chapter 15 - union role in wage and salary administration Flashcards
overview
Experts believe unions face their most critical challenge of a consistent decline in membership; it may be due to:
- The changing structure of America to less unionized industries
- Workers do not view unions as a solution to their problems
- Reduced intensity of organizing efforts
- Management’s increasingly hard stance against unions
Competitive pressures triggered lower-than-normal wage increases in unionized forms and even wage concessions
Some union issues continue to be important to workers and workers show an interest in forming a union when:
- Workplace relations are bad, management is untrustworthy, or when workers feel they have little influence over decisions affecting them
Union Role in Wage andSalary Administration
Workers show strong interest in unions when:
- Workplace relations are bad, management is not trustworthy
- Workers feel they have little influence over decisions affecting them
However, union declining in importance: from 19% to 13% from 1988 to 2016 (today probably ~11%); popular explanations for the decline
- Change in structure of American industry – most unions are in public sector (37%), only ~8% in public sector and those are in declining industries like manufacturing
- Unions no more a solution to workers’ problems
- Reduced intensity of union organizing efforts
- Management’s hard stance against unions
– Increased pressure from domestic & int’l competitors
– Management resists wage increases that would give nonunion competitors a competitive price advantage
% supporting unionization as strong as it was 15 years ago, so anti-union sentiments have bottomed out
Impact of Unions in Wage Determination
Despite efforts to lessen union impact, they still effect wages
Four areas of union impact
- Impact general wage and benefit levels
- Impact the structure of wages
- Impact nonunion firms through the spillover effect
- Impact wage and salary policies and practices in unionized firms
Do Unions Raise Wages?
Unions do make a difference in wages
- To infer that union status caused the wage differences would require confidence that workers would be paid the same with no union
- In 2017, the union wage premium was 26% overall and 21% in the private sector
The best conclusion about union versus nonunion wage differences is that:
- Unions do make a difference in wages across all studies over many years
- Union-nonunion wage differential varies from year to year
- During periods of higher unemployment, impact of unions is larger
- During strong economies, union-nonunion gap is smaller
- There are more and more wage concessions by unions, which reduces the advantages unions once provided
The Structure of Wage Packages
The union’s effect on benefits far exceeds the union’s effect on wages and salaries:
So the effect of unions on total compensation exceeds the union effect on wages and salaries
A second dimension is the evolution of two-tier pay plans:
- Differentiate pay based upon hiring date
- Management views wage tiers as a viable compensation strategy
- Unions allowed their spread thinking they were better than wage freezes and layoffs
- The inequality will eventually cause employee dissatisfaction
Two-Tier Pay Plans
Two-tier pay structures are a phenomenon of union sector:
Differentiate pay based upon hire date
Employees hired after a target date will receive lower wages than their higher-seniority peers on the same or similar jobs
From a union’s perspective, wage tiers are viewed as less painful than
- Wage freezes
- Staff cuts among existing employees
Division Between Direct Wages and Employee Benefits
Presence of unions adds 30-40% to employee benefits
Percentage of total cost of employee wages allocated to employee benefits
- Union workers: ~38% of total compensation package
- Nonunion workers: 28%
- Higher costs show up as higher pension expenditures or higher insurance benefits
– 213% higher pension and 136% higher insurance
Union Impact: The Spillover Effect
The spillover effect occurs when employers avoid unionization by offering wages, benefits, and conditions won in unionized firms
- Management avoids union ‘interference’ in decision making and workers enjoy rewards
- Occurs less often as union power diminishes
Outcomes:
- Nonunion management continues to enjoy freedom from union “interference” in decision making and workers enjoy the “spillover effective” rewards
Unions and Variable Pay
International competition causes a problem for unions:
- Increased wage costs from unionized contract may erode market share
- Unions are more receptive to alternative reward systems when there is competition
About 20% of agreements permit some alternative rewards:
- Lump sum, piece rate, gain sharing, profit sharing, skill-based pay
- Willingness to use such plans is higher in highly competitive industries
- The union usually insists on safeguards
– Group-based performance measures with equal payouts
– Performance measures are most often objective
– Most rely on past performance as a gauge of realistic targets
