Sunday, April 12, 2015

‘We’re All in This Together’: The Multi-Stakeholder Imperative for Healthy, Balanced Employment Relationships

Last month I had the pleasure of participating in a European Union (EU) Presidency event in Riga, Latvia, organized by the European Foundation for the Improvement of Living and Working Conditions (Eurofound) in cooperation with the Latvian Saeima (Parliament). Eurofound is an agency of the European Union whose mission is to provide information, advice, and expertise that helps create better living and working conditions in Europe. Visiting Riga was a fascinating cultural experience, and this was magnified by being the only full-time academic on the event’s program and the only non-European in attendance.

The event marked the launch of Eurofound’s 3rd European Company Survey Overview Report. Consistent with this and with the “Competitive Europe” priority of the Latvian EU Presidency, the theme of the day was “Workplace practices: Creating win-win arrangements for companies and employees” (in Latvian, “Darba organizācija: Uzņēmumam un tā darbiniekiem piemērotu modeļu meklējumos”). Videos are available in this Saeima news release.

The theme of my remarks was “‘We’re All in This Together’: The Multi-Stakeholder Imperative for Healthy, Balanced Employment Relationships.” Trying to create win-win employment relationships has been going on for at least 2,000 years. This suggests that it’s important, but also difficult. Otherwise, we either would have given up by now, or figured it all out! So why is this so important? From my perspective, it’s because the best employment relationships will be win-win-win: they serve workers and their families (win #1), organizations (win #2), and society (win #3). Moreover, the benefits from healthy employment relationships are far-reaching, and include economic gains, physical and psychological health, civic and political participation, and social inclusivity. This requires balances multiple objectives in the employment relationship (objectives that I simplify as efficiency, equity, and voice).

But why is this so hard to achieve? The event participants indicated a number of reasons, but as the lone academic on the program, I highlighted the importance of ideas. Creating win-win employment relationships, designing effective human resources practices, and crafting supportive public policies are not just about the specific practices involved in those important actions, they are also about the mental models, frames of reference, or ideologies that support those practices. And not all ideas about the employment relationship support the pursuit of balanced relationships. Approaches that are firmly rooted in whatever the market will bear are more about organizational interests; approaches grounded in critical thinking prioritize worker interests. We need HR professionals, worker advocates, and policy makers to embrace ideologies that seek to align employer and employee interests while respecting both sets of interests as legitimate. So again, we don’t just need the “right” practices, we also need the right ideas behind them.

I’m also beginning some research with colleagues from the University of Newcastle in Australia as to why it’s so easy to deviate from the “right” practices and mental mindsets. It requires hard work to avoid slipping away from these ideals, but I’ll save that for another posting.

In conclusion, the parties to the employment relationship need to work hard to make it healthy, win-win, and balanced, and to sustain these win-win-win employment relationships. So they need support from many sources, including insights from Eurofound’s European Company Survey. And they also need to be mindful not only of their practices, but also about their ideologies.

Thursday, March 5, 2015

Walton & McKersie Help an Economist Mature into an Industrial Relations Scholar

I cannot attend today's 50th Anniversary Celebration of  Richard Walton and Robert McKersie’s seminal 1965 book, A Behavioral Theory of Labor Negotiations. But a conversation last week with Joel Cutcher-Gershenfeld prompted me to start thinking about its impact on me. In my final year as an economics Ph.D. student at Princeton in the early 1990s, I was lucky that Craig Olson—then a Professor of Industrial Relations at the University of Wisconsin, now at the University of Illinois—spent a year there as a visiting professor. I had little knowledge of the then-mysterious field of industrial relations, but as a leading scholar in that field, Craig kindly introduced me to the key works in the field. I can’t remember everything he recommended, but I certainly remember that A Behavioral Theory of Labor Negotiations was high on the list.

This soon made an impact on my thinking. On a specific level, Walton and McKersie’s insights on intraorganizational bargaining—developed not only in A Behavioral Theory of Labor Negotiations, but also elsewhere—were important for my dissertation. I was analyzing UAW pattern bargaining. The standard economic explanations for pattern bargaining are, unsurprisingly, market-based: wage patterns as 1) taking wages out of competition, or 2) as “rough-and-ready guides whereby the working of supply and demand is anticipated,” as John R. Hicks put it in his 1932 A Theory of Wages (p. 80). But even as a budding economist, no pun intended, I was skeptical about these economic-based explanations. Indeed, archival evidence of union memos and records pointed, in my mind, to internal union political considerations, not market forces. I was familiar with Ashenfelter and Johnson’s model of strikes that was rooted in internal union dynamics (of course, since we would routinely have lunch meetings in Ashenfelter’s large Princeton office, in the shadow of a large portrait of another Hicks: Clarence J. of Standard Oil fame). And I was familiar with the famous Ross-Dunlop debate in which Arthur Ross championed the political side of union wage determination. But Walton and McKersie’s framework provided a much stronger foundation for understanding the role of internal union political dynamics in the context of the entire negotiations process.

On a deeper level, A Behavioral Theory of Labor Negotiations made a more lasting impact on my thinking in at least two ways. One, though economists at Princeton and a few other places study labor unions with some eye toward institutional realities, the general approach in economics is not to give a lot of attention to how things really work within and across organizations. A Behavioral Theory of Labor Negotiations opened up this space to me through its classic development of the four subprocesses of negotiations. Through these subprocesses, I could now start to understand how labor and management negotiators actually interacted, and how decisions were made. This helped me recognize the importance of real-world institutions in understanding the employment relationship. And the need to do so in a rich, multidisciplinary way. These are, of course, two hallmarks of industrial relations scholarship.

Two, A Behavioral Theory of Labor Negotiations introduced me to mixed motive conflict; and as such, to another fundamental principle of industrial relations scholarship—that the employment relationship is best characterized as a mixed-motive bargaining relationship, something I would end up writing about multiple times (eventually). In these ways, then, A Behavioral Theory of Labor Negotiations helped me grow from a young economist into an industrial relations scholar with a deeper, multidisciplinary understanding of institutions and the employment relationship.

Like too many others to count, A Behavioral Theory of Labor Negotiations has also shaped my teaching. And hopefully in some modest way I am helping to continue its influence on future generations. In particular, Walton and McKersie’s four subprocesses form the core of the negotiations material in the bargaining chapter of my textbook, Labor Relations: Striking a Balance (McGraw-Hill). Call me old-fashioned, but I’ve even retained their original terms and have explicit subsections devoted to each one. Nowhere else in my textbook does one piece of work receive such extended discussion. And other key insights on labor negotiations and labor-management relationships are a byproduct of their seminal work, especially Walton and McKersie’s book with Joel Cutcher-Gershenfeld, Strategic Negotiations: A Theory of Change in Labor-Management Relations (Harvard Business School Press), and Raymond Friedman’s Front Stage, Backstage: The Dramatic Structure of Labor Negotiations (MIT Press).

For me personally, then, Walton and McKersie’s work has been influential in significant ways that might not be readily apparent beyond my textbook. But more broadly speaking, the true testament to the enduring importance of A Behavioral Theory of Labor Negotiations is that its insights and the follow-up work it has spawned are still so useful 50 years later, not only for academics seeking to understand labor relations (or negotiations more generally), but also for practitioners who negotiate and manage relationships in diverse organizations.

Sunday, February 8, 2015

Say What? Employee Empowerment Zones?

Illinois’ new Republican governor, Bruce Rauner, gave his first State of the State address this week, which included the following:

We must also empower voters to decide for themselves whether they want their communities to become employee empowerment zones. These zones will give employees the freedom to choose whether or not they want to join a union. Local communities – local voters – deserve this option so that they can compete with other states and other nations for new businesses and new investment. Employee empowerment zones will increase jobs for residents, increase economic activity for local businesses and generate more tax dollars for local governments.

Say what? Employee Empowerment Zones? For starters, call these what they are: local right-to-work zones. "Right-to-work" is a dubious term in its own right, but it's been widely-used for decades. Right-to-work is the belief that individuals should be able to work without having to join a labor union or pay union dues. The issue of right-to-work is an intense point of conflict between supporters and opponents of labor unions and collective bargaining. U.S. labor law allows private sector unions to negotiate contracts which contain union shop or agency shop clauses requiring all employees to pay union dues as a condition of continued employment. Right-to-work advocates label this compulsory unionism and argue that it violates individual freedoms by depriving workers of their right-to-work, that is, the right to freely choose whether or not to become a union member and pay union dues.

Unions argue that right-to-work is a misleading term used to weaken unions. Since labor law requires unions to represent all employees – members and nonmembers alike, unions argue that it is unfair to allow free-riders to benefit from union representation without sharing the costs by paying dues. Majority rule is also a basic feature of democratic institutions and any dues paying requirements are subject to majority approval.

While federal labor law does not forbid union shop and agency shop clauses, it allows individual states to pass laws prohibiting these clauses (section 14(b) of the Taft-Hartley Act). Such laws are called right-to-work laws and a state that has passed such a law is called a right-to-work state. Almost half of the states are now right-to-work states, primarily in the southern, Great Plains, and Rocky Mountains states (Michigan being a curious exception).

Also, while federal law does not prohibit union shop clauses, the U.S. Supreme Court has determined that paying dues is sufficient – no one can be forced to become a union member even in states without right-to-work laws. The Supreme Court has further ruled that nonmembers can choose to only pay agency fees: money that funds collective bargaining and other representational activities like processing grievances. Nonmembers have the right to object to being charged for activities such as lobbying or helping political candidates. Under federal law, unions have a legal “duty of fair representation” so they cannot discriminate against nonmembers when negotiating contracts and processing grievances, but nonmembers can be excluded from internal union matters such as contract ratification votes and union officer elections.

Right-to-work states often have lower wage levels, on average, than non-right-to-work states. Depending on the time period used as the comparison, they also have higher employment growth rates, or not. Whether these differences are caused by the right-to-work laws or instead reflect other factors such as negative attitudes towards unions is a controversial question with no well-accepted answer. So to claim definitively that right-to-work zones "will increase jobs for residents, increase economic activity for local businesses and generate more tax dollars for local governments" is a stretch.

And even if this claim is correct, what kind of jobs will be created? Stagnant middle class incomes, rising inequality, unpredictable work schedules, lack of basic benefits, and the like have been well-documented. How does further weakening labor market institutions that champion workers empower employees? Finally, it should be pointed out that union shop and agency shop clauses are not imposed by some centralized government or union authority. Rather, they are negotiated into collective bargaining agreements by those "on the ground" doing the bargaining. So wherever they exist, the employer and a majority of the employees agree to their inclusion in some earlier bargaining round. That's empowerment. And if  the current employees want to remove the clause from their contract, they can vote on it via a majority-wins NLRB withdrawal of union shop authority election. That's empowerment.

Three years ago I concluded a blog post by saying that "The bottom line is that debates over the cleverly-named "right-to-work" issue simply serve to further divide us in these already divisive times....Our energy and our resources would be better spent directly tackling the serious issues that we face as a society." Making up silly new names, like "employee empowerment zones," is not the progress that I had hoped to see.