Monday, November 7, 2016

Industrial Relations Sadly Chuckles on the Eve of the Election

It’s hard to find many people happy with the choices in tomorrow’s U.S. presidential election. Setting aside the troubling personal qualities that have been so apparent, it’s difficult not to be leery (at best) of Trump’s populism-at-its-worst and Clinton’s elitist-insider-insularity. If only both sides had paid more attention to industrial relations values and institutions over the past several decades rather than actively destroying them (Reagan, Thatcher, Walker, etc.) or just giving them lip service (Clinton, Obama, etc.), then maybe we wouldn’t be in this mess.

Industrial relations values embrace the sanctity of human dignity for all workers and their communities, and respect the needs of stakeholders with distinct interests and unequal power. This means that markets—whether labor, financial, or otherwise—don’t work for everyone, and the sanctity of free markets should be rejected. Industrial relations institutions therefore seek to bring a greater balance to the marketplace to help them work better for all by balancing efficiency, equity, and voice, often in collective rather than atomistic ways. The classic example is collective bargaining which (ideally) brings solidarity to the workforce and empowers them with a voice, but requires bargaining, often at a local level, in which a business’s needs can be addressed and balanced with workers’ interests.  

But for whatever set of complicated reasons, these industrial relations values and institutions have been weakened over the past several decades, and the academic field of industrial relations has shrunken as well. Instead, individualism, personal responsibility, and free market thinking dominate. Workers were assured that the benefits of free trade, deregulation, and increased financialization would trickle down and lift all boats, and that everyone would have the opportunity to work with purpose and meaning if they adopted the right mindset.

Instead, many have been left behind as illustrated by the sharp increase in inequality since the 1980s, and we live in polarized and polarizing times. Economic insecurity seems to frequently bring out the worst in people. And thus we have a distasteful form of populism that seeks to blame other workers and shut others out rather than building solidarity, respect, and inclusion. And we have anti-elitism which becomes anti-intellectualism and contempt towards science, education, and the arts as well as towards good government. Again, rather than bringing society together, fault lines emerge.

At a fundamental level, this disaffection is what industrial relations seeks to avoid. The construction and maintenance of institutions that provide checks and balances would have provided greater equity so people don’t feel left out, and greater voice so that people feel more on equal footing with the elites. But this would have required an embrace of industrial values around solidarity, inclusion, voice, pluralism, and compromise rather than individualism, self-interest, and free markets driven by insider elites.

Perhaps the consequences of the marginalization of industrial relations are now coming home to roost. On the Republican side of the aisle, the threat to the Republican establishment presented by the popularity of Trump has arisen out of disaffection with the Republican Party’s inability or unwillingness to replace the earlier industrial relations system with something that provides equity and voice instead of just individualism and free markets. On the Democratic side of the aisle, the skepticism towards another Washington insider is similarly rooted in policy making that has been top down rather than inclusive, and seemingly benefiting financial interests more than worker and community interests. Indeed, were the seeds of each's side demise planted, at least partly, by their own marginalization of industrial relations? 

Those who embrace the industrial relations ethos are probably thinking “I told you so.” But it’s a sad chuckle indeed.

Saturday, October 1, 2016

Thank You Wells Fargo...For Reminding Us of the Nature of the Employment Relationship

The biggest business story of the past month has been the Wells Fargo banking scandal. Driven by pressures to sell banking customers additional products, thousands of employees created perhaps two millions new accounts without customer approval. Over 5,000 workers were fired for creating fraudulent accounts, and some who were fired for failing to meet sales goals are suing Wells Fargo for wrongful termination. One lawsuit alleges that “The managers and bankers routinely harassed and pressured [the plaintiff] and she was denied promotions and bonuses because she would not engage in the unethical and fraudulent banking practices for unethical quotas.” 

This unfortunate mess raises many problematic issues, such as ineffective regulators, unrealistic pressures for unending corporate financial and stock returns, predatory corporate culture, leadership failings, and the danger of incentives (from stock incentives at the top, to managerial bonuses in the middle, down to the incentive to simply keep one’s job as a teller at the bottom of the banking organizational chart). And we shouldn't overlook the personal distress experienced by individual employees ("Wells Fargo's insatiable greed made me a monster," StarTribune, Sept 30, 2016). But I want to thank Wells Fargo for reminding us of the nature of the employment relationship.  

The debate over the nature of the employment relationship is as old as modern capitalism itself. Adam Smith’s model of self-interested employees and employers trading as equals in markets guided by the invisible hand continues today as the intellectual foundation of neoliberalism. I have called this the “egoist” employment relationship because of its emphasis on individual self-interest and personal responsibility. In order for this to work effectively for employers and employees, labor markets must be ideally competitive, not destructively competitive. This requires employees to have reasonable alternatives that are accessible without excessive switching costs, both economic (e.g., moving costs) and psychological (e.g., stress over the uncertainties of the nature of a new job, or a bias towards over-valuing what you already possess). In this way, if someone doesn’t like their pay, working conditions, or other elements of their job, they can legitimately quit and get another decent job commensurate with their skills and abilities. Minimal institutional supports like unions or protective labor legislative are not needed because competitive markets protect workers from abuse; indeed, they are bad if they interfere with the ideal discipline of the invisible hand.

The Wells Fargo fiasco seemingly rejects the accuracy of this way of thinking. Workers clearly didn’t feel that they could simply quit and find a comparable job. Instead, over 5,000 succumbed to corporate pressure to meet unrealistic targets, and thereby acted unethically by creating fake accounts to keep their jobs. Competitive labor markets also require potential employees to have good information about the nature of jobs, and one can question whether employees joining Wells Fargo fully understood these pressures. And competitive consumer markets require well-informed consumers, which also doesn’t appear to the case here. For example, many customers with potentially fraudulent accounts couldn’t remember whether they had requested them or not. The neoliberal or egoist model of the employment is an important theoretical baseline, but seemingly too idealistic for the messiness of real-world markets, human behavior, and therefore, employment relationships.

An alternative to the neoliberal or egoist way of thinking is the unitarist model of the employment relationship. Ideally competitive labor markets are not required, but this approach critically rests on a belief that the interests of employers and employees are largely one and the same (unitarist = unity of interests). Or more precisely, a belief that well-designed managerial policies and practices can always be found that align the interests of workers and their employers. For example, offering decent pay and benefits will create engaged, loyal workers who reward the employer with high levels of performance that serve the business and its customers. Minimal institutional supports like unions or protective labor legislative are unnecessary because companies will create win-win human resource management policies. The Wells Fargo fiasco seemingly rejects the accuracy of this way of thinking, too. Performance standards were unrealistic and incentives at various points of the corporate hierarchy were extreme. Ethical workers were fired; customers were harmed. And these problems were not self-corrected or policed internally. Rather, these practices were exposed by the Los Angeles Times which then resulted in a lawsuit against Wells Fargo by the Los Angeles city attorney.

This isn’t to say that high-commitment forms of human resource management (“high road” HRM) are a failed project. Well-designed HRM policies and practices are essential for any organization, and we need more HR leaders with sophisticated ways of thinking (like one gets with a Minnesota Master’s degree in HRIR!). But it is to say that as a society, we cannot rely solely on corporate self-interest and well-intentioned managers.

Which brings me to the pluralist employment relationship model. The pluralist model rejects the neoliberal assumption of ideally competitive labor markets, and again, the Wells Fargo scandal highlights why. Moreover, the pluralist model embraces a plurality of legitimate interest in the employment relationship. Yes, there are some interests that employers and employees have in common, but unlike the unitarist way of thinking, pluralists believe that there are also conflicts of interests. But both employer and employee interests are legitimate so none should be exclusively prioritized over others (akin to a pluralist democracy in the political sphere). HRM practices are important for aligning shared interests, but society should not rely exclusively on corporate self-interest to look out for workers. When times are tough or there are excessively strong pressures for financial returns, some companies favor their own interests at the expense of employees. This seems to me to be a better characterization of what happened at Wells Fargo than the other two models of the employment relationship can provide. And consequently, Wells Fargo employees have turned to the courts for relief. In other situations, they might turn to labor unions or other outside, institutional supports. In whatever form, institutional supports for employees, independent of the vagaries or markets or enlightenment of managers, are needed.

In conclusion, how we think the employment relationship works is critically important for determining the extent to we as a society want to rely solely on markets or managers for setting employment terms and conditions. It’s difficult to truly gauge the actual nature of the employment relationship in practice. But we can look to situations like what’s unfolded at Wells Fargo for clues. Maybe it's just me, but I see another example that supports the accuracy of the pluralist model.

Friday, September 23, 2016

And the University of Minnesota faculty organizing drive drags on, or, bananas aren’t apples, but they are more like apples than like airplanes

When I taught labor relations last winter, the union organizing drive among University of Minnesota faculty was a very timely topic. After having been away for the summer, some of the students from that class asked whether faculty were unionized yet. But the answer brings to life one of the realities of union organizing in the United States—it’s a slow process. SEIU Local 284 filed a petition seeking an election with the State of Minnesota’s Bureau of Mediation Services (BMS) on January 20, 2016. Over 34 weeks later, an election is not yet in sight.

In any union representation election, the election unit needs to be defined. That is, what jobs are included and excluded from what will be the bargaining unit if the union wins. This definition is initially presented by the union when requesting an election, but an employer can object on the basis of there not being a “community of interest” among all of the included workers. A major sticking point in the faculty organizing drive is whether the bargaining unit should only include tenured and tenure-track faculty (the University’s position) or should also include full-time and part-time instructors (“contract faculty”) (the union’s position). In other words, the University asserts that regular faculty and contract faculty do not share a community of interest whereas the union argues that they do. Undoubtedly, regular and contract faculty have things in common (an educational focus, instruction, academic achievement as a position requirement) and not (tenure versus annual contracts, sharply different degrees of research responsibilities). So where to draw the line?

Unfortunately, an already-slow process has been made worse by the curious choice of the Minnesota legislature to enshrine the University of Minnesota bargaining units in state law over 30 years ago. It’s clear that tenured and tenure-track faculty are in what the law defines as Unit 8. But what about contract faculty? The University claimed that they are in the “Academic Professional and Administrative Staff” unit (Unit 11) by law, so there is nothing for BMS to decide. The union claimed that the law is so old that contract faculty are new positions that need to be classified by BMS. Over multiple objections by the University, BMS agreed with the union. So a lengthy hearing was held last spring, and BMS finally issued its ruling earlier this week.

In its ruling, BMS largely sided with the union and placed contract faculty into Unit 8 along with regular faculty (although extension faculty were excluded because they are not located on the Twin Cities campus). So unless the University is successful in an appeal, an election will occur some day and will uniquely include regular and contract faculty in the same unit. But that’s still a ways off because (a) the University will probably appeal, and (b) there still needs to be more hearings over excluding supervisors (which could include me as department chair) and determining whether instructors who teach minimal classes are real employees and therefore included. So again, union organizing can often be a lengthy process.

So what about the BMS ruling? How could they put regular and contract faculty together? If this occurred in the private sector, my guess is that they wouldn't have been placed together because they would have been seen as having distinct communities of interest. But in the private sector (and probably in most states), nothing is pre-specified so the National Labor Relations Board (NLRB) could put them together, or keep them separate. What the University seemingly failed to appreciate in this case is that Minnesota law has already limited the bargaining units. So BMS really wasn't deciding whether faculty and instructors go together, it was really deciding whether instructors go with faculty or go with the “everything else leftover” professional and administrative unit that also includes accountants, cartographers, athletic trainers, and over 300 other job titles. The university kept arguing that instructors aren’t faculty. But BMS ruled that they are even less like accountants and athletic trainers. Or the way I’ve bastardized it, bananas aren’t apples, but they are more like apples than like airplanes.

So whether or not this ruling makes it more or less likely that the faculty will vote to unionize remains to be seen. And if the faculty do unionize, it will undoubtedly be an interesting case study of how to include regular and contract faculty interests in bargaining and representation. In the meantime, the events of this year clearly illustrate how this can be a drawn-out process. And at a broader level, this also illustrates why legislators should be careful not to overly prescribe matters and to instead craft laws in ways that are flexible and adaptable.