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Union Role in Wage and Salary Administration

Chapter. 15. Union Role in Wage and Salary Administration. Median Weekly Earnings of full-time wage and salary workers by union affiliation and industry, 2005. Union Nonunion Private wage and salary 757 615 (23% premium) Mining 905* 865* Construction 933 590

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Union Role in Wage and Salary Administration

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  1. Chapter 15 Union Role in Wage and Salary Administration

  2. Median Weekly Earnings of full-time wage and salary workers by union affiliation and industry, 2005 UnionNonunion Private wage and salary 757 615 (23% premium) Mining 905* 865* Construction 933 590 Manufacturing 722 667 Transportation and utilities 864 676 Wholesale and retail trade 615 562 Government 850 692 * (2004 data) Percentage increase, 2004-05, private sector Union: 2.4% Nonunion: 1.8% Source: U.S. Department of Labor, Bureau of Labor Statistics, January 2006.

  3. Union Impact on General Wage Levels • Unions do make a difference in wages • Union workers earn between 8.9% and12.4% more than nonunion workers • Size 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 sector • Union employees earn about 16 – 19%more than their nonunion counterparts

  4. 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

  5. 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 jobs • From 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

  6. 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)

  7. 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

  8. Role of Unions in Wage andSalary Policies and Practices • Role of unions in administering compensation is outlined in contract • Basis of pay • Regular pay • Overtime pay • Pay for nonstandard shifts • Incentive pay • Occupation-wage differentials • Experience/merit differentials • Automatic progression based on seniority • Merit • Combination of automatic and merit progression

  9. Role of Unions in Wage andSalary Policies and Practices (cont.) • Other differentials • Pay to unionized employees employed by firm in different geographic areas • Part-time and temporary employees • Vacations and holidays • Wage adjustment provisions • Deferred wage increases • Re-opener clauses • Cost-of-living adjustments (COLAs) or escalator clauses

  10. Unions and Alternative Reward Systems • When employers face extreme competitive pressures, unions are receptive to alternative reward systems linking pay to performance • Union stipulations • Equity issue involves use of group-based measures with equal payouts • Minimize bias • Use of objective performance measures in unionized firms • Use of measures based on past performance • 20 percent of all U.S. collective bargaining agreements permit some alternative reward system

  11. 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 skills • Gain-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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