1. Copyright  2005 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Industrial Relations 3e by Bray, Deery, Walsh and Waring 10–1 Part three Processes and change CHAPTER TEN INDUSTRIAL RELATIONS, HRM AND PERFORMANCE

2. Copyright  2005 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Industrial Relations 3e by Bray, Deery, Walsh and Waring 10–2 Overview  Trade unions and productivity  Evidence on unions and productivity?  Unions, the IR climate and performance  The conciliation and arbitration system and performance  Labour markets and economic performance  HRM and performance  Final observations  Summary

3. Copyright  2005 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Industrial Relations 3e by Bray, Deery, Walsh and Waring 10–3 Trade unions and productivity  Two perspectives on the relationship between unions and productivity: – the ‘monopoly’ face of unions—unions reduce productivity by driving up wages beyond efficient levels – The ‘collective voice/institutional response’ face of unions—unions can increase productivity through collective voice and ‘shock effects’.

4. Copyright  2005 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Industrial Relations 3e by Bray, Deery, Walsh and Waring 10–4 Trade unions and productivity (cont.) The monopoly face of unions  Unions act as a monopoly supplier of labour, driving wages artificially high.  Reduces workplace efficiency: –high wages prompt the misallocation of resources –unions hinder management in making efficient decisions –union activity and bargaining disrupts production.  Critique of the monopoly view: –unions do not act as monopolists –conflict can occur in non-union workplaces.

5. Copyright  2005 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Industrial Relations 3e by Bray, Deery, Walsh and Waring 10–5 Trade unions and productivity (cont.) The collective voice/institutional response face of unions  Unions can add to productivity by: – providing a ‘collective voice’ for the workforce:  articulating employee concerns  reducing turnover due to employee dissatisfaction. – providing a ‘shock’ to management to:  provide more and better training  improve production systems  reduce organisational inefficiencies.

6. Copyright  2005 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Industrial Relations 3e by Bray, Deery, Walsh and Waring 10–6  ‘Real’ issue is the quality of the relationship between management and unions in the workplace.  Low-trust workplaces: –no incentive for the parties to work towards new efficiencies.  High-trust workplaces: –management and unions collaborate towards increased performance. Trade unions and productivity (cont.) The collective voice/institutional response face of unions (cont.)

7. Copyright  2005 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Industrial Relations 3e by Bray, Deery, Walsh and Waring 10–7 Evidence on unions and productivity United States  Evidence suggests that unions can lead to a significant positive improvement in productivity: –20% increase across a range of studies in manufacturing –6%–8% improvements for cement factories moving from non-union to union.  Improvement typically due to ‘shock effect’: –adoption of more professional personnel practices –higher wages –increased work monitoring.  Lower voluntary turnover rates.

8. Copyright  2005 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Industrial Relations 3e by Bray, Deery, Walsh and Waring 10–8  Initial argument: de-regulated workplaces had greater productivity improvements.  Subsequent research argued the opposite.  Tentative link between unionisation and lower workplace turnover. Evidence on unions and productivity (cont.) Britain

9. Copyright  2005 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Industrial Relations 3e by Bray, Deery, Walsh and Waring 10–9  Evidence about union/productivity relationship is unclear: –positive relationship: some evidence that turnover is lower and job tenure is longer:  Miller and Mulvey (1991)  Loundes (2000). –negative relationship: that labour productivity is lower:  Crockett et. al (1992).  Problem for these studies: – how do you measure productivity? Evidence on unions and productivity (cont.) Australia

10. Copyright  2005 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Industrial Relations 3e by Bray, Deery, Walsh and Waring 10–10  Phipps and Sheen (1994): lower absolute productivity, but higher productivity growth in unionised workplaces.  Structural form of union workplace presence may be important: –single union presence more productive than multiple union or craft unionism (Crockett et al. 1992) –workplace reform less likely the more unions that are present in a workplace (Nunes et. al. 1992) –but counter-evidence also available: Loundes (1999). Evidence on unions and productivity (cont.) Australia (cont.)

11. Copyright  2005 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Industrial Relations 3e by Bray, Deery, Walsh and Waring 10–11 Unions, the IR climate and performance  Clear evidence that a positive union–management relationship is associated with better workplace performance and innovation.  Features of positive union–management relationship: –clear, effective communication channels within workplace –the absence of aggressive, bold and high-risk management styles –employees feel that jobs are secure and that management acts fairly.  Features of negative union-management relationship: –low trust between the parties –high grievance rates, and long running negotiations over contracts.

12. Copyright  2005 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Industrial Relations 3e by Bray, Deery, Walsh and Waring 10–12  The significance of IR climate: the labor–management climate is a key determinant of whether positive collective voice effects or negative restrictive union effects are dominant. Where the labor– management climate apparently precludes joint decision- making, management seems unable, over average, to tap the full potential of employee input (Cooke 1992, p. 132, cited in textbook on p. 343). Unions, the IR climate and performance (cont.)

13. Copyright  2005 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Industrial Relations 3e by Bray, Deery, Walsh and Waring 10–13 The conciliation and arbitration system and performance  Some commentators have argued that the Australian conciliation and arbitration system is an impediment to productivity growth, because: –the tribunal system encouraged adversarial relations between the parties, which induces resistance to change –wage-fixing doctrines, such as comparative wage justice, creates workplace inflexibilities –multi-award structure prevents workplace flexibility –the centralised system discouraged the parties from solving their own workplace problems.

14. Copyright  2005 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Industrial Relations 3e by Bray, Deery, Walsh and Waring 10–14  These views were dominant in public policy over the past 20 years, leading to decentralisation and deregulation of IR.  There are few studies on the effects of the IR system on performance, but they generally conclude: the arbitration system does adversely affect performance.  Longstanding claim that small business is adversely affected by the arbitration system; but no clear evidence.  Remains a contentious topic of debate. The conciliation and arbitration system and performance (cont.)

15. Copyright  2005 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Industrial Relations 3e by Bray, Deery, Walsh and Waring 10–15 Labour markets and economic performance  The past 20 years have seen a major restructuring of Australian industrial relations: –the ‘decentralisation’ of IR decision making away from tribunals at a national, state or industry level to the parties at the workplace –the ‘deregulation’ of IR, with the parties at the workplace taking a greater role in determining workplace conditions.

16. Copyright  2005 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Industrial Relations 3e by Bray, Deery, Walsh and Waring 10–16 Labour markets and economic performance (cont.) Decentralisation, centralisation and performance  Longstanding view among economists and policy makers is that decentralised and deregulated IR offers better economic outcomes.  Counter view has emerged: –‘centralised’ wage bargaining can lead to lower inflation and unemployment (Walsh 1995) –Highly-centralised and highly-decentralised IR systems are most effective (Calmfors and Driffils 1998).

17. Copyright  2005 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Industrial Relations 3e by Bray, Deery, Walsh and Waring 10–17  Worst economic/employment outcomes occur in ‘intermediately regulated’ nations—such as Australia, Britain, Italy and Belgium.  Traxler (2003): the coordination of bargaining across an economy is the key issue in economic performance, not the degree of centralisation: –‘corporatist’ approaches are more effective in maintaining a consensus –but employers will prefer decentralised bargaining. Labour markets and economic performance (cont.) Decentralisation, centralisation and performance (cont.)

18. Copyright  2005 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Industrial Relations 3e by Bray, Deery, Walsh and Waring 10–18  Policy consensus views US deregulated and decentralised labour markets favourably: –US labour-market institutions believed to enable lower levels of unemployment.  Substantial critique of American style IR policy: –deregulated labour market enables declining ‘living standards’, growing wage inequalities and rising poverty. –‘the United States has the least-regulated economy among advanced countries. Its problem is not creating jobs but making work pay …’ (Freeman 1996, p. 120, cited in textbook p. 351). Labour markets and economic performance (cont.) Decentralisation, wage inequalities and performance

19. Copyright  2005 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Industrial Relations 3e by Bray, Deery, Walsh and Waring 10–19  Some reasons for increase in US wage inequality: –decline in US trade unionism –decline in real value of minimum wage, and an increasing proportion of increased productivity is taken as profits.  UK labour-market deregulation also followed by increased wage inequalities. Labour markets and economic performance (cont.) Decentralisation, wage inequalities and performance (cont.)

20. Copyright  2005 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Industrial Relations 3e by Bray, Deery, Walsh and Waring 10–20  The Australian experience: – Chapter 2 of text demonstrates growing income inequality in Australia – proportion of this inequality attributed to:  enterprise bargaining (EB)  decline in union involvement in wage determination. – concern that the gender wage gap is growing as a result of EB. Labour markets and economic performance (cont.) Decentralisation, wage inequalities and performance (cont.)

21. Copyright  2005 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Industrial Relations 3e by Bray, Deery, Walsh and Waring 10–21  The Australian experience (cont.): – the reasons for this—a concentration of women in:  lower status jobs/occupations  part-time and casual positions  lower level of union membership  socialised against industrial action. – evidence:  gender wage gap shrinking over 1990s  possibly explained by decline in male wages in industries previously determined by union-based bargaining. Labour markets and economic performance (cont.) Decentralisation, wage inequalities and performance (cont.)

22. Copyright  2005 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Industrial Relations 3e by Bray, Deery, Walsh and Waring 10–22 HRM and performance  Clear evidence that HRM-style—’high-performance workplace systems’ (HPWS) can increase workplace productivity.  A HPWS is composed of policies and practices to: –develop appropriate employee motivation to win additional discretionary effort –develop useful and relevant employee skills –involve employees in important workplace decision making.

23. Copyright  2005 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Industrial Relations 3e by Bray, Deery, Walsh and Waring 10–23  Why do HPWS systems work? –Better financial performance as a result of greater labour productivity, individual employee discretionary effort, lower turnover.  Critics argue that this increased performance through discretionary effort may be due to work intensification: –increased job-related stress –affects life out of work. HRM and performance (cont.)

24. Copyright  2005 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Industrial Relations 3e by Bray, Deery, Walsh and Waring 10–24 Final observations  Ongoing debate about the impact of trade unions and labour- market regulation on productivity and economic performance: – some argue that unions and industrial regulations limit performance and job growth – others argue that high wage, high-performance workplace systems best improve performance.  Evidence that trade unions can have positive ‘voice’ effects on turnover, tenure and productivity. – positive labour-management relationship and joint decision making clearly related to improved performance.  Some argue that deregulation and decentralisation of industrial relations will add to social inequality.

25. Copyright  2005 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Industrial Relations 3e by Bray, Deery, Walsh and Waring 10–25 Summary  Structure and operation of IR system can affect economic performance.  Two approaches to explaining the union-productivity relationship: – ‘monopoly’ face – ‘collective voice/institutional response’ face  The conciliation and arbitration system and performance: – the consensus is that arbitration has adversely affected workplace performance.  Labour markets and economic performance: – unclear relationship between bargaining structure and centralisation and economic performance.