mcgraw-hill © 2005 the mcgraw-hill companies, inc. all rights reserved. 15-1 union role in wage and...
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McGraw-Hill © 2005 The McGraw-Hill Companies, Inc. All rights reserved.
15-1
Union Role in Wage and
Salary Administration
Chapter
15
McGraw-Hill © 2005 The McGraw-Hill Companies, Inc. All rights reserved.
15-3Median Weekly Earnings of full-time wage and salary workers by union
affiliation and industry, 2005Union Nonunion
Private wage and salary 757 615(23% premium)
Mining 905* 865*Construction 933 590Manufacturing 722 667Transportation and utilities 864 676Wholesale and retail trade 615 562Government 850 692* (2004 data)Percentage increase, 2004-05, private sectorUnion: 2.4%Nonunion: 1.8%
Source: U.S. Department of Labor, Bureau of Labor Statistics, January 2006.
McGraw-Hill © 2005 The McGraw-Hill Companies, Inc. All rights reserved.
15-4
Union Impact on General Wage Levels
Unions do make a difference in wagesUnion workers earn between 8.9% and
12.4% more than nonunion workersSize of gap varies from year to year
During periods of higher unemployment, impact of unions is larger
During strong economies, union-nonunion gap is smaller
Union-nonunion wage differentials in public sectorUnion employees earn about 16 – 19%
more than their nonunion counterparts
McGraw-Hill © 2005 The McGraw-Hill Companies, Inc. All rights reserved.
15-5
Structure of Wage Packages
Three dimensions related to wage structure
Division between direct wagesand employee benefits
Evolution of two-tier pay plans
Relationship between worker wages and pay of managers in union and nonunion environments
McGraw-Hill © 2005 The McGraw-Hill Companies, Inc. All rights reserved.
15-6
Wage Structure: Two-Tier Pay Plans
Two-tier pay structures are a phenomenon of union sector Contract differentiates pay based upon hire date Employees hired after a target date will receive lower wages
than their higher-seniority peers in similar jobsFrom management’s view, wage tiers are a viable
alternative pay strategy Cost control strategy to allow expansion or investment Cost-cutting device to allow economic survival
From a union’s perspective, wage tiers are viewed as less painful than Wage freezes Staff cuts among existing employees
However, tradeoff bargained away equivalent wage treatment for future employees
McGraw-Hill © 2005 The McGraw-Hill Companies, Inc. All rights reserved.
15-7
Two-Tier Pay Plans Recent two-tier agreements
Delphi, Visteon/UAW Caterpillar/UAW S. Cal grocery ers/UFCW
Workers on lower tier have more negative attitudes Effects of permanent and temporary plans differ Perceived employment mobility moderates attitudes
Low mobility workers had more positive attitudes than high mobility
Source: Townsend and Partridge (1999)
McGraw-Hill © 2005 The McGraw-Hill Companies, Inc. All rights reserved.
15-8
Union Impact: The Spillover Effect
Employers seek to avoid unionization by offering workers wages, benefits, and working conditions won in rival unionized firms
Outcomes
Nonunion management continuesto enjoy freedom from union“interference” in decision making
Workers receive “spillover” of rewards obtained by unionized counterparts
McGraw-Hill © 2005 The McGraw-Hill Companies, Inc. All rights reserved.
15-9
Role of Unions in Wage andSalary Policies and Practices
Role of unions in administering compensation is outlined in contract
Basis of payRegular payOvertime payPay for nonstandard shifts Incentive pay
Occupation-wage differentialsExperience/merit differentials
Automatic progression based on seniorityMeritCombination of automatic and merit progression
McGraw-Hill © 2005 The McGraw-Hill Companies, Inc. All rights reserved.
15-10Role of Unions in Wage andSalary Policies and Practices
(cont.)
Other differentialsPay to unionized employees employed by
firm in different geographic areasPart-time and temporary employees
Vacations and holidaysWage adjustment provisions
Deferred wage increasesRe-opener clausesCost-of-living adjustments (COLAs) or
escalator clauses
McGraw-Hill © 2005 The McGraw-Hill Companies, Inc. All rights reserved.
15-11
Unions and Alternative Reward Systems
When employers face extreme competitive pressures, unions are receptive to alternative reward systems linking pay to performance
Union stipulationsEquity issue involves use of group-based
measures with equal payoutsMinimize bias
Use of objective performance measures in unionized firms
Use of measures based on past performance20 percent of all U.S. collective bargaining agreements permit some alternative reward system
McGraw-Hill © 2005 The McGraw-Hill Companies, Inc. All rights reserved.
15-12
Types of Alternative Reward Systems
Lump-sum awards Given in lieu of merit increases
Employee stock ownership plans (ESOPs) Give employees part ownership in company
Pay-for-knowledge plans Pay employees more for learning a variety of
different jobs or skillsGain-sharing plans
Align workers and management in efforts to streamline operations and cut costs
Profit sharing plans Allows union members to share wealth with more
profitable firms
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