Labor market factors

Labor market factors

The employer's ability to pay is also influenced by its ability to cut the costs of production by increasing productivity. While a union may generally support an employer in improving product market competitiveness, the union will often resist the employer's efforts to pay higher wages by laying off part of the workforce, redistributing those workers dues to those not laid off, to justify the reduction of labor costs.

Productivity is simply a measure of the output of a given unit divided by the input. If an employer can increase a factory's output without increasing the hours of work required for that production, the result is an increase in productivity. If a fixed number of workers are producing more for their employers, the employer should have the ability to pay them better wages and benefits. A basic formula for computing productivity is:

Output x Price

Major methods for increasing productivity include:

  1. Stimulating greater work effort per hour of work, or "speed-up,". Increasing work effort is the classic productivity strategy, but it is important to keep this method for generating productivity increases in an appropriate perspective. Greater work effort means more than increasing the work pace. The same result can be achieved by decreasing idle work time, which has been a major element of many employer bargaining initiatives in recent years. If the employer is successful in reducing the idle minutes spent before and after breaks, lost production due to maintenance and set-up operations, time spent waiting for inventory, and other production disruptions, the result will be increased productivity. These bargaining initiatives often relate to changes in work rules and practices giving to the employer greater flexibility in the assignment of work tasks and scheduling.
  2. Implementation of labor-saving technological change. In many situations, an employer will reduce its dependency on human labor through technological change. If production tasks that have historically been performed by workers can now be performed technologically, productivity increases through the decreased work hours necessary to produce a given output level.
  3. Reduction of burden; the number of hours expended in non-productive activities. In determining productivity levels, not all the working hours are based on actual production. Total production costs include substantial costs for non-productive labor, including supervision, maintenance, and other support services. If an employer can reduce these labor costs, a higher percentage of total labor will lead to actual production and therefore greater productivity. The gain may be either temporary or permanent, however. For example, a long-term strategy of avoiding maintenance may increase productivity in the short-term by reducing burden. In the long-term, any labor cost savings may be eliminated through the increased idle time resulting from inoperative machinery. Over the past two decades, bargaining trends illustrate the strategy of increasing productivity through reduction of burden. Eliminating craft distinctions between maintenance workers, de-skilling work, by breaking up the task into smaller less complicated parts, cross-training skilled trades workers to required them to be proficient at a multitude of skills, contracting out janitorial and maintenance services, breaking down functions the contracting out pieces of the production without taking into consideration the impact the loss of control over the production this causes and shifting routine maintenance tasks to production workers are all initiatives expected to reduce labor costs associated with burden.

Union's ability to make the employer pay
Even if an employer can pay higher wages and benefits and to improve working conditions, many employers will not do so unless forced to do so, directly, or indirectly, by a strong union or other market driven influences. Some major factors that strengthen or weaken a union's power with respect to an employer in bargaining are discussed below.