EMPLOYMENT MATTERS A lunchtime seminar series about employment relations and the world of work

1. EMPLOYMENT MATTERS A lunchtime seminar series aboutemployment relations andthe world of work http://www.dti.gov.uk/er/emar/events.htm

2. Why Efficiency is Not Enough: Employment Relations with a Human Face Professor John W. BuddIndustrial Relations CenterCarlson School of ManagementUNIVERSITYOF MINNESOTA Employment Relations Seminar Dept. of Trade & Industry London Tuesday, June 29, 2004 2

3. Adapted From John W. Budd Employment with a Human Face: Balancing Efficiency, Equity, and Voice ILR Press Imprint of Cornell University Press, 2004

4. Overview Employment should be productive, but it is not simply an economic transaction. Employees deserve fair treatment (equity) and input into decision-making (voice). Efficiency, equity, and voice are therefore the key analytical dimensions of the employment relationship. Achievement of economic prosperity, respect for human dignity, and equal appreciation for the competing human rights of property rights and labor rights further require that efficiency, equity, and voice be balanced. Public policies, business practices, and union strategies need to promote this balance and create employment relations with a human face.

5. Ask Yourself • What do you want to get out of working? • How do you want to be treated? • How do you want your job conditions determined? • What does your employer want from you?

6. Common Responses • What do you want to get out of working? £ (or € or $), benefits, self-worth, accomplishment, friendship • How do you want to be treated? fairly, with respect • How do you want your job conditions determined? talk with supervisor • What do employers want? high-quality work, productivity, loyalty

7. But… • Contrast your answers with academic, policymaking, and corporate perspectives on work: • Economics: Work is purely an economic transaction endured to earn income • Human Resource Management: Designing policies to create productive employees • Balance Sheets (and Government Budgets): Employees are costly factors of production • Debates over family leave, minimum wages, trade unions, and global labor standards reduce to analyses of labor costs and competitiveness

8. Aggregate Welfare Maximization (Efficiency!) Well-Defined Property Rights Free Market Transactions + = Efficiency, Efficiency, Efficiency • Contemporary discourse is dominated by Efficiency • Standard economic theory is the basis of the Liberal Market Economy: • Competition is assumed to prevent bad jobs (Milton Friedman) • Marginal Productivity Justice—whatever the market produces must be fair

9. Beyond Efficiency • But what about a concern for how workers are treated? • Decent Work (International Labor Organization, 1999) • A Fair Globalization: Creating Opportunities For All (World Commission on the Social Dimension of Globalization, 2004) • Rerum Novarum/ On the Condition of Workers (Pope Leo XIII, 1891)

10. My Premise • Work is a fully human activity in a democratic society • Employees seek income, and intrinsic rewards • Employees want and are entitled to fair treatment • Employees want and are entitled to participate in decision-making • Efficiency is not enough • Efficiency is important, but it should not be the only goal • Rather, employment relations with a human face

11. Employment Relationship Objectives • Efficiency • Economic performance—the effective use of scarce resources (competitiveness, productivity, quality, economic prosperity) • Equity • Fair employment standards for outcomes and treatment (justice and nondiscrimination) • Voice • Meaningful input into decisions (discretion, free speech, industrial democracy)

12. VOICE EFFICIENCY EQUITY Analytical Framework Employment research should be rooted in the objectives of the employment relationship. ? ? ? Analyze how policies, practices, laws, behaviors, etc. contribute to efficiency, equity, and voice.

13. Workplace Governance Voice Union and Nonunion Representation and Participation Worker Control Free Markets HRM Laws Efficiency Equity

14. Globalization Voice International Representation and Solidarity (e.g., European Works Councils) Corporate Codes of Conduct International Labor Standards Free Trade Efficiency Equity

15. Comparative IR Systems Voice Free Speech Social Partnership Co- determination Strong Voluntarism Enterprise Unionism Sectoral Bargaining Award System Weak Voluntarism New Deal System Efficiency Equity

16. The Balancing Imperative • Equity and voice can enhance efficiency, but… • Global competitiveness (efficiency) can reduce wages and benefits (equity) and weaken unions and works councils (voice) • Legislated minimum standards and unions (equity and voice) might reduce efficiency • Should efficiency (property rights) trump equity and voice (labor rights) ? • Property rights and labor rights are conflicting human rights • Efficiency, equity, and voice should be balanced

17. Healthy Competition / Individual Freedom Balance of Power Between Employers and Employees Optimal Outcomes Pluralist Industrial Relations Balance of Power Between Employers and Employees Healthy Competition / Individual Freedom Optimal Outcomes The Importance of Balancing Competing Interests Neoclassical Economics John W. Budd, Rafael Gomez, and Noah M. Meltz (forthcoming) “Why a Balance is Best: The Pluralist Industrial Relations Paradigm of Balancing Competing Interests,” in Bruce E. Kaufman, ed., Theoretical Perspectives on Work and the Employment Relationship (Champaign, IL: Industrial Relations Research Association).

18. Achieving a Balance • Pluralist Industrial Relations School of Thought • Labor is more than a commodity or factor of production • Inequality of bargaining power between employers and employees in imperfect labor markets • Mixed motive employment relationship conflict: Inherent conflict of interest between employers and employees on at least some issues (mutual gains are possible on other issues) • Employee voice is important in a democratic society • Thus, non-market institutions are needed to help balance efficiency, equity, and voice • For both positive and normative reasons

19. The Liberal Market or Neoclassical Economics Distortionary Vision of Labor Policies and Institutions Harper’s Weekly (July 14, 1894, front cover)

20. The Human Resource Management Unnecessary Vision of Labor Policies and Institutions Forbes (December 1, 1928, p. 29)

21. The Pluralist Industrial Relations Balancing Vision of Labor Policies and Institutions Survey (February 7, 1914, front cover)

22. VOICE EFFICIENCY EQUITY Policy Framework Create social norms and design policies, practices, laws, institutions, etc. to balance efficiency, equity, and voice and create employment relations with a human face.

23. Globalization Voice International Representation and Solidarity (e.g., European Works Councils) Corporate Codes of Conduct International Labor Standards Free Trade Efficiency Equity

24. Employment Relationswith a Human Face • Employment scholarship and policymaking needs a renewed focus on the objectives of the employment relationship • Efficiency is important…but it is not enough • Employment research should analyze efficiency, equity, and voice • Laws and institutions should fulfill the economic and human needs of a democratic society and foster broadly-shared prosperity • Policymakers need to create employment relations with a human face

25. Contact Info Professor John W. Budd Industrial Relations Center University of Minnesota 3-300 Carlson School of Management 321 19th Avenue South Minneapolis, MN 55455-0438 USA e-mail: jbudd@umn.edu Phone: (612) 624-0357 Fax: (612) 624-8360

26. DISCUSSION