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Different IR Systems

Different IR Systems. BUS 430 Summer 2013 Dr. Rajiv Krishnan Kozhikode. Agenda. Peer evaluation info Critical reflection report 1 Critical reflection report 2 Different IR Systems. Wage-setting institutions and pay inequality. Significant differences in pay distribution across countries

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Different IR Systems

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  1. Different IR Systems BUS 430 Summer 2013 Dr. Rajiv Krishnan Kozhikode

  2. Agenda • Peer evaluation info • Critical reflection report 1 • Critical reflection report 2 • Different IR Systems

  3. Wage-setting institutions and pay inequality • Significant differences in pay distribution across countries • Even among advanced industrial economies • What explains this difference? • Level at which wages are set differ across these countries • Individual level • Plant level • Industry level • Entire private sector • Level of centralization • Collective bargaining or government involvement • Union concentration • Share of labor force covered by collective bargaining institutions

  4. So what does the re? • Centralization of wage setting reduces inequality • i.e., either through collective bargaining agreements or through government involvement • Wage-setting at higher level reduces inequality • i.e., industry wide wage setting is higher level, individual/firm specific wage setting is at lower level • Union concentration (few unions) reduces inequality • Union density (unionized workers to un-unionized workers) reduces inequality • Union coverage (percent of work-force covered by collective bargaining agreements) • Density and coverage are not the same but are related

  5. How is pay inequality measured? • Ratio of wages received by the worker at the 90th percentile, to the wage received by the worker in the 10th percentile. • There could be other means as well such as • Gini coefficient (ranges from 0 to 1 for low to high wage dispersion) • Variance of the log of wages in a country.

  6. Demise of national union in Italy • National IR systems are viewed as the basis in most cross-cultural examinations • But there could be sub-national differences in IR systems • Local realities dictate union activities and outcomes • In Italy, national unions rose to prominence but later lost prominence due to local changes • Fiat vs Alfa Romeo • Both were union heavy auto makers • Fiat got rid of union involvement in wage setting • Alfa Romeo continued to work with unions

  7. Demise of Unions in Fiat • Recession in Italy affected both firms • Changes in local situations • More workers laid off • Greater resistance from workers • Responses of unions to these requirements • i.e., shifting responsibility from national to local union structures • Fiat held a strong stance against unions • In Fiat, local unions were unable to help the workers • They had to give up their prominence after a losing battle with Fiat management • Workers held the local unions responsible for their poor bargaining position with the firm

  8. Union resilience in Alfa • Similar situation in Alfa Romeo • But Alfa worked with local unions • Increased productivity through cooperation • Employees were allowed to up skill and make themselves more relevant again • Alfa was later acquired by Fiat but the union-firm relationship still persists.

  9. That’s it for today • Next session we will look at: Comparative Business Ethics

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