What is Distinctive and Value-Added About Employment Relations?

1. What is Distinctive and Value-Added About Employment Relations? Bruce E. Kaufman Georgia State University & Griffith University August 31, 2009

2. What is Employment Relations? • Answer 1: ER deals with the nature and tenor of the relations between ERs and EEs; e.g., adversarial or cooperative?; how much conflict and how to resolve it?; etc. • Answer 2: ER deals with the features and outcomes of the employment relationship; e.g., why do firms hire employees?; what determines the wages paid & work performed; etc.

3. Evidence from the Historical Record • The literature from the 1920s gives one answer: The Employment Relationship. • “the focal point of the field is the employer-employee relationship” (Feldman, 1928). • “industrial relations comprises every incident that grows out of the fact of employment.” (NICB, 1931)

4. The Same Answer in the 1950s “In current practice, careful usage employs the terms personnel management or personnel administration to refer to the management of manpower within a plant or agency, and the terms emphasize employer relations with individual employees, in such activities as selection, rating, promotion, transfers, etc. In contrast, the term labor relations is generally used to describe employer relations with groups of employees, especially collective bargaining contract negotiation and administration. Industrial relations, or employment relations, in recent years, has come to be used as the broadest of these terms, including the areas of both personnel management and labor relations. ‘Industrial relations’ or ‘employment relations’ thus describes all types of activities designed to secure the efficient cooperation of manpower resources.” Yoder, Heneman, Turnbull, and Stone (1958)

5. ER’s Big Problem • It is one thing to say ER covers the Employment Relationship; it is another to develop new theory and tools that push forward value-added research, practice and policy. • Lacking this, ER after WWII fell-back on [mostly] unions and collective aspects of ER. • “[I]ndustrialrelationists, while paying lip service to the goal of achieving understanding, prediction and control over all aspects of employment, in practice tend to focus most of their attention on unions, collective bargaining, and miscellaneous labour market issues.” [Adams, 1993]

6. ER’s Threatened Position • As union density has declined in most nations, so has ER’s fortunes & future. • Some ER academics counsel returning to the broad Employment Relationship conception of the field. • Yes; but: what do we bring to the table? Meanwhile, competitors encroach: “Personnel economics is the study of the employment relationship” (Nielson, 2007) “HRM is the science and practice that deals with the nature of the employment relationship…” (Ferris, et. al., 1995)

7. The Central Existential Conundrum for Every IR/ER Department • The Employment Relationship is composed of ERs and EEs who are matched up in Labor Markets and work together in Firms (organizations). • So, assign the first part to the Economics Dept and the second part to the Management Dept. • Why, then, do we need a separate ER Dept. (with overhead, etc.) and what value-added does it contribute over the other two??

8. The Traditional Answer(s) • First Rationale: ER/IR promotes inter-disciplinary perspective. Fine in concept; weak in practice since research, publication, and professional visibilty are hindered by crossing disciplines. • Second Rationale: ER/IR is more applied and empirically grounded and thus better at labor/employment problem-solving. Fine again, but ER becomes the hostage of grant-mongering. • Third Rationale: A neutral home for study of unions & home for pro-union people unwelcome in Econ and MGT. Untenable with continued union decline.

9. Is There a Way-Out? YES! • Both the Webbs and Commons endeavored to create a more realistic and human type of economics. Social/Institutional Economics. • The core assumption is bounded rationality. • BR leads to positive Transaction Cost which: • Explains the existence of an ER • Implies all labour markets are imperfect • Implies all organizations are inefficient and MGT dominated. • Explains the existence of numerous labour/HRM problems to study and solve.

10. Why Not Just Have Econ and Mgt Depts.? The ER is a Mix of Two alternative and partially conflicting Modes of Resource Allocation and Coordination. 1. Prices and competition in markets 2. Command and cooperation in organizations The Central Theorem of ER: Competition in Markets and Cooperation in Firms are partially opposed and even contradictory. One partially works against the other. Employment Relations studies and reconciles the two.

11. W S W1 Q = f (K, L, N) D L1 L The Employment Relations System i) Competitive Labor Market (ii) Firm (iii) Industrial Relations

12. The Intellectual Rationale for ER • ECON is a “partial equilibrium” study of Markets, abstracting from organizations (firms are production functions). • MGT is a “partial equilibrium” study of Organizations, abstracting from markets. • Employment Relations is the “general equilibrium” study of how Markets and Firms interact in an Employment Relationship that generates numerous Labour Problems because of an unavoidable Conflict between Competition and Cooperation.