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7
WAGE ISSUES UNDER
COLLECTIVE BARGAINING
SUMMARY
Wage and wage related issues constitute historically the leading overt cause of strikes. Three
standards are commonly used to arrive at basic wage rates, but each of these standards, though
having definite advantages from the viewpoint of achieving an “equitable” settlement, also has
significant limitations.
The comparative norm approach is based on the notion that the economics of a particular
unit should parallel the employer/worker relationships of other firms in the same industry. However,
a direct comparison between and among units is rarely valid. The financial and market
circumstances vary among firms in a given industrial grouping. Often it is difficult to classify a firm,
and employees within a particular job classification may not perform the same type and amount of
work. Workers within the same classification, within the same industry, may be paid by different
standards, and may be accorded a variety of fringe benefits. The relative economic position of a given
unit is influenced by all these factors.
Basing wages on the ability of the employer to pay is the second method of wage
determination. The profit level of the firm is the major factor, with several qualifications. The
The establishment of wage differentials is another thorny issue for negotiators. Premium
rates may be paid to employees who work at undesirable times or perform especially demanding or
unattractive tasks. Lower rates can sometimes be found in the cases of handicapped, or temporary
workers and learners. These variations may not be based on race, color, religion, sex, national origin,
or anything else forbidden under the various anti-discrimination laws of the land.
The normal contract calls for an 8-hour workday, and a 40-hour workweek. Overtime work is
compensated at a higher rate, usually one and one-half times the regular wage. Refusal of employees
to work overtime, and how and when the overtime work is offered, are issues that appear in most
negotiations. Although not extensive, there are deviations from the standard work schedules.
Flextime scheduling has appeared in some contracts, but its impact has not been established and to
date unions have been rather negative about it.
Another wage issue is the establishment of relative wage rates for each job so that
differentials are rationalized. Job evaluation is a more popular method than job comparison, and
seeks to rate jobs in terms of their skill, effort, responsibility, and working conditions. As would be
expected, these methods produce controversy. But even though these problems and other wage issues
are the most taxing segment of negotiation, peaceful solutions are reached in the vast majority of
cases.
The chapter also looks at the shortage of wage bargaining victories won by unions over the
past three decades. The discussion raises the issue of whether wage concessions will actually save
jobs. The growth of two-tier wage systems as an alternative to direct wage concessions is inspected
as the chapter’s last topic.
True/False # 1
1.
Historically, wage controversies have been the leading overt cause of strikes.
2.
There is no single method of determining wage rates that has anything approaching
3.
The basic idea behind the ability to pay principle of wage determination is that the
economics of a particular collective bargaining relationship should neither fall
substantially behind nor be greatly superior to that of other employer/union
4.
The comparative norm principle of wage determination is often valid for economic,
5.
An advantage to the comparative norm principle is that in all cases, firms in a given
6.
It is possible that the optimum wage level for two firms within the same industry
7.
An example of the strict application of the comparative norm principle is wage
8.
It is often difficult to classify a firm in a particular industrial grouping for wage
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10.
The fact that classified workers in a particular industrial grouping are paid by
different wage systems would not limit the usefulness of the comparative norm
11.
About 25 percent of all production plant workers in the United States are paid under
12.
Because of the variety of fringe benefit plans, it is wrong to conclude that workers in
14.
Ability to pay based on profit levels is limited by the uncertainty that a given rate of
15.
Another factor affecting the ability to pay criterion is the use to which a company
16.
The ratio of labor costs to total costs is unrelated to the issue of a firm’s ability to
17.
Today, industry payments for fringe benefits are the equivalent of about 30 percent
18.
Firms in certain market situations find it difficult to pass along the costs of a wage
19.
The voluntary wage and price guideposts instituted by the federal government in the
20.
It is doubtful that the voluntary wage-price guideposts of the 1960s had any
22.
Unlike the voluntary guidelines of the 1960s, Nixon’s mandatory plan received the
23.
The AFL-CIO wholeheartedly supported Carter’s “voluntary wage–price guidelines”
26.
The problems inherent in using cost of living as a determinant in wage negotiations
is that wages are bargained for a future period, whereas cost of living data are
27.
In theory, the sole function of an escalator clause is to automatically raise wages
29.
Historically, management has often argued that the CPI has overstated the degree
30.
It is possible that the trend toward longer contracts will increase the presence of
32.
Most escalator clauses specify a time for reviewing statistics in order to make wage
34.
The escalator method of wage adjustment is often accompanied by an annual
improvement factor, which offsets the amount of increase generated by the escalator
35.
Whereas the escalator arrangement provides for an automatic change in wages,
36.
Taft-Hartley permits a strike after a 10-day notice during the life of contracts that
37.
A wage reopener provision can be officially used to negotiate other issues besides
38.
The most common wage differential is premium payment for work on relatively
41.
Federal wage and hour laws prohibit any deviation from the 40-hour workweek and
42.
The vast majority of labor agreements provide overtime rates of exactly 2 times the
44.
Many contracts allow the employer to force employees to work overtime, yet there
are certain standards employers must follow before they can discipline any employee
46.
Under no circumstances could a worker put in a 10-hour day without being paid
47.
Under the flextime procedure, the worker normally selects his or her starting and
49.
In practice, unions accept job evaluation more readily than their official
50.
Job comparison is a far more popular method of establishing relative wage rates
True/False # 2
2.
Negotiators commonly use at least three different standards when determining basic
3.
In the comparative-norm method of wage determination, the parties often make a
4.
Industrywide bargaining, as compared to company-by-company negotiations, has
become the norm in recent years in recognition of the fact that all firms do not have
5.
A weakness of the comparative-norm method of wage determination is that it is at
times misleading to compare employees within a particular job classification,
because the content of jobs may be substantially different among plants within the
7.
To the extent that job classifications within industry have not been standardized,
8.
One drawback of the incentive wage system is that increasing automation in
9.
The determination of what constitutes a rate of profits sufficient to meet a given
union wage demand is the basic controversy surrounding attempts to set wages by
10.
When determining a firm’s ability to pay a given wage increase, that firm’s tax
liability is not considered because tax structures tend to remain constant over time
11.
Non-wage economic benefits should not be considered part of a firm’s total wage bill
because these are indirect payments and therefore do not cost a firm as much as
12.
Companies that operate in monopolistic markets find it more difficult to pass on the
costs of a wage increase to consumers than companies that operate in highly
13.
Wage agreements that increase prices of basic economic commodities, thereby
14.
The concept of wage and price controls as a tool to stem inflation is relatively recent,
15.
Three recent presidents—Carter, Reagan, and Clinton—have imposed mandatory
16.
Management, much more than unions, has viewed wage-price controls as an
17.
Most of the wage-price control programs in this century, whether voluntary or
mandatory, were definite failures insofar as any beneficial long-run effect on the
18.
With inflation very much under control since the early 1980s, and because of its
basic lack of success, the concept of federally mandated wage-price controls is most
23.
In 2008, about half of all workers under major union contracts enjoyed escalator
24.
The frequency with which escalator clauses are included in collective bargaining
agreements tends to remain constant regardless of the rise and fall of the cost-
25.
By the late 1990s, COLA agreements were included in about 38 percent of all major
26.
One of management’s criticisms of COLAs is that cost-of-living allowances become a
27.
Longer-term labor agreements (lasting longer than a year) tend to increase the
29.
Of contracts including escalator formulas in 2008, quarterly reviews of the
30.
Annual improvement factors tend to be greater in contracts where escalator clauses
31.
The facts that prices have virtually always risen in the United States and that there
have been sporadic periods of high inflation make it likely that COLAs will continue
32.
Under wage reopener agreements, either the employer or the union may request
33.
Wage-reopening arrangements invariably provide that a union may call a strike over
34.
Wage differentials refer to situations wherein different workers receive different
rates of wages for performing the same kind of work and holding down the same
35.
Generally, only those who work the third, or “graveyard” shift tend to receive a
36.
Handicapped workers cannot legally be paid less than employees who are not
37.
There is nothing in the federal wage and hour law that prohibits employers and
38.
Pyramiding refers to the practice of paying weekly overtime premiums for hours
39.
Because most labor agreements allow employers to force employees to work
40.
During periods of high unemployment, unions will attempt to negotiate overtime
42.
Under most flextime agreements, there is a period of time during the workday when
43.
Management is basically opposed to the concept of job evaluation because the
process of developing detailed, individual job descriptions and detailed analyses of
44.
Concessionary bargaining refers to a situation where unions give back previously
45.
Periods of wholesale union concessions to employers have occurred with great
47.
Lump-sum payments, as an alternative to wage increases, largely offset low wage
48.
Between the late 1990s and 2002, factory workers lost 1.7 million jobs in the United
49.
Concessionary bargaining violates the deeply rooted union principle of “equal pay for
50.
Two-tier wage plans are likely to vanish within perhaps a decade as a feature of
Multiple Choice # 1
1. In recent years, wage and wage related disputes have accounted for
2. The use of the comparative norm principle in wage negotiations
3. Which of the following is a limitation of the comparative norm approach?
4. Which of the following is not a limitation of the comparative norm principle of wage
determination?
5. Industry payments for non-wage economic benefits, as a percentage of total payroll, over the
last 20 years have
6. The ability-to-pay method of wage determination is not influenced by the
7. With all other factors equal, the employer is more likely to be able to pay a wage increase
when
8. The Kennedy-Johnson guidelines of the 1960s
9. Nixon’s wage and price control program of 1971 was
10. The Carter wage guidelines program of the late 1970s
11. During the Carter Administration, the AFL-CIO announced that it would support
12. Voluntary wage-price guidelines were not imposed by President
13. The Consumer Price Index is regularly published by the
14. During the soaring inflation of 1978–1981, the major determinant for wage negotiations was
15. The inclusion of wage escalator clauses in collective bargaining agreements
16. Escalator agreements
17. Under the wage reopener procedure
18. Lower wage differentials are legal except when based on
19. Premium wage differentials are often provided
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20. For hours worked in excess of the standard workday or workweek, the employer is required
to pay employees
21. In many collective bargaining agreements
22. Labor agreements and arbitration decisions have established standards that employers must
follow before disciplining employees who refuse to work overtime, such as the employer must
23. Under most flextime schedules
24. Job evaluation, through the use of job descriptions and detailed analysis, attempts to rank
jobs in terms of their
25. The use of job evaluation to establish relative wage rates is
Multiple Choice # 2
1. Which of the following is not considered a wage issue in collective bargaining?
2. Which of the following standards is not used at the bargaining table for the purpose of
determining a wage rate?
3. Which of the following is not presumed by the comparative norm principle of wage
determination?
4. Which of the following are wage systems under which workers are sometimes paid?
5. In recent years, the steel industry has conducted negotiations
6. The individual incentive, or “piece” system of wage payment
7. Fringe benefits today count for what percent of an employer’s total wage bill?
8. Which of the following does not affect a company’s ability to pass increased wage costs to the
consumer?
9. Wage and price controls were first imposed by
10. Scholars generally agree that mandatory wage and price controls
11. Organized labor has objected to all attempts at wage and price controls in the 20th century
because, in its opinion they
12. The cost of living criterion is not as universally used by labor and management wage
bargainers as are comparative norm and ability-to-pay because
13. The major limitation of using the cost of living in determining wage rates is that
14. The Bureau of Labor Statistics regularly publishes
15. Which of the following does not tend to increase the frequency with which escalator clauses
are included in labor agreements?
16. The annual improvement factor
17. The basic difference between a wage reopener clause and an escalator clause in a labor
agreement is the
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18. Which of the following is not a characteristic of the wage reopener?
19. Wage differentials are
20. The Fair Labor Standards Act
21. The major reason that unions object to overtime provisions in contracts is that
22. Management support of job evaluation as a method for establishing relative wage rates for
particular jobs includes all but one of the following:
23. It is not true that
24. Which of the following is not a reason that some employers have become disenchanted with
the two-tier wage system?
Essay Questions
1. Discuss the advantages and limitations of the comparative norm, ability to pay, and cost of
living methods of wage determination. In your opinion, should industry rely on only one of
these approaches? Why or why not?
2. Discuss the philosophy and technique of the COLA approach to wage determination. What
are the limitations of this method?
3. Have governmental attempts in relatively recent years to hold down prices and wages been
successful? Why or why not?
4. Contrast job evaluation and job comparison.
5. Compare and contrast concessionary bargaining and two-tier wage systems.
6. Why might an employer prefer the wage reopener to a COLA as method of wage adjustment?
Be sure to explain how each works in your answer.
7. When using the ability-to-pay method of wage determination, what factors need to be
included in evaluating an employer’s ability to pay?
8. What regulations and limitations apply to employers regarding overtime?
9. Discuss the concept of concessionary bargaining. In your answer, show your understanding of
its purposes; its relationship to the economy; and its successes and failures in relation to its
purposes.
10. Analyze the two-tier wage system. Do you feel this is a valuable system for wage
determination? Why or why not?
Term Paper Topics
1. The comparative norm, ability to pay, and cost of living methods of wage determination.
Analyze the limitations of each and discuss why one approach may be more appropriate, or
at least more popular, at certain times than the others.
2. Voluntary and mandatory wage/price controls. Research the problems with both approaches,
paying special attention to the Nixon and Carter attempts to hold down prices.
3. Flextime: Its successes and failures.
4. Concessionary bargaining. Discuss the character of the concessions granted employers by
unions in recent years and indicate what the involved employees received in return.
Determine the chances of such concessions actually saving jobs.
5. Two-tier wage systems: How advisable are they?