During my career, I have participated in numerous negotiations – all very different.
Several years ago, I participated in negotiations that were facing an impasse with a principal issue being perceived as abuse of sick pay. At the table, the company representative held up a copy of the sports pages and indicated that an employee who called in sick, just won a local golf tournament.
After several minutes of silence, the union negotiator proclaimed, “Imagine how much better he would have played had he not been sick.” This changed and lightened the mood and ultimately, the contract was settled.
Recently, other events have created outside influences that will have impact on collective bargaining.
- At least 18 states raised the minimum wage and multiple states and cities added paid sick time laws
- Gross domestic product (GDP) in the first three quarters of 2018 grew at a compound annual rate of 3.2%
- Unemployment rate declined by 0.4 percentage point to a near 50-year low of 3.7%
- Employment growth averaged 223,000 jobs per month
These considerations will trickle over to collective bargaining negotiations creating an alternate bar for wages and other benefits. Combine this with how quickly and easily communications is disseminated via social media and other tools to enhance union campaigns. Furthermore, there have been walkouts and wildcat teachers’ strikes, along with loud cries of public demands of their employers. The Bureau of Labor Statistics recorded a significant rise of work stoppages in 2018 (https://www.bls.gov/news.release/wkstp.nr0.htm) with 21 occurring (the highest since 2017) and involved 533,000 workers (the most since 1986).
The next few years of bargaining will be fairly different in many ways, due to the following facts:
A number of factors contribute to strikes and prevent parties from reaching agreement in collective bargaining negotiations, including the factors cited above. How should employers and unions approach this landscape?
The historical approach will have to be enhanced by focusing on culture, environment, and economic realities for both parties.
The manner in which the prior contract impacted the efficiency and effectiveness of the organization and the bargaining employees is a critical measurement to negotiating teams. A solid approach to generating useful data is a section-by-section discussion of the contract. Negotiating teams should also review external factors such as other employer's compensation packages for similar work, major benefits provided by comparable employers, and recent contract settlement terms for comparable employers in the same industry and geographic area. Sometimes looking at comparable employers in other geographic areas can provide the team with favorable economic comparisons. Additionally, other employers and other unions have implemented innovative measures that can be used by the negotiating team to facilitate the development of the contract.
This does not detract or replace the focus on each party’s objectives but it may shed light on creative solutions to arrive at a favorable settlement. The objective is to cultivate creative approaches while shifting from traditional tactics.
As noted above, employers may wish to focus on the use of signing bonuses vs. direct wage improvements. Why not consider altering those bonuses to educational loan repayment matching programs? For example, if an employee has student loans, consider making some form of matching payback plan up to a specific dollar threshold (e.g. $5,000 in the first year, $7,500 in the second, etc.)
During the data gathering phase, there should be more consideration for addressing concerns and issues of both parties. For example, consider creating a wage bracket reference chart with numbers of employees at each wage increment. This could then be combined with a matrix showing the number of employees in the bargaining unit according to age and service. Then, focus on the critical needs of operations and bargaining units vs. a simple across-the-board wage improvement. This would be a better method of allocating limited dollars.
Once the data has been collected, the next step would be for each party to identify its goals. Is it important to obtain more favorable economic terms or less restrictive contract language? Or both? It is imperative to approach negotiations with a forward-thinking view to ultimately create value for both parties.
Impact of labor settlements on non-union employers
Union wage advantages and disadvantages vary greatly by industry, occupation, race, gender, and state of the economy. Here are some observations of interest:
- Prior agreements commenced before the economic upturn – Three to five years ago, the labor union agreements did not reflect the current strong economic climate. Unless there was built-in provisions in labor contracts for items such as profit-sharing, then some of the recent economic benefits will not be shared.
- Companies are concerned about the future – Even though the past several years produced great results, the forecast for the future may not be so rosy. Employers may be nervous and are reluctant to increase fix costs.
- Healthy financials – From the union perspectives, when companies have done so well, this reflects the going-in financial picture for an employer. Unions will expect and demand a fair share of that pool, as prior contracts did not yield such returns. An employer today may consider providing one-time bonuses but labor will still want a piece of the pie, so to speak.
- Time-off costs – Costs for leaves of absences, disabilities, etc. are increasing and putting strains on the workforce with increasing overtime costs.
- Benefit and retirement costs – Hard to imagine that this is actually more difficult than the prior negotiations but it is. Inability to continue shifting costs to employees and staggering legacy pension liabilities still exist.
- Short supply of quality labor – A tight labor market is impairing the ability to attract and retain the talent needed. This will impact starting wage rates with trickle-up results.
- Customer loyalty – Customers demand on-time high quality products at reasonable prices. They are less likely to be loyal if you fail to meet these demands and will consider alternatives. Just-in-time inventory is now the trend for customers and as such, there is less willingness to stockpile inventory due to the possibility of a company’s labor stoppage.
- The union wage position moves countercyclical, increasing during recessions and narrowing during expansions.
- Certain specialty craft unions have achieved union wage advantages that are much larger than average. The bargaining power of such unions is significant because each craft union represents a small proportion of total costs, and skilled crafts workers can often find employment in various industries.
- The results of labor settlements that increase wages and/or benefits, may influence their own companies as well as others to adopt better personnel and production methods to meet settlement obligations and maintain profitability.
Elliot Dinkin is president and CEO at Cowden Associates, Inc., specializing in helping corporate clients find the best solutions, both for the enterprise and its employees, with regard to compensation, healthcare benefits, retirement and pension issues, and Taft-Hartley fund consulting.
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