Competing Through Technology:
Longshoremen and Automation: Competing Company and Worker Interests
This vignette discusses a legacy contract issue revolving around royalties paid to longshoremen
based on the weight of containers handled each year to compensate for lost wages due to
automated shipping container handling technology. These royalties cost as much as $1.8 billion
annually (over and above the average longshoreman’s wages and benefits of $124,000 per year),
and the representative of the container handling companies the US Maritime Alliance Ltd. says
they are no longer sustainable. The big issue here is whether or not the union representing these
workers can strike over this issue (their work allows about half of the containerized maritime
trade to enter the US through East and Gulf ports), or whether the White House would consider
using emergency powers under the Taft-Hartley Act to order strikers back to work.
Discussion Questions
1. Should the longshoremen be paid to compensate for lost jobs and lost hours that resulted
from employers introducing labor-saving technology?
2. What are the consequences of the royalty payments for workers, companies, and
consumers?
At first glance, the $1.8 billion in royalties annually would seem to add a large cost factor
A. Management’s Willingness to Take a Strike—Willingness is determined by the
answers to two questions.
1. Can the company remain profitable over the long run if it agrees to the
union’s demands?
2. Can the company continue to operate in the short run despite a strike?
3. The following factors help determine whether management is able to take
a strike:
a. Product Demand—If it’s strong, there is greater potential loss for
management.
b. Product Perishability—A strike timed with perishability of a crop
results in permanent revenue loss.
c. Technology—A capital-intensive firm is less dependent on labor
for continued operation.
d. Availability of Replacement Workers—(Note that the Clinton
Administration issued an executive order that at the time of
publication was under an injunctive order. This executive order
prohibits federal contractors from permanently replacing striking
workers).
e. Multiple Production Sites and Staggered Contracts—These permit
the shifting of work from a struck site.
f. Integrated Facilities—If parts are not available from a struck plant,
other facilities may be shut down.
g. Lack of Substitutes for the Product—A strike is less costly if
customers cannot purchase substitute goods.
B. Impasse-Resolution Procedures: Alternatives to Strikes
1. Mediation is provided by the Federal Mediation and Conciliation Service.
While a mediator has no formal authority to force a solution, he or she acts
as a facilitator for the parties, trying to help find a way to resolve an
impasse.
2. A fact finder is most commonly used in the public sector. The fact finder’s
job is to investigate and report on the reasons for the dispute and both
sides’ positions.
3. Arbitration is a process through which a neutral party makes a final and
binding decision. Traditionally, rights arbitration (the interpretation of
contract terms) is widely accepted, while interest arbitration (deciding
upon the outcome of contract negotiation) is used much less frequently.
1 VIII. Union and Management Interactions: Contract Administration
The grievance procedure is a process developed to resolve labor management disputes
over the interpretation and implementation of the contract. The two processes—
negotiation and administration—are linked.
1. The WWII War Labor Board first institutionalized the use of a third-party
neutral, called an arbitrator (now, the final step in the grievance process).
2. The effectiveness of grievance procedures may be judged on three criteria:
a. How well are day-to-day problems resolved?
b. How well does the process adjust to changing circumstances?
c. In multi-unit contracts, how well does the process handle local
contract issues?
3. The duty of fair representation is mandated by the NLRA and requires
that all bargaining-unit members, whether union members or not, have
equal access to and appropriate representation in the grievance process. An
individual union member may sue the union over negligent or
discriminatory representation.
4. Most grievance procedures have several steps prior to arbitration, each
including representatives from increasingly higher levels of management
and the union (Text Table 14.11).
5. Arbitration is a final and binding step. The Supreme Court, through three
cases known as the Steelworkers’ Trilogy, confirmed the credibility and
binding nature of the arbitrator’s decision.
6. Criteria arbitrators use to reach decisions include:
a. Did the employee know the rule and the consequences of violating
it?
b. Was the rule applied in a consistent and predictable way?
c. Were the facts collected in a fair and systematic way?
d. Did the employee have the right to question the facts and present a
defense?
e. Does the employee have the right of appeal?
f. Is there progressive discipline?
g. Are there mitigating circumstances?
Competing Through Globalization:
Renault Plays France against Spain in Hopes of Improving Production Costs and
Flexibility
This is the case of French auto manufacturer, Renault, and their attempt to achieve greater
workforce flexibility and lower costs in France as they were able to achieve in Spain. In France
and much of Europe, the auto manufacturer is still maintaining the same levels of workers when
production is low as when production and sales were at higher levels. CEO Carlos Ghosn claims
reductions of the size of the workforce and changes in work rules are necessary for the company
to return to profitability and being competitive.
Discussion Question
1. Do you believe that Renault will succeed in its proposal to its French workers?
2. What leverage does Renault have?
The short answer here is to move production. In today’s global economy, organizations
2 New Labor-Management Strategies
1. There are signs of a transformation from an adversarial approach to a less
adversarial and more constructive approach to union-management
relations.
IX. Labor Relations Outcomes
A. Strikes—See Table 14.14 in the text for U.S. strike data. Note that strikes occur
very infrequently.
B. Wages and Benefits—In 2012, private-sector unionized workers received, on
average, wages that were 27% higher than nonunion counterparts.
1. The union-nonunion gap is most likely overestimated due in part to the
ease of organizing higher skilled (therefore more highly paid) workers.
The “union threat” more than likely causes an underestimation of the
differences. The net union advantage in wages are 10 to 15%.
2. Unions influence the way in which pay is given (across-the-board wages
on top of occupational wage rates). Promotions are in large part based on
seniority.
C. Productivity
1. Unions are believed to decrease productivity in three ways:
a. The union pay advantage motivates management to use more
capital per worker, which is inefficiency.
b. Union contracts may limit workload, and so on.
c. Strikes and other job actions result in some lost productivity.
2. Unions, alternatively, may increase productivity:
a. Unions provide more efficient communication with management,
which may reduce turnover.
b. The use of seniority decreases the competition between workers.
c. The presence of a union may encourage management to tighten up
in terms of consistency on work rules, and so on.
3. Overall, studies have concluded that union workers are more productive
than nonunion workers although the explanation is not clear.
D. Profits and Stock Performance—These may suffer under unionization if costs are
raised or decrease investment by a greater amount. Recent studies have shown
negative effects on profit and shareholder wealth. These research findings
describe the average effects of unions. The consequences of more innovative
union-management relationships for profits and stock performance are less clear.
X. The International Context—The United States has both the largest number of union
members and the lowest unionization rate of any Western European country or Japan,
aside from France and Korea (Text Table 14.15). A number of potential explanations
exist.
A. The growing globalization of markets (EC common market, NAFTA, etc.) will
continue to put pressure on labor costs and productivity. Unless U.S. unions can
increase productivity or organize new production facilities, union membership
may continue to decline.
Competing Through Sustainability
Saving Multi-Employer Pensions: Employees Pay the Price
This vignette speaks to a coalition of unions requesting changes to pension laws (ERISA)
concerning pension benefits paid out. These laws impact multi-employer pension plans (such as
those found in the construction, trucking or retail food industries). This coalition claims that
these changes are necessary to ensure the solvency of up to 150 such plans. A counter argument
(proposed by the Pension Rights Center) claims that the long-term survival of the plans might
not be consistent with the best interests of older retirees who would also see a decrease in their
pension benefits.
Discussion Question
1. Do you agree with the proposed changes to ERISA? If not, do you have an alternative
solution?
Since this is an opinion question, student responses will vary. Creative thinking is going
2. Have you seen other companies (e.g., in the automobile industry) that have faced similar
problems? What was done in those cases?
Again responses here will be based on the student’s experience. One unfortunate but
The United States differs from Western Europe in the degree of formal worker participation in
decision-making. Work councils and codetermination are mandated by law in Germany.
XI. The Public Sector—During the 1960s and 1970s, unionization in the public sector
increased dramatically. As of 2012, 35.9% of government employees were covered by a
XII. Nonunion Representation Systems – With unions now representing just 11.3% of U.S.
workers, the question is to what degree are forms of nonunion representation operating to
2.1.1.1 A Look Back
The membership rate, and thus influence, of labor unions in the United States and in many other
countries has been on the decline in the private sector. As the chapter opening demonstrates
however, unions recognize that one way to slow or reverse this downward trend would be to
have greater success organizing workers in the new economy jobs and companies.
2.2 Questions
1. Many people picture labor union members as being men in blue-collar jobs in
manufacturing plants. Is that accurate? Are there certain types of jobs where an
employer can be fairly certain that employees will not join a union? Give examples.
Student responses will vary, but should include that although many blue-collar jobs are
Students could mention that managers in high-tech fields with young workers may be
2. Why do people join labor unions? Would you be interested in joining a labor union if
given the opportunity? Why or why not? As a manager, would you prefer to work with a
union or would you prefer that employees be unrepresented by a union? Explain.
2.2.1.1.1.1.1.1.1 Students’ responses will vary about whether they would be interested in joining a union
and why.
Students will have different opinions on whether, as a manager, they would prefer to
work with a union or not.
3. What led to a change in labor relations at Chryler’s Dundee engine plant? What was the
nature of the change and do you think it is an important and sustainable change?
Student answers will vary but may cite the external environment and the global economy
(along with global competition) as reasons for change. The change itself has 2
objectives: 1. to increase the involvement of individuals and work groups in overcoming
solving and 2. to reorganize work so that work rules are minimized and flexibility in
4. What role do (or can) labor unions play in low-wage countries such as China and
Bangladesh?
The role for labor unions in these regions seems to be similar to the roles unions played