance. “Proof of the Matter” runs for 61 minutes.
After conclusion of the video I conduct a 30-minute class discussion in which I respond to any student questions about relevant law or the workings of the grievance procedure. I then ask the students to present their views regarding what is an appropriate arbitration opinion in this case. At the end of the class discussion I take a class vote on the main three alternative arbitration opinions -- uphold the discharge, reinstate without back pay, and reinstate with full back pay and seniority.
I then read the students some of the final passages of the attached mock arbitrator opinion.
Another potential exercise is to assign to each student one or more of the grievance arbitration cases in Appendix C of the text. Students can be asked to prepare written answers to the questions at the end of each case. Then in class some students can present their arbitrator opinions. Other students in the class could be assigned the role of challenger to those opinions and be given a certain time allotment (possibly 10 minutes) to prepare and then later present an argument in favor of an alternative arbitration award. The feasibility of this exercise and the time allotted to the presentations will depend on the size of the class.
Union Impacts on Employment Conditions
I. Why we should be interested in assessing union impacts?
A. Public interest -- what do unions do to efficiency, equity, rights.
B. Understanding impacts helps us understand industrial relations processes -- how collective bargaining works.
C. There are many "employment conditions" we will focus on compensation, turnover, and productivity.
II. Compensation impacts
A. We would like to know union absolute impacts -- how unionized settings compare to what would exist in the absence of unions (union-no union differentials). Most data inform us about relative effects -- union-nonunion differentials.
B. Wage levels
1. Relative differential is about 15% -- it varies somewhat over time, across demographic groups (e.g., race effect is more positive), and across industries (depends on bargaining power).

2. Measuring relative wage effects -- compare union to nonunion workers (use regression analysis and try to control for the influence of other influences on earnings such as education, experience, etc.).

3. Does the relative effect approximate the absolute union effect?
a. Crowding effect in nonunion sector -- in this case the relative wage effect is larger than the absolute wage effect.

b. Threat effect in non-union sector -- in this case the nonunion wage may rise above the no-union wage i.e., the relative wage effect is smaller than the absolute wage effect.

4. How might the absolute wage effect of unions be measured e.g., country comparisons, longitudinal data within a country
C. Distribution of compensation package
1. Fact -- unionized workers take relatively more of their compensation in fringe benefits even after controlling for income level.
2. Why?

a. The union organizes demands for fringes.

b. Greater reliance on seniority (tenure) in union sector leads to demands for compensation deferral.

D. Unions and inflation
1. Unions don't directly cause inflation unless they lead to ever widening union- nonunion differentials -- this occurred in the 1970s but not in other times.

2. Unions and contracts may lead to wage rigidity and thereby exacerbate the unemployment-inflation trade-off i.e., the Phillips curve may be flatter because of unionization.

3. Unions may make it easier to control wages and inflation especially where there are "corporatist arrangements," e.g., Germany, Sweden.
III. Turnover
A. Layoffs -- The evidence is that the layoff rate is higher in the union sector; why?
1. Wage rigidity may lead to employment volatility.

2. Maybe unions don't cause layoffs but rather respond to it; i.e., union representation is greater as a result of layoffs.

3. Unionized industries just happen to be relatively sensitive to the business cycle (heavy unionization in durable manufacturing), or in decline.
B. Quits -- the quit rate is lower in unionized jobs even after controlling for the wage rate; why?
1. Freeman and Medoff: the voice effects of unionism, exit v. loyalty.

2. Maybe union jobs are better in many ways when you luck into one, you choose to stay.

IV. Productivity and efficiency
A. Extremely important issue for public policy purposes especially if substantial negative (or positive) effects exist.
B. Conventional wisdom was that unions limit output by reducing work effort, and limiting managerial discretion. Yet, recent evidence suggests this may not be true.

C. Recent evidence concerning productivity effects

1. Freeman and Medoff (and many studies carried out by their students) find a positive union effect.

2. Case study analysis still finds less flexible and more costly work rules and higher manning levels (lower productivity) in unionized settings.

3. Management continues to act as if unions exert negative effects on productivity -- there has been and continues to be substantial disinvestment in unionized plants.
D. Potential productivity (output/labor hours) effects

1. As the wage rates rise management should substitute K for L, and as K/L rises, so should productivity. But in this case efficiency falls for the economy as a whole if in the absence of unions efficient practices would prevail. Note the difference between firm productivity and society-wide efficiency.

2. Potential "shock effect": as management is forced to pay higher wages and improve employment conditions, to survive management may look for ways to lower costs and the firm may then be shocked into higher efficiency (and productivity). Slichter observed this in the 1920s and 1930s.

3. Unions may impose rigidities, inefficiencies, and a work slowdown (this is the conventional wisdom story).

4. Unions may raise productivity (and efficiency) by improving worker "voice." By giving workers more of a say in decision making workers may become more loyal and motivated, and may quit less frequently.

5. Unions and CB may "manage" the work force and reduce industrial conflict. What would exist in the absence of unions?

6. Union plants tend to be old and there may be a strong negative age effect on productivity. The evidence from a few case studies is that new union plants tend to have more flexible work rules than old union plants, but only recently have union plants come close to the performance of new non-union plants (cite auto evidence, NUMMI, etc.).

The above covers a lot of ground. I take two class periods to present this material. How far you choose to go into the empirical evidence and the debates surrounding the evidence will depend, in part, on how much economics and statistics your students have in their background. The economic impact issues, particularly union effects on productivity, can excite a number of students.
These also are issues you can address through class discussion. For example, ask the class to state their views as to whether the effects on earnings or productivity are good or bad for society. What evidence can the students point to that supports their claims?

Concession Bargaining
I. Introduction.
A. In the early and mid-1980s a number of major unions negotiated contracts that included substantial rollbacks, often including pay cuts or pay freezes.
B. The concession agreements signaled the weakening of union bargaining power as a consequence of economic pressure.
C. Concession agreements were important in their own right -- they affected many workers.
D. A strange irony of this period is that just when unions were weak, in some cases they were able to develop broad involvement in business decisions. Does this involvement signal the emergence of a "new industrial relations system"?
II. Early and mid-1980s -- concession bargaining examples and causes.
A. In 1982, 1.5 million workers (44% of those covered by new CB agreements) received first-year wage cuts or freezes (37% in 1983).
B. From 1983 on, nonunion workers received larger pay increases than union workers, thereby reversing the trend of the previous 15 years.
C. Causes of concessions -- employment declines and the threat of further declines. By 1983 employment had declined the following amounts as compared to 1979 levels:
-- 47% in steel, 48% in farm equipment, 50% in copper mining, 40% in auto assembly and parts production.
D. The sources of employment decline were the recession (a cycle change) and various structural factors including foreign competition, domestic nonunion competition, and deregulation (in industries such as airlines, trucking, communication).
E. By the late 1980s (and on into the early 1990s) concession bargaining faded in a number of unionized firms as the labor market tightened (see improved union wage increases), although concessions continued in some cases.
III. In addition to lower pay, concession bargaining involved (or was produced by) changes in the Bargaining Process.
A. A decentralization in bargaining structures -- breakdown of patterns and a shift from company to plant levels.

B. New forms of communication -- management talks directly to the work force to make their case, bypassing union officers.
C. Shifts on the management side -- financial and operating managers often took charge of IR.
IV. Bargaining outcomes changed as a result of concession bargaining (in addition to lower pay and benefits).
A. More contingent compensation -- profit sharing, group bonuses, stock ownership. Why?
1. Management hoped employee motivation and cost awareness would improve as pay became more contingent.

2. Management also hoped that pay increases would be lower under the new pay schemes.

3. The volatility and uncertainty in the economic environment led management to try to get labor to take on more of the risk; contingent pay is in many ways risk sharing by labor.
B. Employment security programs developed in some agreements -- examples: auto, Xerox, American Airlines. Why?
1. Employment security became more attractive as team systems spread and management increased its investments in the work force -- turnover was more disruptive.

2. The work force and unions were demanding employment security in exchange for the above concessions -- workers needed to be convinced that were really getting something in return for the concessions.

3. Employment security helped convince workers that work rule changes and greater participation was not leading to their displacement.
C. Work Rule Changes -- e.g., team forms of work organization, reductions in the role of seniority, manning reduced (speed-up), fewer job classifications.
D. Worker and union participation programs -- continued in next lecture.
V. Diversity from the early 1990's on
A. Persistent Concession bargaining at some firms (e.g., garment, tire).
B. Union Pressure to secure employment security through investment promises or layoff/outsourcing limitations at other firms (e.g., GM, UPS).

I recommend supplementing this discussion of the general aspects of concession bargaining by discussing some particular examples. Earlier in the course I show the movie Final Offer. Typically there also is a major strike under way that is being described in the news that involves concessions or at least the demand by management for concessions.
To counter-act the optimistic tone at the end of Final Offer and to give students a feel for the devastation associated with the hiring of permanent replacements, I show the film, “American Dream.” Although the event, the Local P-9 - Hormel Strike, took place a while ago, the many powerful messages contained in this film remain poignant and timely.
For discussion purposes I ask the students how they would respond if they were workers and management suddenly demanded major contractual concessions. What would you like to know in such a situation that would help you decide if it would be worthwhile to agree to concessions? What could management do or say that might help convince you that concessions are necessary and worthwhile? Which workers (old v. young, militant v. cooperative) tend to support concessions and why?

Participation Processes
I. Eras in the evolution of worker and union participation programs.
A. Quality circle approach
1. Housekeeping issues and worker-supervisor relations.

2. Starts in the 1970s with concern for worker alienation and the blue-collar blues (Lordstown and then 1973 GM-UAW QWL contractual language).

3. In the 1980s great expansion -- faddish and in some cases desperate effort to imitate the Japanese.

4. Often high initial returns and then plateauing --hard to sustain worker commitment; bumps up against constraints in the contract and managerial authority.

B. Process expands if it survives by addressing work organization (and other basic business decisions) and contractual issues.
1. Examples such as Xerox, joint process in autos, periodic airlines experiments, elaborate change in steel, etc.

2. How to link participation and work restructuring.

3. Worker and union concern that the contract is being abandoned.

4. Need for employment security, managerial commitments, and strategic involvement.

C. Strategic changes that link restructuring and participation involvement.
1. Many potential avenues for strategic involvement ranging from formal positions on corporate boards, to joint labor-management committees, to informal exchange of information and input.

2. Saturn and other plant-level experiments with extensive joint involvement through in-sourcing committees, investment issues, training, etc.

3. How can the union preserve its integrity?

4. What is the union's role in a world of extensive and often informal participation?

5. Extensive (maybe even greater) changes in management required to make the new system work.

6. Need to "link IR and business strategy changes."

7. Note, the many connections between changes in the new system -- e.g., if pay is more contingent workers want more involvement and information; if there are terms, there is more participation and employment security makes more sense.
II. The role of business and union strategies in shaping restructuring.

A. Firms vary substantially in their bargaining tactics (this leads to varying bargaining process changes) and the bargaining outcomes they seek.
B. In simple terms the extreme cases are a low labor cost strategy (e.g., Lorenzo and USX) v. a cooperative- restructuring strategy (e.g., GM, Xerox).
C. Unions also vary in their strategies, and their choices influence management's decisions.
D. Some unions militantly reject restructuring (e.g., UE), while others are pressing for greater involvement (e.g., UAW, USW).
III. Why is restructuring (a mixture of all four bargaining outcome changes) hard to accomplish?
A. Management is reluctant to commit to reinvestment (employment security) given the opportunity to go abroad or nonunion.
B. The union and workers doubt management's commitment --previous and sometimes continuing betrayals. Some oppose management on ideological grounds.
C. The difficulty of making systematic changes -- the four outcome changes lead the parties to a new system.
IV. How has restructuring been affected by the strength of the U.S. economy from the mid 1990's on?
A. Increased diversity - high road vs. low road.

  1. Ups and downs in particular labor-management relationships (e.g., GM, American Airlines, Boeing, etc.)

Having carried out a lot of primary field research on this topic, needless to say, I enjoy this lecture. Here, as elsewhere, it is valuable to describe one or more actual cases of participation in more detail. The auto industry, now in the form of Saturn, is often in the news on these matters.
The strength of the U.S. economy in the mid and late 1990s altered the debates about work restructuring by de-emphasizing the focus on Japan and Germany. Yet, wide variety persisted (and even appears to have increased) in labor-management approaches. Some participatory experiments were overwhelmed by conflict, while most commonly labor and management cycled through periods of conflict and participation.

Public Sector Unionization and Collective Bargaining
I. Introduction -- why public sector CB is important
A. The public sector is a sizable component of our economy (about 35% of GNP).
B. The public sector work force is heavily organized (36% of employees are unionized, a majority of public school teachers, police, and firefighters).
C. The largest and wealthiest American unions are now public sector unions (such as AFSCME, NEA).
D. The growth of CB in the public sector in the mid-1960s was an important exception to post-World War II union decline.
E. Public sector labor is different -- the public sector is not covered by the NLRA; state law applies; the laws vary.
II. Eras in public sector collective bargaining
A. Pre-1960s
1. Sovereignty doctrine applied by many courts.

2. Sporadic unionism (e.g., Boston police strike in 1919 broken by then Governor Calvin Coolidge).

3. Why is unionism so late in coming? In part because civil service was the alternative, courts also restricted unionism.
B. 1960s to mid-1970s
1. Rapid growth in public sector unionism and bargaining.

2. Led by teachers (AFT in NYC).

3. Some links to civil rights movement, for sanitation workers; note Martin Luther King assassinated while in Memphis to support a sanitation workers' strike.
C. Mid-1970s to early 1980s
1. Taxpayers' revolt.

2. Plateauing of public sector union growth.

3. Concession bargaining in NYC, SF, and other cities.
D. Recent developments

1. Public concern over education quality.

2. Relative public sector pay gains (in 1990s).

3. Participation push in public sector – in schools linked to education reform (e.g., Rochester school district agreement).

4. Current privatization push

5. State budget crises

III. Is CB different in the public and private sectors?

A. Multilateral v. bilateral bargaining
1. The diversity of management interests and actors in the public sector (e.g., school bargaining --management includes school board, superintendent, parents, community groups (PTA), state legislature, governor, Congress, state and federal departments of education, mayor, city council, etc.).

2. Opens the door to politics and tactics such as end runs.

B. The elasticity of demand for labor -- Is demand more inelastic in the public sector? Consider Marshall's conditions.
1. More difficult to substitute other factors for labor in public services such as teaching, police, fire.

2. Demand for final good is relatively inelastic --few competitors given government monopoly (although some competitors do exist such as private police and schools).

3. High share of labor in total cost -- serves to disadvantage labor.

4. Note: The above varies depending on which

service -- police and fire (and teaching) may have inelastic demand, but public clerical or social workers may face elastic demand.
C. The potency of the strike
1. There is much variation across public services (police v. clerical).

2. There appears also to be much variation over time in the public's (and government officials') willingness to withstand a strike and across time (late 1960s v. late 1970s).

D. Scope of bargaining -- a history of broader employee involvement in some public services (e.g., teachers, social welfare counselors); the service nature of many public services.
E. Wellington and Winter argued that public sector employees would have too much power.
1. Power seems to vary substantially across employee types and over time.

2. Is it fair to give management sole authority --why should employee rights be different because of the sector in which employees work?

3. What are the alternatives?
IV. Current issues in public sector labor relations
A. Alternatives to the strike

1. The multiple objectives on impasse resolution procedures -- due process, lack of bias, fairness, contain conflict.

2. Public employee bargaining power has influenced the design of legislation and impasse resolution as well as influencing power.
B. Education reform
1. Professionalism v. merit pay.

2. Note parallels to work restructuring v. speed up management strategy choice in the private sector.

C. Conflicts between the source of financing and the bargaining structure.
1. Bargaining tends to be very decentralized, at the school district level.

2. Increased state role in financing -- due to courts' outlawing the current heavy role of local property tax financing.

3. Bargaining and lobbying are chasing after the money; unions are seeking to influence state appropriations, since they matter so much; there is a mismatch between the locus of power (money) and the traditional decentralized bargaining structure.

I usually spend one and one half or two class sessions presenting this material. My second class session is completed with the introduction and instructions for the Queen City mock bargaining exercise (in Appendix B of the text).
One obviously could spend a lot more time on the public sector. At Cornell, students are offered a whole separate course on this topic so I spend relatively little time on this topic. Yet, more time on the public sector may be warranted given the continuing decline in private sector unionism and the relative strength of unionism in the public sector.

Queen City Mock Bargaining Exercise
I use the Queen City mock bargaining exercise included in Appendix B of the text at this point in the course. I find that it is very valuable for students to compare mock bargaining in the public and private sectors and to experience bargaining concerning professional employees (police) versus the blue-collar employees in the Barnhouse exercise. In a later section of this manual I provide recommendations regarding how to run the Queen City exercise.

Comparative Industrial Relations
I. The value of comparative IR analysis
A. We learn more about our own IR system by contrasting it with other systems.
B. We can test theories or propositions with comparative analysis, e.g., causes of strikes (Kerr-Siegel).
C. The other countries are important in their own right.
II. IR in Germany and Japan: We focus on these countries for the following reasons.

A. Each country was economically vibrant: Japan had extremely rapid growth from 1960-1990; (West) Germany was the "economic miracle" of the 1960s.

B. The U.S. IR system is becoming somewhat like the Japanese and W. German systems (see the lecture on participation).
C. The Japanese and German IR systems have some distinctive features very unlike the U.S. IR system.
III. Japanese IR system: key features
A. Lifetime employment principle
1. Not contractual, only a promise firms work hard to support; in extreme times firms do lay off, e.g., steel and shipbuilding.

2. Retirement traditionally at 55, now at age 60.

3. Covers roughly one-third of the work force; suppliers and temporary workers serve as the buffers to this system.
B. Nenko pay system
1. Pay tied to seniority (age); so workers performing similar jobs can receive very different rates of pay.

2. Worker pay also varies as a function of performance appraisals. Note: Blue-collar workers receive regular appraisals, almost unheard of in the unionized sector in the U.S.

3. Other aspects of pay determination -- large companies also offer a bonus; often one-third of total earnings (this is distinct from Nenko). Pay increases in union contracts follow the spring wage offensive.
C. Broad job definitions
1. Relatively few classifications.

2. Job rotation and mobility; high corporate investments in training.
D. Union structure -- enterprise unionism in private sector
1. White-collar staff included.

2. Militants purged in the 1950s.

E. Participation
1. Quality circles at the shop floor level. Note: supervisors are in the union and often are union stewards.

2. Participation through labor-management committees.

3. Few written grievances -- settled through worker-supervisor discussions, or passed to labor-management committee if the issue affects many workers.
IV. Analytic issues
A. Post-World War II elaboration of Japanese system -- the Japanese system did not take full form until then.
1. Difficult to reconcile with cultural explanation of origins, e.g., early 1960s introduction of QC's.

2. Critical event was purging of the militants and the unsuccessful strikes in the early 1950s; note the public sector has different and often more militant unionism.

B. What has happened to lifetime employment and cooperation as a result of the prolonged recent economic downturn?
C. How much of the Japanese economic success of the 1960-1990 period derived from IR practices? Do the IR practices cause growth or are they merely sustained by growth that is caused by other factors such as the educational system or the strong work ethic?
V. German IR system: key features
A. Codetermination
1. Employee representatives elected to "supervisory board" (one less than management); specified in federal law, white-collar staff votes along with blue collar.

2. Works councils: employee representation on committee concerned with personnel matters; parallel forum to union representation, e.g., "social plans" for layoffs (these specify who gets laid off and the compensation to be received by laid off workers).

B. Union structure
1. Multiple unions allowed.

2. Industry-wide bargaining common, e.g. I G Metal (agreements extended to nonunion firms).

C. Government labor courts -- individual "owns" the grievance.

D. Immigrants (guest workers) were used as cyclical buffers (secondary sector of supplier firms used this way in Japan).
VI. Analytic issues
A. Low post World War II strike rate: due to codetermination or fears of inflation and social instability?
B. Does codetermination lead to effective participation? E.g., Volkswagen U.S. investment decision -- union delayed and modified but did not block the investment; see Streeck.
C. Does the recent strength of American economy affect your views regarding the strengths or weaknesses of other industrial relations systems?



I actually give this lecture before the public sector lecture (Lecture 17) although the text presents the public sector chapter before the comparative chapter. I discuss comparative issues first because this discussion follows so nicely after discussion of experiments with participation processes and other recent changes in U.S. collective bargaining (Lecture 16).

I use the attached chart as a handout (or overhead) to compare the U.S., Japanese, and German industrial relations systems. It is not in the text.
One can bring home to students comparative issues by addressing the issues posed by the expansion of Japanese investments in the U.S. I often show a short video tape about the NUMMI auto plant to raise these issues in class. Or, you might just ask students what kind of IR system they would introduce if they were the manager of a new Japanese production facility in the U.S. Would it have traditional U.S., traditional Japanese, or some hybrid of policies? How have recent economic trends affected their answer, specifically, the strength of the U.S. economy and the weaknesses within the Japanese economy?

Key Features of the U.S., German, and Japanese

Industrial Relations Systems









Industrial or craft


Information sharing





Complaint procedure

Labor court







Social plans-guest workers

Lifetime employment





Industry annual agreements

(job evaluation)

Seniority-based (bonuses)


(job evaluation)

Job-evaluation bonuses


Key feature:






Multinational Unionism and the European Union
I. Introduction -- unions and workers are under greater pressure from international competition due to:
A. The expansion of world trade and interdependence
B. The extension of multinational corporations
C. The integration of markets (e.g., Europe 1992) and relaxation of barriers to trade.
II. Unions are generally disadvantaged by the growth of multinationals and cross-border capital mobility.
A. Labor cannot move as easily across borders.
B. Multinational unionism (or even union coordination) historically has been weak.
C. Capital mobility, in effect, creates a new competitive menace for labor.
1. The product market widens but unions cannot organize the market.

2. International expansion thus is analogous (although even more troubling) than the competitive menaces labor faces as markets widen within the U.S.

D. Unions in high-wage countries are particularly threatened by the movement of capital to low-wage countries.
1. Note the extreme wage differentials between the industrialized and less developed world.

2. Even across the industrialized world there are wide wage and other cost differentials (e.g., wide differentials within the EEC between Germany and Spain or Greece).

III. Why are cross-national unions (or coordination by unions) traditionally so weak?
A. The lack of solidarity.
B. The lack of common interests.
1. National interests dominate, creating worker-worker competition.

2. Some unions benefit from trade (those in the export sector); others are strongly harmed.

3. Union members' interests as consumers also differ from their "producer" interests.
C. Poor communication and lack of industrial traditions
1. There are immense language and cultural barriers.

2. Unions also differ greatly in their structure --even if they wanted to coordinate their policies it would be very difficult.
IV. Europe market integration
A. Promoted by corporations and governments, yet feared by labor.

B. Labor worries that labor standards will be driven down to the lowest common denominator (Greek and Spanish v. German wage levels).

C. EU harmonization of the "social dimension" -- possibility of "Germanization."
1. The Social Charter issued in May 1989 -- principles without legal force.

2. Past Thatcher veto, now Tony Blair supports the EU.

3. What will emerge? A diversity of interests exists across and within countries.

By the time you are using this manual there will have been further developments regarding European integration and monetary union. There should be much in the news to talk about. In the U.S. the expansion of trade with Canada and Mexico spurred by new trade pacts can provide the gist for discussion. A potential discussion question is to ask students why unions are so opposed to "free trade." Are union concerns justified? What has happened in the aftermath of the trade pacts? Who has benefited? What could unions do to promote cross-national union cooperation? Are there any recent signs of activity in this area? You may want to focus on the controversy surrounding “sweatshop” factories in the garment industry. Should Nike or the products of other companies be avoided due to their international labor practices? Is increased regulation appropriate and if so, of what form?

The Future of U.S. Industrial Relations and Labor Policy
I. We are in a period of change and experimentation -- that's why it is extremely interesting to speculate about the future.
A. The economic environment is volatile
1. We face extensive and expanding international competition.

2. Consumer markets are also more unstable as demand fragments.

B. Shifting political tides
1. Continuation of conservative tide or a return to more government intervention?

2. Deregulation has not worked out as many predicted -- it has created many problems for consumers as well as for employees.

C. Strategic choices confront unions, management, employees, and government.
II. Unions' choices and dilemmas
A. Organizing difficulties -- continuing decline in membership in the private sector.
1. New strategies (AFL-CIO Organizing Institute, Justice for Janitors, corporate pressure campaigns etc.).

2. Will the new organizing work? Can it be effectively linked to new representation approaches?

3. Does the AFL-CIO or Change-to-Win federations have a more successful strategy and will one or the other dominate in the future?
B. Debates regarding the "participatory model"
1. Unions fear cooptation; demands for equality of sacrifice or investment assurances.

2. Doubts about union role in new system.

C. What is an appropriate and feasible national macroeconomic policy?

1. How could the government spur workplace restructuring?

2. Need for better training and income stabilization.
D. Labor's political agenda?
1. Is labor law reform possible? Would it help much?
2. Should the NLRA be abandoned? (Return to the "law of the jungle)."

3. How to relate to new rights issues (child care, maternity leave, due process, health and safety, civil rights); can these be made part of labor's new representational strategy? Would this sizably improve organizing success?

III. Management's choices

A. In the union sector
1. Participatory workplace restructuring or union avoidance.

2. Will restructuring yield economic payouts? How far to allow

strategic involvement.
B. In the nonunion sector

1. Participation or managerial authority.

2. What will management do as unions decline as a threat?
C. What is appropriate government policy?
1. Laissez-faire is ideologically attractive, yet many problems

seem to require public-private partnerships.

2. We seem to be on a course of increased piecemeal federal

regulation of employment issues -- is there a way to address

workplace issues in a more systematic and cost-effective

way? Management may have to rethink its view of regulation.

IV. Governmental policy options
A. Laissez-faire v. intervention
1. The recent lessons from airlines and banking are that the

deregulation is neither so simple nor so beneficial.

2. How to provide appropriate degree of regulation and


B. How can the government encourage workplace restructuring -- what are the government's levers of influence?
C. Given the failure of NLRA policy (encouraging CB), what is our labor policy?
D. How to facilitate public-private partnerships in training, human resource adjustment, etc.?

We intentionally wrote a provocative final chapter to the text. There is so much at stake and so many interesting issues that we thought it made sense to state our preferences regarding the need for further restructuring in industrial relations along the lines of the participatory path. We also believe there is much more required of the government to meet our nation's current challenges than merely hoping that an "unfettered" market will find solutions to these problems. At the same time there is much room for debate regarding the need and appropriate form of future policy and choices.
I hope you find that student's discussion of these issues at the end of the course has benefited from the text and this manual.

Company I


TO: Walt Dickens -- Personnel
FROM: D. G. Barnhouse
RE: UMP Negotiations and New Technology Issues

As you know, we have not yet decided where to place the new automated manufacturing equipment we are about to invest in, and we are waiting for the negotiations with the UMP in Grandville. As far as I can see, given our uncertainty, you can take two kinds of approaches in the negotiations with respect to this issue:

1. Decide to put the new technology in Grandville on the condition that the contract achieves a major overhaul in terms of labor costs, including productivity increases and work rule relief. I would be very careful about taking this line unless I saw a clear change in attitude on the union's part. You know, of course, that my heart really is in saving the Grandville plant. But on the other hand, I think it would be ridiculous to take the risk of negotiating this line unless we are pretty sure it will make good business sense in the medium-term and long-term.
2. Put the new equipment in Newton, Indiana (significantly, a right-to-work state), and move production from Grandville to Newton over about 3 to 5 years. If labor costs increase really dramatically, moving over to Newton should be done more quickly, of course, since Newton labor costs are not likely to increase as much. This line leads to a negotiating posture that would be relatively conservative; no innovations, just a standard contract that maintains the status quo would be about right.
Well, those are my ideas. I'll leave the details to you, and look forward to hearing your advice about which position to take.
Think about the possibility of my writing the employees a letter to let them know what our constraints are. Would it help once we got to the negotiations?

Company II


TO: Donald Barnhouse
FROM: Walt Dickens -- Personnel
RE: UMP Negotiations

People on the floor seem to be under the mistaken impression that we are trying to build inventory against the possibility of a strike. They're not happy about the possibility of a strike. They're not happy about the possibility, my foremen tell me. The ambience is not good. We haven't had a real decrease in productivity, but quality control is pretty shoddy. I get the feeling that the mood is bad enough that we can anticipate losing in these negotiations, no matter what we do. On the one hand, if we walk way with a favorable contract the union will be up in arms and we'll go through what we did last year, with secret meetings, rumors, and so on. On the other hand, if we give in too much, to keep people happy, we may not be able to make it for long.

Another potential problem is that if the UMP doesn't deliver in these negotiations, I'm told by William Robbins (day shift) that the Machinists are thinking of moving in on our older employees. That would mean another heavy jurisdictional fight, and we have no guarantee that having the IAM in would be any easier than things are with the UAW alone, even if the two are competing here. As you know, the IAM is pretty aggressive too.
We are going to wait to find out the posture of the union bargaining committee before we make a final decision about the two new technology options you suggested. I'll get back to you with everything new after I meet with our other negotiators next week.


Company III

TO: Walt Dickens, Personnel Director

FROM: Peter Moore, Director, MIS Service
RE: New Data on Industry Labor Cost Comparisons

We finally got some useful numbers out of that industry survey we are participating in. The attached tables provide 1987 to 1990 trends in average union and nonunion wages, fringe benefit costs, and data on costs of time not worked for a sample of 85 plants (50 nonunion and 35 union) in our industry.

(The data on our Grandville and Newton plants are part of the survey.)
I thought you might find these data useful for your upcoming negotiations.
Should I send a copy to the union?

Company III


Table 1
Industry Wage Rates by Union Status

(in dollars per hour)

% Increase

2004 2005 2006 2007 2004-07

1. Low Rate* 7.93 8.30 8.79 9.05 14%

-Nonunion 6.03 6.61 6.94 7.14 18%

-Union 9.31 9.94 10.65 10.08 18%

Ratio: Union/Nonunion 1.54 1.50 1.53 1.54
2. High Rate** 12.10 13.31 14.21 14.64 21%

-Nonunion 11.76 13.41 14.35 14.78 26%

-Union 12.34 13.24 14.08 14.50 18%

Ratio: Union/Nonunion 1.05 0.99 0.98 0.98

3. Average Rate*** 9.58 10.51 11.25 11.59 21%

-Nonunion 8.41 9.50 10.15 10.45 24%

-Union 10.43 11.51 12.38 12.75 18%

Ratio: Union/Nonunion 1.24 1.21 1.22 1.22

4. Benefits (Total) 3.75 3.46 5.15 5.30 41%

-Nonunion 2.88 2.73 4.06 4.19 46%

-Union 4.4 4.17 6.25 6.44 46%

Ratio: Union/Nonunion 1.53 1.53 1.54 1.54

*Average Hourly Wage Rate for workers hired into the entry job classifications

**Average Hourly Wage Rate for workers in the highest wage classifications

***Average Hourly Wage Rate for all production workers

Number of Observations = 85 (50 nonunion; 35 union)

Source: Industry Surveys, Inc.

Company III


Table 2
Benefits Costs by Union Status

(in dollars per hour)

% Increase

2004 2005 2006 2007 2004-07
1. Benefits (Health) 0.60 0.71 0.92 0.96 60%

-Nonunion 0.39 0.50 0.60 0.62 59%

-Union 0.75 0.94 1.26 1.32 76%

Ratio: Union/Nonunion 1.97 1.89 2.08 2.10

2. Benefits (Pension) 0.49 0.51 0.60 0.63 28%

-Nonunion 0.33 0.35 0.37 0.38 15%

-Union 0.60 0.67 0.83 0.87 45%

Ratio: Union/Nonunion 1.87 0.94 2.21 2.30

3. Total Benefits 1.33 1.52 1.87 1.96 47%

-Nonunion 0.92 1.12 1.28 1.33 45%

-Union 1.63 1.92 2.46 2.58 58%

Ratio: Union/Nonunion 1.79 1.72 1.91 1.90

4. Benefits (Legally

Required 0.71 0.83 0.94 0.98 38%

-Nonunion 0.65 0.76 0.87 0.90 38%

-Union 0.75 0.92 1.01 1.06 41%

Ratio: Union/Nonunion 1.17 1.21 1.15 1.20
5. Pay for Time

Not Worked 0.97 1.11 1.31 1.38 42%

-Nonunion 0.75 0.88 1.09 1.13 51%

-Union 1.13 1.35 1.54 1.61 43%

Ratio: Union/Nonunion 1.53 1.54 1.40 1.40

Number of Observations = 85 (50 nonunion; 35 union)

Source: Industry Surveys, Inc.

Company III

Table 3
Hours Not Worked by Union Status

% Increase

2004 2005 2006 2007 2004-07
1. Average Hours of

Absenteeism 91.6 84.6 74.0 64.7 -29.0%

-Nonunion 82.9 77.3 70.3 60.1 -28.0%

-Union 101.4 95.4 79.6 69.3 -32.0%

Ratio: Union/Nonunion 1.22 1.23 1.13 1.20
2. Average Hours of

Holidays 97.0 100.1 102.1 103.8 7.0%

-Nonunion 86.5 85.3 86.7 87.2 0.8%

-Union 104.9 114.7 117.7 120.4 15.0%

Ratio: Union/Nonunion 1.21 1.34 1.35 1.40
3. Average Hours of

Vacation 107.2 115.0 126.1 132.1 23.0%

-Nonunion 85.6 91.0 104.6 111.1 30.0%

-Union 122.6 137.9 147.2 153.1 25.0%

Ratio: Union/Nonunion 1.44 1.52 1.41 1.40
4. Daily Rest and Lunch

Periods 27.4 27.1 27.1 27.9 -2%

-Nonunion 25.8 25.4 24.7 25.0 -3%

-Union 28.4 28.6 29.2 30.7 -8%

Ratio: Union/Nonunion 1.10 1.13 1.18 1.20

Number of Observations = 85 (50 nonunion; 35 union)

Source: Industry Surveys, Inc.

Company IV

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