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III. Your Turn: Predicting a Contract’s Clauses
Summary of Case
It introduced technologies that reduced the number of workers needed, both in the
The realities for the union auto workers are as follows:
Unions preach fairness and equity. Workers are attracted to unions in part because they
fight for fairness and equity.
Unions have faced catastrophic reductions in their membership. Companies, seeking to
survive in a global environment, assert they cannot afford the costs (and reduced freedom
in decision making) that accompany unionization.
Learning Objective
Analyze and evaluate the facts and issues of the case study to explain why the following
components of the new agreement between GM and UAW are predictable outcomes.
Teaching Guideline
Use this case to discuss the challenges of resolving union-management conflicts.
Discussion of Case Issues
1. Given all the information, explain why the following components of the new agreement
are predictable outcomes.
a. The new agreement gives a $5,000 signing bonus to eligible UAW-represented GM
no longer job openings.
e. GM agreed to restart production at an idled plant in Spring Hill, Tennessee, and to
start assembly of new products at factories in Michigan.
b. Student answers may vary. This agreement is also based on the two-tier wage plan in
which new hires are paid substantially less than workers who were hired before the
two-tier plan was initiated.
direct function of the profit in that particular. In order to reduce the risk factor in this
clause, the union has asked GM to base the profit-sharing formula only on GM’s North
American profits and not on global profits.
job openings.
e. Student answers may vary. The auto industry is a stronghold of unionization that
Michigan.
Answers to Review Questions
1. What is spillover? How does it lead to underestimation of the impact unions have on
wages?
Spillover effect, specifically, involves employers seeking to avoid unionization by offering
workers the wages, benefits, and working conditions won in rival unionized firms. Although
factors diminish the impact unions have on wages.
2. Why don’t many public sector unions have the right to strike, a weapon almost
universally guaranteed in the private sector? Make your explanation based on
compensation.
organizations could then be attributed to unionization (a union wage premium).
Unfortunately, few such situations exist. One alternative strategy that has been adopted is to
identify organizations within the same industry that differ in level of unionization. For
shut down the entire industry could be thwarted by nonunion firms). Consequently, any
union, would lead to underestimation of union impact on wages.
3. If merit pay is supposed to increase individual equity and unions are very concerned
about equity, why do unions frequently oppose merit pay for their membership?
Merit pay is traditionally based on individual performance. Unions prefer administrative
In Chapter 11, the different errors that raters make in the normal course of deciding who will
get merit awards were discussed. Even beyond this, though, unions fear reprisals against
4. It is probably true that, if given a choice, unions would prefer to implement a
skill-based pay system rather than some form of gain-sharing plan. Why?
Unions prefer wage increases linked to objective measures over which employees have
Most other measures used to determine wage increases are less objective than seniority.
While some forms of gain sharing plans may also have objective performance standards
(measures of costs and productivity), there are usually some elements of subjectivity even in
