Chapter 7

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Labor Relations

Chapter 7 Notes

Pg 293 Industrial Wage Differentials
Industrial wage differentials may be explained in terms of three interrelated factors: (1) the degree of completion or monopoly in the product market (2) the value added by workers in a particular industry (3) the percentage of total costs that labor costs represent -Competition in the product market

-Value added by employees
-Labor costs as a percentage of total costs. A firm’s degree of labor intensiveness a measure of the proportion of total operating costs compromised of labor costs must also be considered in determining employee wage rates. Pg 294 Occupational Wage Differentials and the Role of Job Evaluation and Wage Surveys Job evaluation – The process of determining the relative importance of each job to the organization helps in understanding occupational wage differential; therefore the following steps in a job evaluation program are presented. Evaluating Jobs Within the Organization

-Three common job evaluations methods used are ranking, classification or point system. -A job evaluation may use 10 to 15 different job factors
-The foundation of job evaluation is Job analysis – is the process of systematically securing information and facts about the jobs evaluated. -Exhibit 7.1 Typical Wage Structure for Manufacturing Firm

Pg 295 Surveys to Compare Firms’ Wage Structure Exhibit 7.2 Typical Results from a Wage Survey Pg 297 Production Standards and Wage Incentives
Although wage incentive plans such as gain sharing, piece-rate pay, and profit sharing vary in structure and specific content, their goals are essentially the same: (1) to increase employee productivity (2) to attract prospective employees to the company (3) to reward employees monetarily for their increased productivity. Pg 298 Profit sharing plans – cover between 6 and 27 percent employees in most industrialized countries where government tax policies often encourage the adoption of such plans. 20 percent of U.S. firms have a profit-sharing plan. Gain sharing plan or group incentive, companies make monetary payments to a specific group or groups of employees for producing more output or generating cost savings beyond some establishes goal. Most popular incentive plan is the Scanlon plan, a group plan for sharing labor cost savings that developed by former union leader Joseph Scanlon in the late 1930s. Rucker plan is based on a change in the ration between labor costs and dollar value added. Improshare share plan is derived from “improved productivity through sharing”. Keys to successful implementation of the reward system (1) developing a cooperative relationship between union and management (2) involvement of the union in the development and implementation of the reward system (3) effective communication of the program to covered employees (4) flexibility to adapt the reward system to operating conditions and changing business needs (5) established of realistic achievable goals, particularly with respect to group incentive plans Pg 300 skill based plans - base compensation on the skills and knowledge an employee possesses that are valued by the employer. Arguments Used by Management and Union Officials in Wage Determination Union and management officials do not always favor the same criteria for wage determination. Pg 301 Differential Features of the Work: Job Evaluation and Wage Spread The relative influence of job evaluation can be seen in the Wage spread, which represents the internal distribution of the proposed or negotiated wage increase to the bargaining unit employees. (exhibit 7.3 Three examples of Internal Wage Spreads) Pg 302 Maintaining this wage differential is important to management for two reasons: (1) it helps ensure that current skilled employees do not leave because higher wages offered by other firms (2) it offers some motivation to employees in lower paid classification to train for higher skilled-level classifications...
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