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MU Labor Education Program

Collective bargaining

Historical Models of Collective Bargaining in the U.S.

Paul K. Rainsberger
Director

The predominant collective bargaining model in the United States is only one of a number of alternative methods through which workers have historically attempted to exert collective power over the determination of wages, benefits and conditions of work. Before evaluating the modern collective bargaining practices and results, it is important to identify some of these alternatives that have been at least temporarily abandoned by workers in this country.

The starting point for distinguishing forms of collective action is recognition of the different means through which workers may attempt to achieve control over their conditions of work. Labor organizations may be broadly classified as either political or economic organizations. In theory, political unions attempt to exercise power over the organization of work through political action, looking to government or the political process to establish terms and conditions of work and economic security for workers. Economic unions attempt to achieve similar goals through the economic arena, through direct interaction with the employers of workers. Although virtually all modern unions in the United States are economic organizations, albeit with significant political agendas, this has not always been the case. A number of efforts to establish political movements of workers in this country have occurred, although none has achieved long-term stability.

The earliest economic labor organizations in the United States were temporary unions. Workers banded together to raise their wages or resist wage cuts without any effort to maintain an organizational structure between labor disputes. Even when efforts to establish a permanent structure emerged, the new permanent unions tended to have a short life span. Consolidated economic power in times of relative prosperity was generally counterbalanced by the destruction of early organizations in times of economic depression or panic. In contrast, early political labor organizations tended to be countercyclical. Workers turned to political unions in greatest numbers during times of economic depression. Unlike workers' experience in other nations, efforts in the United States to develop permanent and consistent political and economic organizations simultaneously have never achieved long-term success.

A second major issue in evaluating alternative models of labor organization is the identification of the intended beneficiaries of labor's collective action. Labor organizations can be classified as either job conscious or class conscious, depending on whether the goal of the union is to advance the economic and workplace security of an identifiable group of workers or whether the goal is to advance broader working or producing class interests. Occasionally, an organizational form emerges for which neither the job nor the class is the dominant bond between the members. Religious labor organizations represent an organizational model that is based on social relations rather than job or class concerns. Contemporary unions in the United States are generally job conscious organizations, although this has not always been the dominant union goal in this country.

Where modern unions differ is in the determination of which workers or jobs to include in the development of job conscious strategies. By definition, class conscious unions tend to be broadly inclusive, general organizations. While there have been different conceptualizations of a working or producing class historically, craft, industrial or occupational differences tend to be irrelevant or of secondary importance within a class conscious organization. However, these distinctions lie at the heart of the difference between industrial and craft unions. Craft unions attempt to advance the interests of all workers possessing the same skill irrespective of the nature or identity of their employers. Industrial unions attempt to organize all workers engaged in production of the same or similar goods or services, irrespective of individual craft or occupational distinctions. For example, although it now represents workers in a number of occupations and industries, the traditional strategy of the Carpenters' union as a craft organization was to bring into one union all skilled carpenters, whether they were employed in construction, manufacturing or transportation services. In contrast, traditional industrial union strategy, such as that of the United Automobile Workers, was to organize all workers engaged in the manufacturing of the same product, such as automobiles, whether they were skilled craft workers or semi-skilled or unskilled productions workers. The vast majority of modern unions in the United States began as either craft or industrial unions but now constitute multi-craft or multi-industry general organizations.

Perhaps the first rather than the last question relevant for analysis of union strategy and organizational models is the ultimate goal of the union. Unions may exist for either pragmatic or ideological reasons. Unions may either accept the existing economic order and work within that order to achieve a favorable set of economic terms and employment conditions, or they may seek to overthrow the existing economic system and replace it with another. The former strategy has been called "business unionism" or "pure and simple unionism" and was the underlying philosophy of the American Federation of Labor and its affiliated unions. Although modern unions are neither as pure nor as simple in strategic organization, they still tend toward this ideology in the United States. The best revolutionary union example from U.S. labor history was the Industrial Workers of the World, which thrived for a short period in the early twentieth century. In addition to the pragmatic and revolutionary union ideologies, a variety of other philosophical forms of labor organizations have existed at different times during United States labor history. Socialist, collectivist and uplift unions have all experienced some temporary success during various eras in this country's history and remain viable organizations in other parts of the world.

The economic framework for collective bargaining
The model of collective bargaining that has dominated American industrial relations since the 1930s relies on the relative economic power of employers and unions to establish wages, hours and other terms and conditions of employment for workers covered by specific collective bargaining agreements. While bargaining structures and processes are regulated by pubic policy through the National Labor Relations Act, as amended, the content of the employment contract beyond legislative minimums is determined by market factors and relative economic power. While the density of union labor in the United States has been declining in recent years, collective bargaining remains the primary method for determining working conditions for millions of American workers.

The actual impact of collective bargaining on wages and benefits is difficult to predict for a variety of reasons. However, most estimates suggest that wages in the union-represented sector are between 10 and 30 percent higher than they would be in the absence of unions. The fluctuation of the gap over time is attributable to various economic factors that tend to effect short and long-term bargaining power.

In the American industrial relations system, union bargaining power tends to be greatest when two factors are present. One is the ability of the employer to meet the wage and benefit demands of the union. The second factor is the ability of the union to make the employer pay, to direct its economic resources toward higher wages and better benefits rather than for other purposes. If either of these factors is not present, union bargaining strategy is unlikely to produce substantial benefits. At any particular time and in any particular setting, the critical abilities of the employer to pay and the union to make the employer pay will be influenced by a number of issues, some of which are discussed below.

The employer's ability to pay

Product market factors
The employer's ability to meet union wage and benefit demands may result from favorable conditions either in the product market or in the labor market relevant to the employer's business. In the product market, if the employer has the capacity to pass the increased cost associated with improved wages, benefits and working conditions on to the consumer without serious damage to the demand for the goods or services produced, the employer will have the ability to meet union bargaining demands. Some of the methods through which an employer may be in a favorable market position include the following:

  1. Market concentration and administered pricing
    If the market for a particular product is dominated by a very few large corporations, those producers have the ability, within limits, to artificially set the price for the product. For example, the four largest cereal firms in the United States produce 90 percent of the cereal we eat, and the eight largest produce 98 percent. This extensive concentration eliminates substantially the pressure of competitive pricing.
  2. Market expansion
    If the demand for an employer's goods or services is high and expanding, the employer is in a position to pass higher costs on to the consumer. For example, the rapid growth of demand for automobiles through the 1950s and 1960s placed the UAW in a favorable bargaining position. Consumers were willing to absorb higher wage and benefit cost of higher in order to obtain a product in high demand.
  3. Economic cycles
    The cyclical nature of the economy as a whole can also affect the employer's ability to pass costs on to consumers. If a market (local, national or international) is in a period of depression, consumers are unable to absorb increased costs of many commodities because of their lack of spendable income. If times are good and people are working, their personal demand for goods and services increases.
  4. Governmental influences
    A number of governmental policy decisions can have direct and indirect influences on an employer's ability to pay higher wages to workers. Some of the most significant include:
    1. The government as consumer
      The government of any political entity is a major consumer of goods and services produced by private employers. Each year, for example, the federal government spends billions of dollars to buy paper clips, automobiles, filing cabinets, computers, airplanes, books and countless other commodities and services. If the government is willing to absorb cost increases for these items, the employers providing the goods and services can pass along the higher wage costs. This is particularly important when the government is a primary consumer of a particular industry, such as the aerospace industry.
    2. Demand-side social programs
      A number of social programs are designed, in part, to assure that money is made available to maintain demand for goods and services. For example, unemployment compensation insurance is designed to cushion the blow of recessions. When people lose their jobs and income, their demand for goods decreases. By returning a portion of their lost earnings, the government theoretically stimulates demand for goods.
    3. Regulated price setting
      In public utilities and other regulated industries, a governmental unit may have the power to fix the price for the goods and services produced. If a regulatory agency is willing to allow increased costs to be passed on to the consumer, a regulated employer has an increased ability to pay for higher wages and benefits. If the regulated product is one considered essential by consumers, such as electric service, the consumer has little choice but to accept the higher cost of that service.
    4. Subsidies
      In some cases, the role of the government is to serve as a buffer between the employer's increased costs and the consumers' inability or unwillingness to pay higher prices. If the government subsidizes an industry, it allows the employer to charge more fort he product without forcing the consumer to pay more. Subsidies may be either direct or indirect.
    5. Trade and monetary policies
      The government can shift the relative market advantage between domestic and foreign producers through trade policies that either encourage or discourage the consumption of imported goods. The relative cost of domestic goods can also be influenced by the relative cost of money. For example, if the dollar is weak against other currencies, domestic goods are relatively cheaper than imported goods. A weak dollar gives domestic producers a cushion to absorb wage increases without adversely affecting the comparative cost of goods.

Labor market factors

The employer's ability to pay is also influenced by its ability to cut the costs of production by increasing productivity. While a union may generally support an employer in improving product market competitiveness, the union will often resist the employer's efforts to pay higher wages through the reduction of labor-based production costs.

Productivity is simply a measure of the output of a given unit divided by the input. If an employer can increase a factory's output without increasing the hours of work required for that production, the result is an increase in productivity. If a fixed number of workers are producing more for their employers, the employer should have the ability to pay them better wages and benefits. A basic formula for computing productivity is:

Output x Price
Hours

Major methods for increasing productivity include:

  1. Stimulating greater work effort per hour of work, or "speed-up," including work rule concessions. Increasing work effort is the classic productivity strategy, but it is important to keep this method for generating productivity increases in an appropriate perspective. Greater work effort means more than increasing the work pace. The same result can be achieved by decreasing idle work time, which has been a major element of many employer bargaining initiatives in recent years. If the employer is successful in reducing the idle minutes spent before and after breaks, lost production due to maintenance and set-up operations, time spent waiting for inventory, and other production disruptions, the result will be increased productivity. These bargaining initiatives often relate to changes in work rules and practices giving to the employer greater flexibility in the assignment of work tasks and scheduling.
  2. Implementation of labor-saving technological change. In many situations, an employer will reduce its dependency on human labor through technological change. If production tasks that have historically been performed by workers can now be performed technologically, productivity increases through the decreased work hours necessary to produce a given output level.
  3. Reduction of burden, or the number of hours expended in non-productive activities. In determining productivity levels, not all of the working hours are based on actual production. Total production costs include substantial costs for non-productive labor, including supervision, maintenance and other support services. If an employer can reduce these labor costs, a higher percentage of total labor will lead to actual production and therefore greater productivity. The gain may be either temporary or permanent, however. For example, a long-term strategy of avoiding maintenance may increase productivity in the short-term by reducing burden. In the long-term, any labor cost savings may be eliminated through the increased idle time resulting from inoperative machinery. Recent bargaining trends illustrate the strategy of increasing productivity through reduction of burden. Eliminating craft distinctions between maintenance workers, cross-training skilled trades workers, contracting out janitorial and maintenance services, and shifting routine maintenance tasks to production workers are all initiatives expected to reduce labor costs associated with burden.

Union's ability to make the employer pay
Even if an employer is in a position to pay higher wages and benefits and to improve working conditions, many employers will not do so unless forced to do so, directly or indirectly, by a strong union. Some major factors that strengthen or weaken a union's power with respect to an employer in bargaining are discussed below.

Organization of the relevant workforce

To solidify bargaining power, an important union goal is to organize those workers that represent a threat to union member wage levels and job security. Union structure and goals and the labor market in which it operates help determine the appropriate organizational focus for that union.

  1. Craft-based unions
    In some unions, the goal is extend the collective bargaining agreement to all workers sharing the same skills. This is particularly common in the construction industry where unions tend to be organized along strict craft lines. For example, the primary threat to union-represented electrician wage scales is a contractor's ability to find and employ non-union electricians. A traditional method for protecting against this risk is for the union to control the craft knowledge through union-controlled or dominated apprenticeship programs and hiring halls or referral systems.
    A major for craft unions is in part attributable to short term planning in the relatively prosperous years of the 1960s. When there was plenty of work for union members, the unions enjoyed relatively low unemployment and concentrated their referrals to the lucrative industrial and commercial projects. The less stable, lower wage residential construction market was left to the non-union sector of the industry. In the short term, this was not a major problem because most union members were working. However, by allowing non-union entry into the residential market, unions' control of craft knowledge suffered significant erosion. The non-union sector became a training ground in direct competition with the union apprenticeship programs. As the construction market weakened, these non-union workers became more attractive to industrial and commercial builders because they brought lower wage levels and an acceptable level of skill.
  2. Industrial unions
    Industrial unions' goal is to bring all workers engaged in specific manufacturing processes under the same bargaining patterns. If a union's jurisdiction is defined by identifiable product or service lines, it is described as an industrial union. A goal of the United Steelworkers of America, for example, is to extend the same or comparable working conditions to all workers engaged in the domestic steel industry.
    If an industrial union is successful, any employer manufacturing the specific product anywhere in the country would be subject to the same general terms and conditions of employment. If the union is not successful, the presence of non-union plants with substandard working conditions undermines the union's bargaining power in the organized sector.
    Logically, this strategy results in wage and benefit levels being highest in those economic sectors with the highest percentage of union-represented workers. In sectors where unions have been less successful in organizing, wages are generally lower. In the 1980s and 1990s, employers have emerged in nearly every industry that have remained non-union, even in their domestic operations. The presence of Honda, Nissan, Toyota and other non-union automobile facilities in the United States represents one example of the erosion of traditional union bargaining power.
  3. Geographical constraints
    In any situation, the relevant workplace for organizing and collective bargaining is defined in part by geography. If a union focuses organizing attention on the assumption that workers are part of a local labor market but the employer is able to import workers or export work to a different market, the union stands to lose bargaining power. For example, construction work has traditionally been a local labor market industry. However, in recent years, large and highly mobile national contractors have developed the ability to move non-union workers into and out of local markets, creating a new definition of the relevant workforce for construction unions.
    The same trend has occurred in industrial unions. Major corporations first began to move work out of the high wage, heavily unionized northeastern and midwestern states and into the low wage southern regions of the country. Those same employers subsequently moved increasingly off-shore, out of the organizing reach of unions that are traditionally based on national labor market assumptions. Industrial organizing strategy is to follow the work wherever it is done. To respond to the international mobility of capital, unions have a vested interest in the development of strong unions internationally.
  4. General unionism
    Traditional industrial union organizing assumptions have not worked with many employers that can no longer be identified with a single product. Industrial diversification allows an employer to become less dependent upon any single product, and therefore more capable of avoiding union bargaining power. For example, R.J. Reynolds began its corporate life in the tobacco industry but now owns businesses engaged in dozens of unrelated product lines. If a company has the power to avoid high wages in a given industry by getting out of that industry, union bargaining power in the core industry will erode.
    General union principles suggest that a union's organizing and bargaining goals should follow a company not only geographically but also industrially. If USX (formerly US Steel) can avoid steelworker wages by redirecting its capital investment into the oil industry, the steelworkers' bargaining strength is eroded. Similarly, diversification of General Motors Corporation represents a threat to the UAW's bargaining power. Corporate-wide pattern or coordinated bargaining is a response to the conglomerate mergers that is similar to the development of industry-wide pattern bargaining in traditional product-defined industrial unionism.

Avoidance of competitive unionism

Union bargaining strength is also weakened by wage competition between more than one union in a given industry or with a particular employer. Corporate exploitation of competitive unionism in the electrical appliance industry immediately after World War II is a classic example of this problem. A fairly common management bargaining strategy based on competitive unionization has been called "Boulwareism" after the Vice President for Industrial Relations of the General Electric Corporation who was the architect and master of the strategy.

Following World War II, one union (the United Electrical Workers) had organized the electrical appliance industry to about the same extent as the UAW in the auto industry and the USWA in the steel industry. The UE was one of several unions that left or were expelled from the CIO for alleged communist influence. This opened the industry to wide-spread competitive organizing by several AFL, CIO and independent unions. The result was that thirteen different national unions negotiated sixty separate contracts with the industry leader, General Electric.

Lemuel Boulware of GE was extremely successful for several years in exploiting this competitive unionization. Boulware's tactics were relatively simple. GE did an assessment of union strength in each organized facility. The company presented a uniform set of proposals to all locals and resisted making any changes in its bargaining package. After tying up negotiations throughout the corporation, Boulware would target what appeared to be the weakest local union and offer that local a slightly better contract than was presented elsewhere. After the weak union settled, the company was able to force other local to accept the same package since no single union could launch a successful strike as long as others were working.

Development of appropriate bargaining structures

In addition to worker organization, a union must also develop a bargaining structure that allows the union to eliminate wage competition. Normally, this will require some concentration of power within the union to assure that weak locals or national unions do not undermine strong ones. The GE strategy, above, illustrates the problems resulting from a lack of coordination. Some of the most common bargaining structures in the United States are discussed in this section.

  1. Scope of bargaining units
    1. Single plant/single union agreements
      In some locations, a local union still bargains with a single employer directly, leading to a collective bargaining agreement covering a single facility. While this structure is quite common, a local union in this bargaining position is apt to be guided by a need to remain a part of a pattern within the relevant industry. Many small auto parts suppliers (and some large ones) are examples of this mode.
    2. Corporate-wide agreements
      With large producers in a single industry, a typical bargaining structure involves a national union negotiating a master contract covering all organized plants and local unions negotiating supplements to that national agreement. This is the bargaining structure between the UAW and each of the Big Three automobile manufacturers.
    3. Industry-wide agreements
      In industries characterized by a large number of relatively small producers and a single large union, a multi-employer, industry-wide bargaining structure is common. For example, the United Mine Workers negotiate a single contract covering numerous independent coal mine operators that are part of the Bituminous Coal Operators Association. Another example of this structure is the Master Freight Agreement negotiated between the Teamsters and part of the trucking industry.
    4. Area-wide agreements
      Craft unions often negotiate a single agreement covering all employers of that craft in a local labor market. This is similar to industry-wide bargaining, except on a more limited geographical basis. The IBEW and local Electrical Contractors Associations bargain under this structure.
  2. Bargaining patterns beyond the unit
    Irrespective of the formal bargaining structure, the elimination of wage competition in bargaining requires that a union look beyond the specific contract to determine an appropriate strategy. It is also necessary to eliminate wage competition among different employers within the same industry.
    1. Pattern bargaining
      In any structural approach to bargaining, there is a strong likelihood that the terms of any specific contract will be influenced by a broader pattern. For example, while the UAW/GM contract is a corporation-side agreement, it is also part of an auto industry pattern. Local agreements between a single union and single plant in the supplier industry may also be negotiated in a manner consistent with the auto industry pattern.
    2. Coordinated bargaining
      If the various plants of a single corporation bargain with different unions, the unions may attempt to keep terms relatively consistent in order to establish a pattern. This is done through the exchange of information, bringing contract expiration dates closer in line with each other, and coordination of strategies among the various unions involved. In the AFL-CIO, the Industrial Union Department collects data and provides assistance to unions involved with a large number of highly diversified corporations.
    3. Coalition bargaining
      When more than one union represents different units of the same company, it may be desirable for those unions to actually sit together in their separate negotiations with that employer. In response to Boulwareism, eight national unions negotiating local agreements with GE sent observers to sit in on individual negotiations with the company.
      With any identified bargaining structure, a constant problem for unions is that corporate structures can change much more rapidly than bargaining structures. It is important for union bargaining structures to remain sufficiently flexible to respond to corporate merger, diversification and conglomeration activities and changing investment strategies.

Updated 4/29/09