Chapter 12: Role of Government, Public Sector, and Unionization

Role of Government

  • Difference between sectors is dual role of government
  • As employer \rightarrow government is party to collective bargaining - required to be neutral
  • State intervention in collective agreement results in permanent dismantling

Imperfect Labour Market

  • Noncompetitive markets (service by teachers, nurses, police)
  • Monopoly power
  • Characteristics \rightarrow low wages. chronic labour shortage

Public goods - Item whose consumption does not reduce amount available for others

  • Inefficiently provided in competitive market either because of high capital costs or because individuals can’t be charged for products

Politics and public opinion

  • Play major role in public sector than in private sector
  • Government earn revenue during strike/lockout \rightarrow pressure comes from loss of services and public perception
  • Public opinion is important in determining collective bargaining outcomes
  • Parties settle collective agreement outcomes that are less visible and long term (group benefits, pensions)
  • Line between politics \rightarrow policy making in a democracy and CB agenda of terms and conditions of employment
  • Public employees can't bargain over policy matters

History of Public Sector

Union growth factors

  • Social upheaval
  • Civil rights
  • 1968 \rightarrow Attracted civil rights movement leaders \rightarrow issues were union recognition, unsafe working conditions, very low wages
  • Growth of public services
  • Public service grew in 1960's \rightarrow 1970's
  • With the growth there were more members
  • Dissatisfaction with existing employee voice mechanism
  • Public employees demand for decent wages and working conditions increased many of weaker organizations were transformed or merged into unions
  • Union mergers
  • Merger reduced inter-union competition and increased resources for organizing new members
  • Relative absence of employer opposition
  • Removal of legal barriers

An Economic Analysis of Union Power

Greater union power exists because

  1. Some services if disrupted present danger to health and safety of public
  2. Demand is relatively inelastic
  3. Public sector strikes affect public who have the power to punish only of the parties
  • Marshall’s conditions - Four conditions from chapter 3 they determine the elasticity of demand for labour and wage employment trade off, unions are more powerful when
  1. Demand is inelastic
  2. Gives more power to public sector unions
  3. Labour is not easily substituted
  4. Supply substitute is inelastic
  5. Rising prices of substitutes will not likely be major deterrent to replacing labour in either the public or private sectors
  6. Labour is small proportion of total costs
  7. Reduces union power in the public sector

Dispute resolution in public sector

  • Essential public employees couldn’t be allowed to walk off their jobs because of irreparable harm that might be done to public and because union bargaining power would result in excessive wage gains in negotiations
  • Policies range from ban on all strikes and lockouts to a private sector model where all strikes are permitted
  • Disputes over what is essential service in Ontario are decided by Ontario Labour Relations Board
  • Result of various strikes policies is a legislative patchwork of conditional right to strike. Interest arbitration, and in few cases laws that give union the choice of striking arbitration
  • Because of inconsistency across jurisdiction and occupations it is difficult to identity patterns of dispute resolution
  • Police and firefighters tend to be restricted by laws that ban strikes and substitute interest arbitration
  • Difficult policy questions involve determination of what constitutes essential services in order to assess essential services policies occupations are ranked
  • Police and fighters are at the top, with hospitals, utilities and teachers & educational authorities

More Recent Developments in Dispute Resolution

  • Three Models
  • Unfettered \rightarrow Strike model
  • Services are essential, unions may have too much bargaining power because they determine what services are to be provided in the event of a strike or lockout
  • Advantage of producing the most freely negotiated settlement
  • Designation model
  • Neutral tribunals are available
  • No \rightarrow strike (or interest arbitration) model
  • Right to strike is substituted with interest arbitration
  • Chilling Effect - Lack of bargaining flexibility caused by the parties fear that a concession made in negotiations will reduce the arbitration outcome
  • Example \rightarrow MGM asks for 1% and unions asks for 5% arbitration will give 3% therefore if either MGM or union were to modify its offer before arbitration it would run the risk of adversely affecting its arbitration outcome
  • Narcotic or Dependency Effect - Result of frequent use of arbitration that may cause parties to lose the ability to freely negotiated settlements without third party assistance
  • Impact on wage outcomes
  • interest arbitration wage outcomes are higher where unions have the right to strike
  • Loss of control
  • opposition to interest due to loss of control over outcomes

The four generations of public sector bargaining

Dividing into period and generations

  1. Represents growth phase of employment and union.
  2. Characterized by retrenchment and citizen of resistance.
  3. Put great emphasis on performance and productivity of public service.
  4. Which is the current public employees are increasingly under attack on related fronts of collective bargaining and restructuring of service

Management Issues

  • Restructuring - An international phenomenon
  • With new global paradigm \rightarrow more emphasis on job performance and efficient
  • New public MGM (NPM ) \rightarrow in developed countries where private sector practice are emphasized and service provisions
  • Problem: appropriateness of exporting private sector MGM values and practices into public domain
  • Evidence is in table 12.2
  • Downsizing policies were pursued by strengthening the hands of provisional and federal finance ministries to impose spending limits, reducing transfer payments to lower level of government and cutting services and transferring responding to individuals and families
  • Canadian Context
  • Driven by credit rating downgrading in some provinces and increases in deficit public sector struggle to cut costs
  • There were several attempts to cut cost that's where privatization of public service came from

Implications of restructuring for union-MGM relations in Canada

Government Policies

  • MGM Employees
  • Risk of lowering morale and losing experiences employees, government free to downsize and downgrade conditions of managers
  • Some government offered special early retirement to MGM
  • Unionized Employees
  • Some government demand concessions from unionized employees using adversarial bargaining
  • Other adopt a more cooperative approach by opening the books to reveal the bleak financial picture and working towards a solution
  • Government reduce compensation through legislation or through collective bargaining by threatening legislation if concession is not matched.

(The most common strategy for unionized employees is third)

Management Issues

  • Innovation
  • Teamwork, job rotation, socio-technical system design
  • Socio-technical system design system of new tech in which workers are complements to not simply extensions of tech in which participation communication and collaboration are encouraged through an accommodative organizational structure and in which each worker achieve control through shares responsibility and minimal supervision
  • Higher unionization - Unions may make into to innovative programs more difficult play a positive role in integrating them into workplace
  • Crisis atmosphere - Enhanced workplace less likely under threat for layoffs, cost cutting and privatization
  • Civil service rules - Civil service bureaucracy act as a serious deterrent to implementing innovative employee involvement programs
  • Recent evidence that HR practices are moving closer to private sector ones
  • Public taking ‘high performance’ work practices from private
  • Union Issues
  • Because privatization shifts job from public to private could expect a decline in public union membership because of threat to jobs and compensation
  • Unions make strategic choices in reacting to privatization that affect their members
  • Acquiescence \rightarrow Least popular
  • Traditional collective bargaining
  • Proactive - Most popular. Reduces worst effects of privatization through negotiation


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