© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Chapter 15 Union Role in Wage and Salary Administration © 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

Learning Objectives The impact of unions in wage determination Unions and alternative reward systems 15-2

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. The Impact of Unions in Wage Determination Impact on general wage and benefit levels Impact on structure of wages Impact on non-union firms or spillover effect Impact on wage and salary policies and practices in unionized firms 15-3

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Union Impact on General Wage Levels Strategies to measure union impact on wages Comparing organizations in the same industry that differ in unionization Comparing two different industries that vary dramatically in unionization 15-4

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Union Impact on General Wage Levels Unions do make a difference in wages Union workers earn between 8.9 and 12.4% more than nonunion workers Size of wage gap varies from year to year During periods of higher unemployment, impact of unions is larger During strong economies, union-nonunion gap is smaller 15-5

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. The Structure of Wage Packages Three dimensions related to wage structure Division between direct wages and employee benefits Two-tier pay plans Relationship between worker wages and pay of supervisors in union and nonunion environments 15-6

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Wage Structure: Two-Tier Pay Plans Differentiate pay based upon hire date Employees hired after a target date: Receive lower wages than their senior peers on the same or similar jobs Management point-of- view A viable alternative compensation strategy Cost control strategy to allow Expansion or investment Economic survival 15-7

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Wage Structure: Two-Tier Pay Plans Union point-of-view Less painful than: Wage freezes Staff cuts among existing employees 15-8

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Union Impact: The Spillover Effect Employers seek to avoid unionization by offering workers: The wages, benefits, and working conditions won in rival unionized firms Outcomes Freedom from union interference in decision making Workers receive spillover of rewards obtained by unionized counterparts 15-9

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Role of Unions in Wage and Salary Policies and Practices Is outlined in the contract Basis of pay Regular pay Overtime pay Pay for nonstandard shifts Incentive pay 15-10

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Role of Unions in Wage and Salary Policies and Practices Occupation-wage differentials Different occupations should receive different wage rates Experience/merit differentials- Progression is based on: Seniority Merit Combination of automatic and merit progression 15-11

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Role of Unions in Wage and Salary Policies and Practices Other differentials 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 Negotiated at the time of initial contract negotiations 15-12

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Role of Unions in Wage and Salary Policies and Practices Reopener clause Specifies that wages and some nonwage items will be renegotiated at a specified time Cost-of-living adjustments (COLAs) or escalator clause Involves periodic adjustments based on changes in the consumer price index 15-13

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Unions and Alternative Reward Systems In face of extreme competitive pressures, unions are receptive to: Alternative reward systems that link pay to performance Unions stress on: Group-based performance measures with equal payouts to members Use of objective performance measures Use of measures based on past performance 15-14

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Unions and Alternative Reward Systems Lump-sum awards One-time cash payments Not added to base wages Given in lieu of merit increases Employee stock ownership plans (ESOPs) Give employees part ownership in the company 15-15

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Unions and Alternative Reward Systems Pay-for-knowledge plans Pay employees more for learning a variety of different jobs or skills Make individual worker more valuable and less expendable, to the firm Lessen the subcontracting of work to nonunion organizations 15-16

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Types of Alternative Reward Systems Gain-sharing plans Align workers and management in efforts to streamline operations and cut costs Profit-sharing plans Allow union members to share wealth with more profitable firms Are effective when union members participate in plan development 15-17

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Exhibit Union Perceptions of Gain Sharing Source: