Union Role

1
Chapter
15
Union Role in Wage and Salary Administration
2
Learning ObjectivesAfter studying Chapter 15,
students should be able to

• Discuss each of the factors that affects wage
  determination in unionized organizations.
• Discuss the union impact on wage and benefit
  levels, and the wage structure.
• Discuss the union perspective on the use of
  alternative reward systems.
• Explain when unions would desire cost of living
  adjustments in contracts.

3
Union Impact on General Wage Levels

• Unions do make a difference in wages.
• Union workers earn between 8.9 and 12.4 more
  than non-union workers.
• The size of the gap varies from year to year.
• During periods of higher unemployment and slow
  economies, the impact of unions is larger.
• During strong economies the union-nonunion gap is
  smaller.
• Unions in the public sector make a difference in
  wages of 7 to 12 more than their nonunion
  counterparts.

4
Union Impact The Spillover Effect

• Employers seek to avoid unionization by offering
  workers the wages, benefits, and working
  conditions won in rival unionized firms.
• The nonunion management continues to enjoy the
  freedom from union interference in decision
  making.
• The nonunion workers receive the spillover of
  rewards obtained by their unionized counterparts.

5
Role of Unions In Wage and Salary Policies and
Practices

• The role of unions in administering compensation
  is outlined primarily in the contract. This
  includes
• Basis of pay
• regular pay
• overtime pay
• Occupation - wage differentials
• Experience / merit differentials

6
Role of Unions In Wage and Salary Policies and
Practices (continued)

• Other differentials
• new and probationary employees
• pay to unionized employees employed by firm in
  different geographic areas
• part-time and temporary employees
• Vacations and holidays
• Wage adjustment provisions
• deferred wage increases
• re-opener clauses
• cost-of-living adjustments (COLA)
• escalator clauses

7
Unions and Alternative Reward Systems

• To help employers remain cost competitive, unions
  have become receptive in recent years to
  alternative reward systems that link pay to
  performance.
• 20 percent of all U.S. collective bargaining
  agreements permit some alternative reward system.
• Lump sum awards
• Piece rate
• Gain-sharing
• Profit sharing
• Skill-based pay
• Employee stock ownership plans (ESOP)

8
Summary

• Due to increased international competition, U.S.
  labor costs must be cut to improve competitive
  position.
• Unions face a difficult situation.
• How should they respond to the attacks on
  traditional compensation systems?
• The crisis demands changing attitudes from both
  management and labor.

9
Review Questions

• Most union contracts do not include provisions
  for merit pay. Given what we have discussed here
  and in Chapter 11, explain why unions oppose
  merit pay.
• In recent years, the economy has enjoyed a rare
  combination of low unemployment and low
  inflation. Explain why this combination would
  make COLA clauses less likely to appear in union
  contracts than was true twenty years ago in the
  1980s.
• It is probably true that, if given a choice,
  unions would prefer to implement a skill-based
  pay system than some form of gain-sharing plan.
  Why?