COLLECTIVE BARGAINING AND PRODUCTIVITY THE INDUSTRIAL RELATIONS RESEARCH ASSOCIATION

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INDUSTRIAL RELATIONS RESEARCH ASSOCIATION (608/262-2762) Social Science Bldg .. University of Wisconsin, Madison, WI 53706 INDUSTRIAL RELATIONS RESEARCH ASSOCIATION

COLLECTIVE BARGAINING AND PRODUCTIVITY

AUTHORS

JOSEPH GOLDBERG ROBERT McKERSIE

LEON GREENBERG RUDOLPH OSWALD

WAYNE HORVITZ LEONARD SAYLES

PETER TCHIRKOW FRANCES BAIRSTOW

LAURENCE HUNTER SAM ZAGORIA

ARCHIE KLEINGARTNER

Ross AzEVEDO

EDITORIAL BOARD

GERALD SOMERS, Chairman

ARVID ANDERSON

MALCOLM DENISE

LEONARD SAYLES COLLECTIVE BARGAINING AND PRODUCTIVITY. Copyright @ 1975 by INDUSTRIAL RELATIONS RESEARCH ASSOCIATION. Printed in the United States of America. All rights reserved. No part of this book may be used or reproduced in any manner whatsoever without written permission, except in the case of brief quotations embodied in critical articles and reviews.

First Edition

Library of Congress Catalog Card Number: 75-36659

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Colwell Printing Corp., 510- N. Hickory, Champaign, IL 61820 ii CONTENTS

PREFACE ...... iv

CHAPTER !-Definitions and Concepts ...... 1 Leon Greenberg

CHAPTER 2-Bargaining and Productivity in the Private Sector ...... 15 Joseph P. Goldberg

CHAPTER 3-An Evaluation of Productivity Bargaining in the Public Sector ...... 45 Robert B. McKersie

CHAPTER 4-Bargaining and Productivity in the Public Sector- A Management View 63 Sam Zagoria

CHAPTER 5-Bargaining and Productivity In the Public Sector: A Union View ...... 83 Rudolph A. Oswald

CHAPTER 6-Bargaining Over Work Standards By Professional Unions ...... 103 Frances Bairstow and Leonard Sayles

CHAPTER 7-Productivity Bargaining and Organization Behavior ...... 119 Archie Kleingartner and Ross E. Azevedo

CHAPTER 8-Productivity, Collective Bargaining and Wage Control ...... 141 Wayne Horvitz and Peter Tchirkow

CHAPTER 9-Productivity Bargaining Abroad: An Evaluation ...... 169 Laurence C. Hunter iii PREFACE

Productivity has been in the news for many years. For some time it was the principal concern of private employers, and the concept of increased efficiency was pitted against the workers' drive for security. More recently, increased productivity has become a central issue in public sector employment. As budgets have tight­ ened under "tax payers' revolts," administrators of public agencies have sought to improve their benefit/cost ratios. Joint committees and councils, with union and management representation, have existed sporadically for half a century in countries of the western world. However, the phenomenon known as "productivity bargaining" first came to the fore with the Esso agreements at the Fawley Refinery in Britain in the 1960's. It has experienced periods of rise and partial decline in Britain and has spread only haltingly in the U.S. and elsewhere. It remains to be seen whether the recent emphasis on productivity in the public sector will blossom into formalized union-management agreements with tradeoffs resulting in increased output per unit of input. The authors of this volume provide a background for the under­ standing of management's concern with productivity, of worker and union attitudes toward productivity, and of the conditions under which productivity bargaining has emerged. They also pro­ vide a basis for estimating the future course of productivity and productivity bargaining. Leon Greenberg's discussion of definitions, concepts and mea­ sures provides not only a basis for an answer to his own question, "Who is responsible for productivity improvement?", but also a useful starting point for the investigative studies provided by the other authors. Joseph Goldberg traces the development and spread of productivity issues in collective bargaining in longshoring, the maritime industry, autos, steel, construction, and other private American industries; and he notes the importance of the broad climate of the industry and the economy for the development of productivity bargaining. Environmental influences are also stressed in the descriptions and analyses of productivity and collective bar­ gaining in the public sector by Robert McKersie, Sam Zagoria, and Rudolph Oswald. In keeping with the traditions of the IRRA, the

iv public sector sections are illuminated by the differing viewpoints of an academic, a management and a union spokesman. The importance of occupational status for the growth and dis­ tinctive characteristics of bargaining over work standards is empha­ sized in the chapter by Leonard Sayles and Frances Bairstow. The analysis of bargaining over standards by professional unions pro­ vides additional understanding of productivity bargaining in both private and public sectors. Archie Kleingartner and Ross E. Azevedo offer additional evi­ dence on the role of the environmental context in their discussion of productivity bargaining and organizational behavior. They show that productivity bargaining is most likely to occur in a crisis or under organizational pressure. Fortunately, they also note that this is neither the best nor a necessary condition for bargaining over work rules. Illustrative of their thesis is the detailed discus­ sion of union-management productivity incentive plans developed during the Economic Stabilization Program. Wayne Horvitz's study of the interaction between productivity bargaining and wage con­ trol buttresses the theoretical formulations and empirical findings of Kleingartner and Azevedo. The comparison of productivity bargaining in Britain, North America and European countries, drawn by Lawrence Hmiter, further illustrates the importance of economic, legislative and or­ ganizational conditions for the emergence and expansion of pro­ ductivity bargaining. These environmental considerations are sig­ nificant not only for the differences that are discernible between nations, but also for the progress of productivity bargaining within a country, a company or a governmental agency. The combination of high unemployment and inflation existing throughout much of the western world as this preface is written, presages further growth in managerial concern with increased productivity and union con­ cern with job security and living standards. The present institu­ tional environment leads to the conclusion that these concerns may be translated into productivity bargaining on a wider scale. September 1975 The Editors

v

CHAPTER 1

Definitions and Concepts

LEON GREENBERG Contractors Mutual Association

The word "productivity" is not generally mentioned in collec­ tive bargaining agreements but it is, nevertheless, a major con­ tributor to many of the contentious areas of disagreement which occur during negotiations and on the job site. Labor and management, at least at the leadership levels, recog­ nize that gains in general economic welfare as well as the real in­ come of workers rest on the attainment of higher productivity in the total economy. There is somewhat less agreement on the dis­ employment effects of productivity at the level of the total econ­ omy, although with general recognition of the fact that productivity gains do not have to result in overall unemployment if economic growth is sustained at a sufficiently high rate. When productivity is viewed at the company level, there are two areas of labor management contention which emerge-one on the issue of job security and the other on sharing the economic benefits of productivity. In the mind of the average worker, productivity is a scare word-it is management's euphemism for speed up, it is a potential threat to his job security. In the mind of the employer, productivity is equated with efficiency-it is a means of reducing labor requirements and labor costs. On the question of sharing there is both disagreement and mis­ understanding of what proportions of the productivity gains should go to the workers in the form of wages, to the firm in the form of profits, and to the consumer in the form of lower prices. It is in this arena, in particular, that productivity measures prepared by the Federal government are subjected to intensive scrutiny and criticism because they may have a dollar and cents impact on the different interested groups. These two issues-job security and sharing the gains of pro­ ductivity-have been at the core of bargaining for many years although most often not specifically referred to as productivity 2 COLLECTIVE BARGAINING AND PRODUCTIVITY bargaining. In fact, there may be many variations of productivity bargaining, and this can lead to semantic disputes over what it really is. One definition of productivity bargaining is that it is "the negotiation and implementation of formal collective agreements that stipulate certain changes in working rules in order to achieve greater productivity and ensure that labor receives its share of the resulting savings."l Collective bargaining often deals with technological change­ an important factor in productivity improvement (or reduced unit labor requirements) . Agreements may specifically restrict the use of certain kinds of tools and equipment or may specifically forbid such restrictions. Agreements may be written to provide protection to workers who are subject to loss of employment because of technological change-including advance notice, use of attrition to reduce the work force, provision for early retirement, some form of wage guarantee, special severance pay and others. Many of the types of agreements become operative when the physical act of technological change is anticipated or actually occurs, and do not require that productivity resulting from such change be measured. There are, however, forms of productivity bargaining in which the measurement of productivity is important if not crucial. Its most direct form is that in which wage increases or special bonuses are granted on the basis of measured company increases in pro­ ductivity. At the broadest level the parties may agree that the earnings of workers should be commensurate with the gains in the productivity of the economy and may agree to an "annual improve­ ment factor" in wage rates based on the general trend of national productivity. Somewhat less directly, productivity indexes for an industry may be placed on the bargaining table to illustrate an industry's ability (or inability) to grant the size of wage increase requested by the workers. Adding to the confusion is the fact that there is no single, uniquely defined measure of productivity. There are various ways of measuring it and the measures can be prepared at different levels-the plant, the industry and the economy. In view of these

1 Robert McKersie, Productivity Bargaining, The British and American Experience. DEFINITIONS AND CONCEPTS 3

variants and the importance of measurement in many collective bargaing or related issues, it is useful to review the concepts of productivity in some of its different forms, recognizing that some of the discussion will be familiar and elementary for many readers whose interests reach out to the subject of productivity bargaining.

WHAT IS PRODUCTIVITY? The simple definition of productivity is that it is the relation­ ship of some volume of output to a volume of input. Bricks laid per man-day and kilowatt hours produced per dollar of capital equipment are both measures of productivity. They do not meas­ ure the volume of production; they do not indicate how hard any­ one works. Productivity is a measure of the use of resources or of the degree of their use. It is often an indicator of, but not identical to, a measure of efficiency. For example, 30 letters typed per day is a ratio which measures the utilization of a typist's time. It might be possible to increase the typist's productivity by improving skills or using a better typewriter and thus produce a larger number of letters per day; but it Inight be even more productive for the business firm or government agency to evaluate and reduce the need for letter writing and multiple copies. A productivity ratio, no matter what input measure is used, may be affected in different degrees by factors other than the specific input factor which is a part of the ratio. Productivity ratios for bricklayers and typists are affected largely by the skill and effort of individual workers using a small amount of tech­ nological equipment. A ratio of tons of steel per steel worker, on the other hand, reflects the interaction of the skill and effort of many workers utilizing massive amounts of different kinds of technology. Most government indicators of productivity measure changes in rather than levels of productivity. These indexes are the pro­ ductivity indicators which are considered when studying and eval­ uating economic trends relating to production, wages, costs and income, in issues related to econoinic stabilization programs and in considerations of sharing the gains of productivity. Measures of the levels of productivity, reflecting average per� formance (e.g. average number of bricks laid per work day on a 4 COLLECTIVE BARGAINING AND PRODUCTIVITY construction job) are rarely available in an organized, statistical format. They may exist in the records of individual companies or in the heads of foremen and superintendents but are usually not a matter of public record. Nevertheless, it is this aspect of pro­ ductivity which is often in the minds of negotiators when they are implicitly or explicitly bargaining over productivity. Quite often the productivity measure is thought of in its inverse form, e.g., workers required per unit of output. It is particularly in this form and its related measure unit costs that management views work rules and practices and that workers view their employment.

TYPES OF RATIOS-INPUT The most common type of productivity ratio is labor produc­ tivity, usually expressed as output per man-hour. There are at least three reasons for the prevalence of this type of measure. One stems from the traditional interest in the improvement of human well­ being in the form of income, leisure and related components of the standard of living. A second is that manpower-as exemplified by the abilities, skills, education, experience and knowledge of the workforce, including management-is probably our most important economic resource. A third, technical and less noble, reason is that labor input information-employment and man-hours-has gen­ erally been more readily available than other types of input statistics and is more easily measured. Another measure of productivity is output per unit of capital. This measure is less common than output per man-hour partly because of the difficulty of measuring capital, conceptually and technically. Capital is usually thought of as comprising land, plant and equipment, but it may also include cash, inventories and other investment required to run a business or an entire industry. Sub­ stantial difficulties are encountered in obtaining basic data and, especially, in converting the value of capital to constant prices in order to measure the "quantity" of capital unaffected by price change. A measure which has received increased attention in recent years is total factor productivity. Usually this measure relates out­ put to labor and capital combined and, since not all inputs are included, it is a bit of a misnomer to call it "total factor" produc­ tivity. In this measure, capital is combined with labor, where man- DEFINITIONS AND CONCEPTS 5 hours are weighted by earnings, as of a base year and the indexes are moved forward by combining indexes of capital in constant dollars with indexes of man hours, using the base year "rate of return" as weights. This type of index is often regarded as a better indicator of efficiency because it encompasses the substitution of capital for labor and reflects the usage of "total" resources. It is not, however, a measure of costs since it is in constant dollars and the price changes of labor and capital may vary from each other. At the level of the firm or industry, changes in volume or price of materials would also have to be considered.

TYPES OF RATIOS--OUTPUT

In the most common concept of productivity, at least to the lay­ man, the output part of the productivity ratio is expressed in physical unitS--number of bricks, tons of steel, yards of cloth and so on. Most firms and industries produce several commodities which must be added together, with an appropriate weighting sys­ tem to derive a total measure of physical output. In many industries, output is measured by total value, or by value added, in constant dollars, using price deflators. These in­ dexes are often considered as approximation to a physical output measure. They are, however, affected by shifts in the relative volume of production of goods or services with higher (or lower) value per man-hour. Also, a total value measure can differ from a value added measure if the firm or industry has managed to achieve savings in the value of materials used per unit of final output. At the level of the total private economy, gross national product in constant dollars is used as the output component of the produc­ tivity ratio. (Government is not included because its services do not have a dollar market value and cannot be adequately priced.) This index is approximately, although not exactly, equal to the value of goods and services added by all industries in the private sector. Private gross national product per man-hour is generally accepted as the indicator of national labor productivity trends, although not completely without reservation because of statistical data limitations and because of the difficulty of measuring the out­ puts of the non-commodity sectors in real terms. 6 COLLECTIVE BARGAINING AND PRODUCTIVITY

WHICH PRODUCTIVITY MEASURES?

Which type of productivity measure is most appropriate for productivity bargaining and other wage determinant issues-in those situations where the need for a measure is agreed to by the bargaining parties? With regard to the choice of inputs, there are some who believe that the total factor productivity measure is the relevant measure because it is more comprehensive and more closely reflects the total cost·s to an employer or for the total economy. The preponderant opinion, however, is that output per man-hour is the relevant measure. As one productivity scholar has said:

"If the use of the productivity measure is in wage analysis, negotiation, or determination, the appropriate productivity concept is not output per unit of total input. Instead, it is output per weighted man-hour. (The wage index is presumed to be adjusted to exclude the effects of interindustry and intraindustry shifts in the relative im­ portance of different classes of labor. If not, the appro­ priate .productivity concept is output per weighted man­ hour) ... The reason for choosing output per man-hour rather than output per unit of total resources is not that the econ­ omy's efficiency is unimportant in the determination of wages. It is very important. But it is also insufficient. Wage levels are also determined by other factors. Out­ standing among these is the scarcity of labor relative to capital in the economy at large. Output per weighted man-hour combines both important factors, efficiency and labor scarcity. That is, the efficiency of the economy is measured by national product divided by weighted man­ hours plus capital. The relative scarcity of labor is meas­ ured by weighted capital divided by weighted man-hours, or (inore conveniently in the present context) by weighted man-hours plus capital divided by weighted man-hours. A combination of the two factors, obtained by multiplying them, yields national product per weighted man-hour. "2

With regard· to the relevant output measure, some warnings need to be indicated. First, it must be remembered that productivity

• Solomon Fabricant; A Current Question, Monthly Labor Review, June 1962. DEFINITIONS AND CONCEPTS 7. indexes are not measures of costs. Second, indexes based on value of output are affected by shifts in the relative volume of produc­ tion of different goods and services. The man-hours (input) side of the ratio is not so affected; the hours would have to be seg­ regated by occupation and weighted by hourly earnings rates in order to reflect similar shift effects. Third, except for the shift effect, constant dollar value and physical output indexes would be identical if perfect data including price deflators, were available. However, the data are usually imperfect so that indexes seldom have the precision of a mechanical measuring instrument. Even without the problem of data limitations, it is extremely difficult to pinpoint one measure of productivity which, on a con­ ceptual basis, is most suited to productivity bargaining. At the establishment level, existing programs for productivity sharing (such as the Scanlon plan) generally do not use any of the meas­ ures described but are related in some way to the changes in payrolls per unit of output or as a percent of sales or some related variant. There is a productivity factor in this kind of measure but it is implicit rather than explicit. Whatever measure is used, the goals, interests, and mutual trust of the parties must play a large role in the joint selection process. At the industry level (and, in fact, at the establishment level) it is relevant to examine the previous trends in both productivity and compensation. The productivity index that would be most appropriate, conceptually, for comparison with earnings would be one in which the output component is obtained by combining the different products or services with weights equal to the hourly earnings assignable to each product or service. In this case, what­ ever shift effects have taken place would be reflected similarly in both sets of measures (Earnings rise because of occupational shifts as well as because of general wage increases.) Such data are well nigh impossible to obtain, so available value or physical output indexes must be used. An output index obtained by use of man­ hour or value added weights may be the closest approximation. A value weighted index is affected by the cost· of purchased materials; :At the industry level, there is seldom a choice of productivity measures. Official government publications rarely, if ever, provide more than one index for an industry. And that index is published only after painstaking and judicious examination of the basic data 8 COLLECTIVE BARGAINING AND PRODUCTIVITY required for construction of both the output and input side of the ratio. The parties can spend their time haggling over the absolute precision of these indexes or they can accept them as reasonably accurate indicators of productivity change.

WHO IS REsPONSIBLE FOR PRODUCTIVITY IMPROVEMENT

Some economists have attempted to isolate and measure the contribution of various factors to the economic growth of the United States, including such items as capital, volume of labor input, quality of labor input (e.g., as measured by education) and, at times, a residual technology or "efficiency" coefficient. In this discussion, we will use a descriptive and less sophisticated approach, bearing in mind that no single factor produces significant gains in productivity all by itself. Productivity improvement is generally the result of interaction-of capital equipment and its technological capabilities; of the volume, quality and attitude of human resources; of scale of operations, of short-term and long­ term changes in economic conditions. Technology tends to have the most dramatic and massive im­ pact on the production process. In most, if not all, production and service activities requiring physical effort man's capacities are limited. In contrast there is, in theory, no limit to the capacity of technology especially if one considers that new technologies make it possible to substitute new materials, new products and new processes. Technology in the industrial world does not refer only to methods of producing goods and services; it also refers to new materials and products which have had a profound effect not only on our way of life but also on productivity. Plastics, for ex­ ample, make it possible to produce various forms, shapes and final products which would require more labor or other inputs if made of metal. Technology is a reflection of the state of the sciences. It is often- the product of applied research which follows on the scientific discoveries of basic research. Developmental effort is then required in order to refine the technology to the point where it is commercially, economically practical. Finally, the technology is brought into the production stream when it is translated into machinery and equipment or substituted for old materials and products. While much of the basic scientific research is supported by DEFINITIONS AND CONCEPTS 9 government, developmenal work and the investments in plant, machinery and equipment are undertaken by private entrepreneurs or by many investors who become stockholders. It is the marriage of technology with capital investment that leads to increments in productivity. Size of market and scale of operations usually have an impor­ tant bearing on the productivity of a firm or an industry. The scale of operations of an enterprise can frequently be expanded without adding to the stock of capital equipment and with only a small addition to the work force, especially the overhead em­ ployees (such as bookkeepers) not directly engaged in the produc­ tion process. There are two factors, outside the firm itself, which can have a positive or negative effect on the productivity of the firm, an industry or the entire economy. One is long-term economic growth; the other is the business cycle. An economy is in which consumer incomes are growing pro­ vides opportunities for companies to expand their markets and increase their scale of operations. In this kind of economy the expectations of businessmen are also expansive and they are more willing to invest in the plant and equipment which are needed both to meet the increased demand and to help stimulate the growth process. The business cycle operates in a similar fashion but its impacts are more immediate and directly apparent. When business is expanding and output is increasing, productivity increases more rapidly, partly because of the scale effect previously mentioned. During the downturn, when volume falls, employers are slow to release workers, particularly their "overhead" workers, so produc­ tivity declines or rises very slowly. If the recession lasts long enough or becomes deep enough, management becomes much more concerned with costs and lays off its workers at a more rapid pace. When this happens, productivity can rise sharply even during a business recession. At the heart of enterprise and the entire structure of pro­ ductivity is the human resource-the intelligence, skill, ingenuity and attitude of people. Highly skilled scientists and engineers, whose intellectual capacity and training enable them to invent and innovate, help to produce the new technologies and capital 10 COLLECTIVE BARGAINING AND PRODUCTIVITY equipment. There are the managers who apply the skills of super­ vision, of plant layout, or work flow and of other managerial functions to improve the efficiency of labor and capital. There are the semiskilled and skilled workers who apply their art and craft and intelligence to the production process. As tech­ nologies emerge, these workers must adapt to new methods, tools and materials. Their ability to adapt and learn has increased through succeeding generations. Higher productivity provides a basis for obtaining more education; higher levels of education, in turn, prepare the workers for higher levels of achievement and productivity by increasing their capacity to understand composition and arithmetic. The worker who performs unskilled work also makes a con­ tribution to the production process by undertaking work not yet suitable (or profitable) for machines, work which at times is dangerous, dirty or otherwise onerous. It would be remiss not to make some observations about the negative effects, actual or potential, induced by practices or atti­ tudes of the human resource. The incompetent manager can have a directly negative impact on the efficiency and productivity of the enterprise. He can also have an influence on· the subordinates who observe his incompe­ tence and react accordingly. Attitudes, practices and rules of the workers can also restrict productivity improvement. Sometimes the poor attitudes and practices are closely related to poor supervision. In some industries there are clauses in collective bargaining agreements which impose unnecessarily restrictive work rules. "While some of them may have had a reasonable justification when first promulgated they have tended to become entrenched in the collective bargaining agree­ ments and regarded by many workers as inalienable rights rather than as matters to be renegotiated.

SHARING THE GAINS OF PRODUCTIVITY

As indicated earlier, there is general acceptance of the principle that the growth of real compensation (wages and salaries plus benefits) of workers should reflect the trends in national produc­ tivity. The historical statistical evidence indicates that, in fact, there has been a close long-run relationship. Data on earnings for DEFINITIONS AND CONCEPTS 11 all workers are not available for the period prior to World War II but the real average hourly earnings of production workers on manufacturing industry payrolls have about tripled in the past 50 years, in line with the national increase in output per man-hour during the same period. Since 1950, real average hourly compensation (including wages, salaries and supplements) and output per man-hour of all per­ sons employed in the private economy have risen at an average annual rate of about 3 percent. Both figures, compensation and productivity, cover wage and salary workers, proprietors and un­ paid family workers. Both sets of figures are affected by inter industry shifts in output or employment, by occupational upgrad­ ing and by general wage and benefit changes. This general principle was embodied in two government econ­ omic stabilization programs. The first was in 1962 when the Council of Economic Advisors established a set of "guideposts for noninflationary wage and price behavior" using national productivity as a guide but recognizing that "specific modifications must be made to adapt them (the guideposts) to the circumstances of particular industries."s In 1971, the administration established a price stabilization program which set up a Pay Board and a Price Commission to review wage and price increases. The general standard and guide established by the Pay Board was 5.5 percent to take account of an average 3 percent productivity improvement factor and an expected rise of 2.5 percent in consumer prices. The long term relationship between productivity and wages does not necessarily hold in any specific short run period, and should not be expected to do so. The market for goods and labor is seldom, if ever, in equilibrium. Prices, output, produc­ tivity and wages may move at different rates during different periods, with subsequent adjustments. The principle of sharing is more complex at the level of the establishment or individual industry. On the one hand, rewards, incentives and participation in the firm's welfare should usually be reasonably immediate and proximate. On the other hand, they may be factors which recommend that, in the short run at

8 Council of Economic Advisors, Economic Report of the President, Wash­ ington, D.C. 1962. 12 COLLECTIVE BARGAINING AND PRODUCTIVITY least, the sharing should not be equally proportionate. The stage of economic development of the firm (e.g., introducing a new product) the need for capital investment and expansion, the impact of external influence such as the business cycle, inter­ national and domestic competition all have a bearing on the extent to which the productivity gains are to be shared between the workers, management and the investors and the extent to which prices should be stabilized or reduced for the benefit of the con­ sumer and expanded markets. In industries and occupations characterized by a very high degree of personal service (musicians, hairdressers) significant advances in productivity are extremely difficult to achieve. If these workers are to participate in the general advancement of real earnings, they must draw on the productivity gains of other industries. In this sense, the increases in productivity of some industries are shared both by workers in those industries and, indirectly, by workers in certain types of other industries with low productivity gains. One final technical point needs to be made. It is sometimes said that if productivity rises by "x" percent and the workers receive an "x" percent increase in compensation, then the workers are getting all of the productivity increase, leaving nothing for others. This is incorrect. If productivity rises, say 10 percent, and output increases commensurately, then each factor of pro­ duction-labor-management, capital-can receive a 10 percent in­ crease. If output does not rise commensurately (this can happen in a firm or industry but has not happened in the long-run in total private economy) then total compensation of input factors and rates of return to those factors will depend on the difference between the output increase and the productivity increase, the size of the hourly compensation increase and the cost of new capital investment.

Selected Bibliography

1 . Bok, Derek C. and Dunlop, John P., Labor and the American Community, Chapter 9, Simon and Shuster, New York, 1970. 2. Denison, Edward F., The Sources of Economic Growth in the United States and the Alternath•es Before Us, Supplementary Paper No. 13. New York: Committee for Economic Development, 1962. ll. Fabricant, Solomon, Primer on Productivity. New York: Random House, 1969. DEFINITIONS AND CONCEPTS 13

4. Fabricant, Solomon, Which Productivity Perspective on a Current Question, Monthly Labor Review, June 1962. 5. Greenberg, Leon, The Economics of Productivity, Joint Council on Economic Education, New York, 1973. 6. Greenberg, Leon, A Practical Guide to Productivity Measurement. Wash­ ington: Bureau of National Affairs, 1973. 7. Kendrick, John W., Productivity Trends in the United States, revised edition. New York: National Bureau of Economic Research. In process. 8. Mark, Jerome A., Technical Note: Industry Indexes of Output Per Man­ Hour. Monthly Labor Review. November 1962. Reprint 2404. Bureau of Labor Statistics, U.S. Department of Labor. 9. McKersie, Robert B. and Hunter, L. C. Pay, Productivity, and Collective Bargaining, St. Martins Press, New York 1973. 10. Council of Economic Advisors, Economic Report of the President. Wash­ ington: U.S. Government Printing Office, 1962. II. National Commission on Productivity; Improving Productivity, Labor and Management Approaches, Washington, D.C. 1971. 12. U.S. Department of Labor, Bureau of Labor Statistics, Trends in Output Per Man-Hour in the Private Economy, 1909-1958. BLS Bulletin 2149. Washington: U.S. Government Printing Office, 1959. (Annual extensions issued each year.) 13. , Indexes of Output Per Man-Hour For Selected Industries. Wash- ington: U.S. Government Printing Office. Published annually. 14. , Productivity and the Economy, revised 1973 Edition, Bulletin 1779. Washington: U.S. Government Printing Office, 1973.

CHAPTER. 2

Bargaining and Productivity in the Private Sector

JOSEPH P. GOLDBERG U.S. Department of Labor

Introduction There has been a real and significant transformation in the terms and climate surrounding the approaches to productivity through bargaining over the past 20 years. The automation phase of technological change of the mid-fifties was viewed as an inten­ sification of pre-World War II trends and therefore a new and more serious phenomenon. Basically, this was the first confronta­ tion of this by labor-management relationships which, in many instances, had only been well grounded in the war and post-war years. There were fears that management pressures to exercise prerogatives over work arrangements and manning met by worker fears over employment security and long-held work rules, would have explosive results on labor-management relations. The fears were actualized in the 1959 steel strike and the rail­ road issues, and in many other bargaining situations. But the combination of governmental activities, and individual industry bargaining developments produced a broad consensus on ap­ proaches to bargaining in productivity, and early awareness of their limitations in the broader context of economy-wide condi­ tions. Technological change, and its effective application as essential to the continued productivity gains which had benefited U.S. consumers were accepted on all sides, government, manage­ ment and labor-but, equally, only with assurances that workers immediately affected would not bear the cost of society's gain. "Manpower utilization-job security" was the indivisible basis for the Department of Labor's study of the East Coast longshore industry. The development of the separate area of "productivity bar­ gaining" from the more routine periodic renegotiation of labor-

15 16 COLLECTIVE BARGAINING AND PRODUCTIVITY management contracts represented the formulation derived in part from several industrial bargains which had involved broad reexamination of long-established relationships, including work rules and bargaining structures, as well as changes in technology and operations and their impact on the labor force and the industry's finances. These were matters requiring protracted di­ alogue, delicate negotiations, and adequate advice to the rank-and­ file members of the union. They could not be negotiated out in the haste and pressure of contract-term bargaining. The unyielding unemployment situation and the actuality of major strikes, along with broader economic trends, focussed govern­ mental attention on the technological change issue in the late fifties and early sixties. Such change was necessary to assure the competitive position of lagging industries, like the railroads, and to ensure the competitive position of U.S. products in world markets. The early instances of bargaining to ensure increased productivity were explored and endorsed. Difficult labor-manage­ ment situations, requiring government intervention such as rail­ roads and east coast longshoring, were influenced toward ap­ proaches based on productivity coupled with worker security. There was early awareness that broader government action was necessary, and the Manpower Development and Training Act was enacted, on the assumption that retraining was necessary to cope with the existing unemployment of skilled workers. When the economic situation improved, and with it the employment of the skilled, the orientation of the statute was redirected to meeting the needs of the new labor market entries and the untrained. The easing of the employment situation, the gradual achieve­ ment of approaches to particularly difficult and well-publicized situations, and the ongoing and regular adjustments to change under contractual provisions made for lesser attention, and new orientation to the matter of productivity concerns. In the private sector, there have been new productivity bargains, and the earlier bargains have been renegotiated to meet changing circumstances. Governmental concerns were evident in the period of the guide­ posts, in the standards for wage adjustments of the Economic Stabilization Program, 1971-74, and in the continuing concern with productivity represented by the National Commission on Productivity and Conditions of Work. THE PRIVATE SECTOR 17

Productivity bargaining in the private sector is, of course, a function of the terms and arrangements developed by the parties themselves, generally; with governmental assistance in some in­ stances. The distinction is made by some between productivity bargains, and productivity concerns inherent in the regular con­ tract negotiation process. Jerome Rosow, an exponent of this view, has said: "the conventional agreement is a peace pact which fixes the price and duration of that pact so as to maintain the old style production. Occasionally the traditional agreement may in­ corporate minor or even quite significant productivity changes but these are not seen by the parties as fundamental goals aimed at changing the over-all productivity of the firm. In productivity agreements, change and efficiency are the basic objectives. It may change basic occupations, including new combinations, elimina­ tion, or unique rearrangements of occupations. Since it deals with the classic products of work, it confronts the questions of union jurisdiction, job rights, status and opportunity and estab­ lished customs and traditions. Therefore, when management is launching a new productivity bargain, it is introducing new and

highly unstable questions . .."1 One can agree with the foregoing distinction, without accept­ ing the formulation for it. More will be said on this later.

The Broad Climate for Productivity Bargaining The focus of attention to technological change, including automation, rationalization and modernization, in the early fifties was centered around developments in particular industries. As the economy showed limited growth in the late fifties, and unem­ ployment grew, exceeding 6.5 percent in 1958 and again in 1961, there was widespread concern over the impact of the apparent intensification of technological change, through automation, on the problem of employment opportunities for the new and larger group of job aspirants who would appear in the next decade, as wall as for the available labor force. Concurrently, there were management concerns for rapid adjustment in the labor force to the requirements for full and flexible use of technological

1 Statement of Jerome Rosow, in U.S. Congress, Joint Economic Committee, Improving National Productivity, Hearings, 92d Cong., 2d Session, 1972, p. 126. 18 COLLECTIVE BARGAINING AND PRODUCTIVITY improvement and operational adjustments to meet domestic and foreign competition. The climate of economic uncertainty was reinforced by the widespread absence of experience in bargaining on the social techniques to be applied. "Hence, the so-called 'hard-line' approach of management, which consisted simply of a concerted drive to seize the initiative on bargaining, roll back the size of wage settlements, and abolish or by-pass allegedly restrictive work rules and practices," Robert M. MacDonald has written in assessing motivations of the period, "Unions were in­ evitably placed on the defensive. With unemployment already excessive and employers moving determinedly to curtail labor expenditures, union leaders had no alternative but to conduct a holding operation, attempting to shore up job opportunities against the corrosive influence of technological improvements, mergers, plant relocations and the like. Their concern for security was sharpened moreover, by the failure of unemployment to decline with the resumption of economic growth."2 Difficulties in a few situations, particularly in the railroad firemen controversy and the steel strike of 1959, and the attendant publicity tended to overshadow the positive approaches to the problem, both in the development of a general social approach, and the meeting of requirements in specific industry and plant situations. There were Congressional hearings held on the impact of automation on employment in 1955 and again in 1959. The temper of the witnesses and times was soberly assessed in 1960. "In the past year the threat of employee displacement from auto­ mation and technological change has been the central point in every major labor dispute-including those in the steel, long­ shore, meatpacking and railroad industries. It is noteworthy, how­ ever, that both labor and business witnesses before the committee agreed that most American trade unions accept automation as a desirable development which holds promise for greater produc­ tivity, higher wages, and a higher standard of living."s Recog­ nized as well, was the unstabilizing effect on specific establishments

• Robert M. Macdonald, Collective Bargaining in the Postwar Period, Industrial and Labor Relations Review, July 1967, pp. 557-558. •u.s. Congress, Senate, Special Committee on Unemployment Problems, Report No. 1206, 86th Congress, 2d Session, 1960, pp. 45-46. THE PRIVATE SECTOR 19

and commumues, as the earlier experience in the coal industry had demonstrated in declining employment. In the executive agencies, during the Eisenhower Administration, the Department of Labor established an Office of Manpower and Technology. A consensus had been developing which increasingly acknowl­ edged that collective bargaining, while essential in dealing with manpower and job security adjustments to innovation and modern­ ization, was only a circumscribed approach, even for the im­ mediate situations involved. "Organized labor welcomes tech­ nological change, as providing the basis for potential benefits for the Nation and all Americans ... " George Meany stated, "But organized labor insists that the burdens of rapid technological change must be cushioned, that Government and business must assume their responsibilities to minimize social dislocations and to provide adequate cushions that will protect workers, their families and communities against the hazards of rapid technolog­ ical changes."4 Walter Reuther stated that as far as possible the UAW had placed into practice in the provisions of its collective bargaining agreements the principle that since "industry as a whole profits from technological advance and from the general dynamism of our economy, and one of the first charges against those profits should be the cost of reasonable protection for those workers to whom the change brings only loss of a job.''5 In­ dustry spokesmen, like Ralph Cordiner of General Electric, agreed that "If, in spite of the best planning we do, some people are temporarily unemployed because of technological change, both industry and government have a recognized responsibility to help families through any such period of transition.''6 With the Kennedy Administration, the press was for legisla­ tion to deal with the broad problem of unemployment, while acknowledging the achievements and prospective role for collective bargaining in meeting radical technological change. Then Secre­ tary of Labor Arthur Goldberg testified that "these great tech­ nological improvements will result in increased productivity, im­ proved national strength, and a substantially higher standard of

'U.S. Congress, Joint Economic Committee, New Views on Automation, 86th Congress, 2d Session, 1960, pp. 536-537. s Ibid; p. 563. . •u.s. Congress. House Committee on Education and Labor, Impact of Automation on Employment, Report, 87th Congress, 1st Sess., 1961, p. 18. 20 COLLECTIVE BARGAINING AND PRODUCTIVITY living for Americans. . . . However, the short-term effects of automation and technological changes make obsolete the skills and impair the livelihood of individual displaced workers and can depress the economies of entire communities."7 The Manpower and Development and Training Act was enacted in 1962 in the light of the ongoing concern with automation and its impact on the established labor force, as well as the possible compounding of the problem by the growth of the labor force in the succeeding decade. With the upturn in the economy and improved employ­ ment, the immediate prospect of continued and widespread un­ employment of skilled workers was dissipated. "As the economy recovered, almost all of these skilled workers were reabsorbed without retraining. At that point, Congress modified the thrust of MTDA in the direction of improving the employability of the hard-to-employ. And through later amendments the legislation was further broadened to be more responsive to the needs of young people who were first entering the labor force.''8 And were more recently adjusted to ensure closer adaptation to local requirements. The concern with the automation issue had provided the basis for the continuing national manpower assessment and policy formulation. There was fairly close interaction between executive and legislative branches in the development of approaches to deal with the collective bargaining aspects of productivity, as well as national manpower policy. The intention in treating these sep­ arately here is primarily to clarify the variety and interaction of approaches and their results. The tripartite Presidential Advisory Committee on Labor­ Management Policy, established in 1961 by executive order was given the mission of advising on policies to promote collective bargaining, industrial peace, sound wage and price policies, im­ proved standards of living, and increased productivity. The Com­ mittee reinforced the growing consensus on the need for conjoint private and public policies. This frame of reference was essential in reducing the possible tensions suggested by the prominence

T U.S. Congress, Senate, Committee on Labor and Public Welfare, Training the Unemployed, Hearings, 1961, p. 221. 8 Eli Ginzberg, with James W. Kuhn and Beatrice G. Reubens, Private and Public Manpower Policies to Stimulate Productivity, National Commission on Productivity, 1971, p. 3. THE PRIVATE SECTOR 21 given to the difficulties in steel and railroads, and the possibility of growing dislocation. The significance in the terms of reference was the tripartite endorsement: "First, automation and technical progress are essential to the general welfare, the economic strength, and the defense of the nation; "Second, this progress can and must be achieved without the sacrifice of human values and without inequitable cost in terms of individual interest; "Third, the achievement of ,maximum technological devel­ opment with adequate safeguards against economic injury to individuals depends upon a combination of private and governmental action, consonant with the principles of the free society."o The continued stickiness of the national unemployment rate resulted in the establishment of the National Commission on Technology, Automation and Economic Progress in 1964. Its two-year study was wide-ranging and intensive in line with its mandate. The report, adopted with virtual unanimity by its public, labor and management participants, was released in early 1966, when the economic environment had changed and unemployment had fallen substantially.lo The Commission con­ cluded that there had been an increase in the pace of technological change in the post-war period, but found no evidence that "there will be in the decade ahead an acceleration in technological change more rapid than the growth of demand can offset, given adequate public policies." The failure of economic growth in the fifties to keep pace with the combined effects of productivity increase and a growing labor force, was accounted the basic cause of the persistence of high levels of unemployment for the decade. Acknowledged was the impact of technological change on

• Presidential Advisory Committee on Labor-Management Policy, The Bene. fits and Problems Incident to Automation and Other Technological Advances, 1962, p. 2. 10 "'As a result of tax cuts and other fiscal policies adopted beginning in early 1964, unemployment has been reduced from 5.4 percent to about 4 percent at present. With the intensification of the war in Viet Nam, the prospects are for still further cuts in unemployment and concern is expressed about inflation." National Commission on Technology, Automation and Economic Progress, Report, Technology and the American Economy, Vol. 1, 1966, pp. XIII-XIV. 22 COLLECTIVE BARGAINING AND PRODUCTIVITY

unemployment in particular industries, localities, occupations and individuals. The recommendations of the Commission stressed that the "responsibility of Government is to foster an environment of opportunity in which satisfactory adjustment to change can occur. But the adjustments themselves must occur primarily in the private employment relationship. The genius of the private adjustment process is the flexibility with which it accommodates to individual circumstances.''11 The extensive recommendations in the report, together with the research and position papers developed, remain an impressive contribution. Executive action was prominent in several specific situations involving efforts to modernize labor-management relationships to accommodate to changing technological and operational require­ ments. This was particularly notable in the railroad, maritime shipping, and longshore industries. Each of these was an industry situation in which governmental concern in terms of the public interest had been expressed either directly through legislation or through involvement in situations deemed to affect the public welfare. The federal government's interest in the operational health of the railroad industry, and in railroad labor-management rela­ tions, was one of longstanding. The Railway Labor Act of 1926 and its procedures were the fruition of a history of almost 50 years of special federal procedures. In 1960, with the termination of a moratorium on carrier proposals for work rule changes on a national basis, including elimination of the firemen in diesel freight or yard service, the parties agreed to a proposal by Sec­ retary of Labor James Mitchell to establish a special Presidential Railroad Commission to investigate and mediate, and submit a report of its findings. The Commission, established by executive order, was a tripartite group whose neutral members were selected by the President, while the labor and management parties nom­ inated their representatives. Mediation efforts were unsuccessful, and a report was filed in early 1962 written by the neutral mem­ bers. The recommendation was for a modified form of attrition based on the finding that firemen were not so essential to tl1e operation of diesel locomotives, as to warrant the existing national

11 Ibid; pp. 109-llll. THE PRIVATE SECTOR 23 rule for their invariable presence. For those required to leave their positions, alternative job opportunities or severance pay were recommended. When the unions refused to negotiate on the work rules, the railroads announced that they would place the recommendations into effect unilaterally. There was litigation with Supreme Court decision in March 1963 upholding lower court decision not to intervene in the case. Continuing efforts to settle the dispute over firemen's jobs and the consist of train crews were unavailing, as were government efforts to obtain agreement on binding arbitration. In August 1963, the first peacetime com­ pulsory arbitration law was enacted by joint resolution.12 East Coast longshoring was also a focus for governmental efforts at settlement of manpower utilization and job security issues. A partial resolution was reached in the 1959 negotiations, but basic work rule issues remained, including employer demands for man­ ning reductions. With contract expiration, there was a coastwide stoppage in October 1962. Taft-Hartley Act emergency pro­ cedures were effectuated. When the strike was resumed following the expiration of the 80-day injunction period, President Kennedy appointed a special board, warning th at "the point of public toleration of this situation has passed. If this case can not be settled by private action, then further public action is required." The Board, chaired by Senator Wayne Morse, proposed the broad outlines of a study on manpower utilization, job security, and all related problems to be carried out by the Department of Labor. The parties accepted the proposal. In a year-long study, the Department ensured active and guiding participation by the parties, to ensure use of the findings in meeting collective bargain­ ing needs, and in avoiding compulsion. When the parties were unable to reach complete agreement, the original board was recon­ vened. While there were further clarifications, the Board was re­ quired to formulate recommendations. These were subsequently adopted by the parties, and incorporated in their agreement, but only after a Taft-Hartley injunction, and a strike following its

"' Harold M. Levinson, Charles M. Rehmus, Joseph P. Goldberg and Mark L. Kahn, Collective Bargaining and Technological Change in the Transportation Industries, The Transportation Center at Northwestern University, Evanston, Illinois, 1971, pp. 194--201. 24 COLLECTIVE BARGAINING AND PRODUCTIVITY

termination, complicated by the regional character of bargaining in east coast longshoring.1s Governmental concerns in research and development activities relating to U.S. flag merchant shipping are the result of several factors, with subsidy costs figuring among the most prominent. In the early sixties, emphasis was placed upon automation of ship operations, basically to conventional ship types, with central con­ trols operated from the bridge and console panels in the engine room. The then Maritime Administrator in 1962 supported the research on automation, pointing to Japanese automated ships in being, as he stated, "our competition forces us to face the facts, and our heritage demands it of us." Stressed also were the labor implications, with assurances that "any move toward automation must be made over an extended period with a thorough sense of responsibility toward labor." The general reaction among the licensed and unlicensed maritime unions was one of acceptance of change, with a balanced program for protection of seniority and working conditions, and a sharing of the benefits of increased mechanization. While agreements on reduced manning on newly­ constructed mechanized ships for subsidy purposes appeared to have been reached in 1963, there remained continuing concern of the sev­ eral shipboard unions with ensuring job security within their juris­ diction. Aspects of adj ustment to mechanization, and manning reductions remained for settlement and for decision under tl1e subsidy provision for sometime after the new automated ships were operational.14 The experience with the difficulties encoun­ tered in gearing collective bargaining on manning in with subsidy requirements appear to have been met by the provision in the 1970 amendments to the Merchant Marine Act of 1936 that prior to the award of a contract for the construction of a vessel, the Secretary of Commerce is to make a finding on any officer or crew member positions deemed to be unnecessary for the efficient and economical operation of the vessel. In making such a finding, he is to take into account manning scales under existing collective bar­ gaining contracts, and provide labor and management representa­ tives an opportunity to comment prior to· the effective date of his finding.15

18 Ibid; pp. 346-354. "Ibid; pp. 378-391. 111 Public Law, 91-469, Octo!Jer 21, 1970, Sec. 17. THE PRIVATE SECTOR 25

Productivity as an influence on broad economic trends in the economy has been a maj or element in consideration of govern­ mental wage-price policies, and, more recently, in continuing positive governmental approaches. Long-run trends in produc­ tivity were a continuing feature in wage-price guideposts during the sixties. When wage-price controls were established in 1971, the permissible standard for pay increases was set at 5.5 percent; of which 3 percent represented the "normal" rate of productivity growth for the economy as measured by output per man-hour. In the case of both east and west coast longshore agreements, adjustments in excess of these were approved by the Pay Board on the basis of the substantial gains in output per man-hour asso­ ciated wi th the collectively bargaining arrangements making for relaxation of manning and work rules, with substantial benefits to the longshoremen.1o The National Commission on Productivity was established by executive order in 1970. Composed of representatives from in­ dustry, labor, agriculture, the public, and :Federal, State and local governments, the Commission's first attention was given to "pro­ ductivity bargaining" between labor and management; manpower adjustment policies; education and research development; and government productivity. Congress subsequently gave the Com­ mission statutory authority under the Economic Stabilization Act amendments of 1971, with expanded responsibilities. The broad objectives of the Commission have been summarized as providing information and inspiration in the private sector; to advise the Government on its policies affecting productivity; and to provide a basis for cooperative action by representatives of labor and man­ agement, State, local and the Federal Government through con­ structive discussion. The Commission has expanded its approaches to productivity, stressing the specific requirements of individual sectors, like food, transportation, health, and State and local sectors. All factors affecting productivity improvement have been explored, including the interaction of improvement in such a pervasive factor as railroad transportation on other sectors. The human aspects of productivity change continue to receive full attention. Increasingly attention is being given to productivity in

•• Economic Report of the President, together with the Annual Report of the Council of Economic Advisers, January 1973, pp. 51-70. 26 COLLECTIVE BARGAINING AND PRODUCTIVITY

government affairs at all levels, as well as the impact of govern­ ment programs on private industry,l7 The matter of a Federal government policy as relates to the Commission or to the estab­ lishment of a national productivity center is the continuing sub­ ject of legislative proposals.1B The governmental and public-oriented concerns with enhanc­ ing the productivi ty and efficiency of U.S. industry have reinforced and lubricated the trend toward labor-management consultation and joint overall approaches to the adjustments required by tech­ nological change and modernization. The growth of arrangements to meet the human requirements for such adj ustments are reflected in the spread of protective provisions in manufacturing industry agreements and the resolution of work rule issues in the trans­ portation industries. The extension of technological change to the retail and wholesale trades has made these also a current focus for protective arrangements for employees. The adj ustments which have been made in many industries and establishments have represented more gradual accretions of adjustments, in situations where changes are regular and ongoing. The more spectacular "productivity bargains" have been those which have either involved major anticipated technological changes or have involved major structural and contractual readj ustments, or a combination of these. The influences determining the nature and content of changes in bargaining relationships and structures are numerous, complex and diversified, all factors which underline the awareness that government involvement can only be to help lubricate the relationships, with the active and predominant par­ ticipation of labor and management representatives. "At the plant and work level it is imperative that labor and management organizations review their policies and collective bar­ gaining agreements with reference to their suitability for an ac­ celeration to technical change and automation," John T. Dunlop has said, "This may call for a review of methods of setting internal wage structures, incentive methods of pay, seniority districts and procedures, training procedures, the rights and practices of man-

>T The National Commission on Productivity, Third Annual Report, March 1974, pp. 1-2. 18U.S. Senate, Committee on Government Operations, Hearings on S. 4130 and S. 4212, National Productivity, 93d Congress, 2d Session, December 1974. THE PRIVATE SECTOR 27 agement in introducing technical changes, as well as provisions relating to layoffs, severance pay, transfers, retraining and a variety of other contract sections. In general, it is probably the better part of wisdom to have such provisions established in advance of an upsurge of new technical changes, when such provisions can be discussed with more detachment, rather than to have them established midstream during massive technical changes ..."19 These guides have, in fact, been characteristic of the develop­ ment of many agreements in the post-war period. The attention given to the more spectacular and all-encompassing adj ustments to technological change and relocation of operations have over­ shadowed the steady, ongoing adjustments which have occurred elsewhere. The nature of the manufacturing industries, with steady improvements in machines and techniques, together with the greater degree of union organization in this sector, have produced contractual provisions geared to provision of a measure of job security and easing of the disemployment effects of tech­ nological change. These agreements have been influenced by the market position of the industry and firm, as well as the strength and structure of union organization. The terms of these agree­ ments permit the parties to consider the needs of the work force in the company, in terms of seniority, skills, mobility, retraining, and relocation. The contractual provisions have developed over time, rather than as all-encompassing approaches to technological change. In part, this is a function of the single industrial union organization in manufacturing establishments, as well as acceptance of man­ agement's responsibility for continuous improvements to ensure· the competitive position of the firm. In part, it has been a func­ tion of the developing trends in bargaining, including broader consultation between management and labor on the broad in­ fluences on employment and working conditions in the firm. Provisions for job security which were developed to meet seasonal and cyclical influences on employment, have also been a factor in easing the impact of technological change. Distinction between craft union situations and industrial union situations is reflected in the greater emphasis given to ·attrition in the former, as in

10 John T. Dunlop, Automation: Its Meaning and Dimension, New York Governor's Conference on Automation, Proceedings, June 1960. 28 COLLECTIVE BARGAINING AND PRODUCTIVITY railroads, printing and longshoring. Attrition provisions are rare in manufacturing agreements, as in agreements generally. This, however, does not preclude joint efforts to minimize the effects of major technological change through advance planning. A major instance involved the anticipated impact on local telephone offices of conversion of long distance phone communications to direct dialing by the Bell System and the Communications Workers of America. The Union sponsored a study of approaches in collective bargaining to meet the long-run effects of automation. The com­ pany approached the impact with planning guidelines for local offices, to fit local circumstances, directed at retaining as many permanent employees as possible; suitable transfer to other offices, avoiding downgrading, and avoiding a surplus labor force. With this advanced planning, the number of regular employees laid off or transferred was minimized. For those few who were laid off, because of inability to relocate, severance payments were made, with preferential rights in rehiring.2o The terms of contracts have been adjusted to meet the impact of altered technology and operations. Thus, advance notice to unions on technological changes, plant relocation, and shutdown are being extended. Job protection is sought through interplant transfer and preferential hiring provisions with many agreements providing for relocation allowances. On the job training provisions are widespread. Where job losses occur, a measure of income security is provided through supplemental unemployment benefit plans, severance pay andfor eased or early retirement provisions. All of these provisions have been extended more widely among industries during the past decade.21 The variety of experience which is associated with the impact of new technology and operations is so great that it can hardly be dealt with exhaustively in this context. The following in­ stances are intended to be suggestive of the nature of adaptations within specific settings. In this, the effect is to indicate that only very general precepts can be laid down. But leading all others, is the precept that it is the parties themselves who must fashion

"'Bureau of Labor Statistics, U.S. Department of Labor, Bulletin 1715, Improving Productivity: Labor and Management Approaches, 1971, pp. 17-18. 21 Bureau of Labor Statistics, U.S. Department of Labor, Bulletin 1784, Characteristics of Agreements Covering 1,000 Workers or More, July I, 1972; 1973. THE PRIVATE SECTOR 29 the adjustments, through consultation, to ensure that the efficiency and productivity of the firm are accompanied by appropriate provisions for the jobs and income of the work force.

AUTOMOBILES The process of technological change in the automobile in­ dustry has been a continuous one. More recently this has been accompanied by modernization of plant facilities also. Output per man-hour in this industry has exceeded the overall national gains in the long-run. The manifold factors accounting for this are, however, overshadowed in the short-run when the level of output is the major single influence. The provisions of the auto­ mobile industry agreements have reflected this continuous process, with evolution to meet changing requirements and the growing mutuality of long-standing arrangements. The adoption in 1948 of annual wage increases, made up of the "annual improvement factor" (based on national gains in productivity) and cost of living escalation adjustments, provided a basis for improving the workers' standard of living as well as a sharing of productivity gains. Subsequently supplemental unemployment benefit plans were negotiated in 1955, in response to the union demand for a guaranteed employment plan. Operational decentralization in recent years, and the replacement of older plants, has been accom­ panied by the negotiation of interplant transfer arrangements. Allowances were provided for displaced workers relocating to other plants, with agreements varying in providing graduated payments based on distance of the move and family status, or providing close to actual expenses. Supplemental unemployment benefits, severance pay, and early retirement were also available. In the 1973 negotiations, the parties agreed to the 30 and out principle for retirement, with 25 and out for foundry and forge workers, without regard to age.

STEEL Steel industry contracts contain similar provlSlons to those in other industries directed at coping with the effects of technological change in the work force. There have been additional develop­ ments in collective bargaining in this industry which bear on 30 COLLECTIVE BARGAINING AND PRODUCTIVITY productivity for the industry, without direct "productivity bar­ gaining" as such. These developments are products of long-term efforts to establish arrangements to deal with ongoing conditions in the steel mills-through joint consultation, avoiding the crisis atmosphere of contract expiration negotiations. Although the last strike in Basic Steel was the ll6-day strike in 1959, that experience has continued to overshadow contract negotiations. As a result, all the symptoms of a work stoppage situation were performed unnecessarily, at substantial costs to both companies and workers. In advance of contract negotiations, steel users built up huge in­ ventories to hedge against a general work stoppage, with some supplies obtained through foreign imports; management gradually banked furnaces, as the contract termination date approached; and, even though no strike occurred, workers were laid off until stockpiles were reduced well after the agreement was concluded. At the 1972 United Steelworkers Convention, President I. W. Abel noted that the aftermath of the 1971 negotiations had been the longest post-contract layoff cutback in the history of the nego­ tiations. He announced that "the time has come for the steel industry to sit down with this union and explore the practical advantages and the social benefits of smoothing out the produc­ tion cycle so that, once and for all we can get rid of the needless boom and slump that now attends our contract negotiations. This union stands ready to see what can be done about this without infringing in any way on free collective bargaining." The result in 1973 was agreement in the innovative Experi­ mental Negotiating Agreement (ENA) on provision for voluntary final and binding arbitration for unresolved industrywide bar­ gaining issues in the forthcoming 1974 negotiations. The union retained the right to strike at the local level on unresolved local issues. Minimum wage increases were provided for in the following three years and provision was made for early opening of negoti­ ations. The 1974 negotiations were concluded successfully, with agreement to readopt ENA for the contract negotiations sched­ uled for 1977. In the view of the parties, the mere availability of voluntary and binding arbitration by an outside third party was sufficient pressure to reach agreement. Another development of the 1971 negotiations was agreement on the formation of joint advisory committees on productivity at THE PRIVATE SECTOR 31 each plant in the industry. This was the result of concern over the growing volume of foreign imports which were frustrating the productivity benefits in volume and quality intended by the in­ dustry's massive capital spending program of the sixties, coupled with stagnating profits, sluggish growth, and noncompetitive labor costs. These committees, continued under the 1974 agreement as "Employment Security and Plant Productivity Committee," have additional purposes to the improvement of productivity. They are to promote orderly and peaceful relations in the plants; pro­ mote the use of domestic steel; achieve desired prosperity and pro­ gress for the company and its employees; and, consistent with the terms of the agreement, review matters of special concern. As the union has stressed, these joint productivity efforts are based "not on the concept of speedup but of eliminating waste and unneces­ sary costs." Pointing to the substantial increase in the annual rate of output per man-hour from 1971 to 1973 and the maintenance of a relatively stable employment level, the union view was that "after three years of experience under the joint productivity pro­ gram, a great many tangible results became apparent. No speedup measures have been instituted by management. None of the feared job rearrangements materialized. Slowly the process of building mutual trust set in after the plant committees began functioning." The increase in productivity was attributed to the evening of production schedules, high level of demand and output, imports down and exports up, and the joint labor-management produc­ tivity program.22

CONSTRUCTION Rising home and commercial construction costs, along with the rise in construction wage rates and persistent charges of re­ strictive work practices, have made the construction industry a continuing focus of attention for the possibility of change in structure and operations. This public climate, together with in­ roads by nonunion contractors and unemployment among con­ struction workers, made for willingness by construction union officials to participate in special industry committees. The slow­ down in wage increases during the wage-price stabilization pro-

..Steel Labor, March 1975, pp. 18-19. 32 COLLECTIVE BARGAINING AND PRODUCTIVITY gram under the special tripartite arrangement of the Construction Industry Stabilization Committee was achieved with administrative guides which required attention to the particular institutional and historical arrangements which have existed in the construction industry. The Construction Industry Stabilization Committee was estab­ lished in early 1971, before the general wage-price stabilization program was effectuated later that year. During the period of controls, construction wages were adjusted within the general standard, while maintaining established relationships among crafts in the locality and related areas. In 1973, the final stage of controls, the policy was set out for the Committee "to move toward viable long-run arrangements for dispute settlement in each branch of the industry and toward more effective collective bargaining in the public interest." It was envisaged that the remaining period of controls should be utilized to meet some of the major long-term problems in the industry through the cooperation of labor, contractors and government. Among the major problems were: procedures at the national level to ease settlement of disputes over contract terms at local or regional levels; broadening the geographical structure of nego­ tiations in some localities and for some crafts; review of some managerial and labor practices and contract provisions in some localities as they affects costs; and greater coordination of bar­ gaining negotiations among crafts and associations in some local­ ities. The Committee indicated that special consideration would be given to agreements providing for significant changes in the geographical structure of bargaining, where such change would promote the stabilization of collective bargaining and the effective utilization of manpower and management resources. Following termination of the control program, work stoppages increased sharply in 1974 and new imbalances in wage relation­ ships developed. There was continuing consideration by a group of industry representatives to establishing a continuing joint committee for the industry and its recommendations were sub­ sequently ratified by the national labor and management orga­ nizations in the industry. On the basis of this agreement, an executive order was issued in April 1975, establishing the Collec­ tive Bargaining Committee in Construction, technically a unit of THE PRIVATE SECTOR 33 the President's Labor-Management Committee established by Ex­ ecutive Order ll809. The Construction Committee, consists of representatives of labor and management, with the Secretary of Labor as chairman, and the Director of the Federal Mediation and Conciliation Service as a member. The Order states that it "is required to establish an arrangement for an operating structure with a minimum of government interference in the furtherance of more effective collective bargaining in the industry." Basically, the concerns of this Committee are those of the earlier committee, without any authority, however, to set wage standards. While under the aegis of governmental aid, and with governmental par­ ticipation, the role of the committee is basically that of a bipartite group, seeking to facilitate constructive bargaining at local and area levels, as well as to facilitate local coordinated and larger area bargaining wherever appropriate. The Committee can hold conferences to further these objectives, and may make recom­ mendations to the standard labor and management organizations in particular collective bargaining disputes. Other broad con­ struction industry concerns the Committee will consider include manpower requirements and training needs, and increased pro­ ductivity under collective bargaining agreements.23 There have been continuing efforts on the part of the in­ dustry itself to meet the need for change in the industry. A Work Rules Agreement was negotiated between the Building Trades Department and the National Contractors Association effective June 1973, directed primarily at achieving increased pro­ ductivity and stability in labor relations. The agreement required inclusion of the rules in the agreements of the signatory inter­ national unions, with utilization of their best efforts to obtain local union incorporation also. The Sheet Metal International Association in 1973 negotiated the Stabilization Agreement of the Sheet Metal Industry with major sheet metal contractors. The agreement provides for a special underemployment benefit up to a limit of 180 hours of pay in a six-month period to any worker who works fewer hours than the average for his local, through no fault of his own; as well as a travel allowance to those who must travel to find work.

23 AFL-CIO News, April 12, 1975. 34 COLLECTIVE BARGAINING AND PRODUCTIVITY

Financed by employer contributions (3 percent of gross earnings for each worker) , in return the union agrees to work rules ensur­ ing fair day's work, no restriction on output, no slowdown or "featherbedding," and no illegal stoppages or lockouts. First benefits were paid in early 1975.24

RETAIL FooD Another outgrowth of the wage-price controls program of 1970-73 is the Joint Labor Management Committee for the Retail Food Industry. The problems confronting this industry in its collective bargaining relationships became apparent in the con­ siderations of the special food industry wage and salary committee established by the Cost of Living Council. The presently orga­ nized voluntary group consists of major chains, and the Amal­ gamated Meat Cutters and Butcher Workmen, the Retail Clerks, and the Teamsters, with a neutral chairman. The Committee will seek to aid collective bargaining through the maintenance and exchange of information on wages, collective bargaining settle­ ments and other matters which will facilitate collective bargain­ ing. The Committee will also be a forum for the discussion of longer range problems including technological change, manage­ ment and union work practices, and fragmented bargaining, and the need for adequate information on such sensitive areas of tech­ nological change as the automated check out, automated ware­ housing, and centralized meat cutting was set forth as a leading matter.25 Most recently the Joint Labor Management Committee has been assigned responsibility for the labor matters associated with the front end automation, or computer scanning of the Universal Product Code on each package. This followed the criticism levelled at the arrangement planned for marking prices on store shelves, but not on the packages. Consumer groups and the unions were critical of this proposal, with stress placed on the need for greater openness on the impact of the impending change on the work force, and on more consumer input into the plans of the

•• New York Times, April 10, 1973; AFL-CIO News, February 22, 1975. ""Remarks of Wayne L. Horwitz, Chairman Joint Labor Management Com­ mittee for the Retail Food Industry, June 12, 1974, in BNA, Retail;Services Labor Report, No. 1301, July 4, 1974; Retail Clerks Advocate, May 1975, p. 16. THE PRIVATE SECTOR .!15 industry. Consideration of Federal legislation in response to con­ sumer criticism, and actions at local and State levels, apparently have resulted in the provision of more information, particularly to the Joint Labor Management Committee.26 In an agreement covering Washington, D.C. area stores, the Retail Clerks negotiated a provision in 1974 covering the possible installation of electronic checkouts. This provided for advance notice to the union of such intention. Regular assigned employees as of the date of utilization of the new system would be retained on the payroll, subject to transference, assignment to other work, or laid off in accordance with seniority provisions, provided the layoff is for reasons other than the new system installation. This provision is similar to provisions in agreements negotiated by the Meat Cutters Union permitting new methods or new products, provided that full-time workers will not be removed from the payroll as a result of such changes.

PRINTING AND PUBLISHING Almost all phases of the printing industry are being influenced by new technology. In the case of the composing room, innovations affecting manpower and productivity include typesetting com­ puters, high speed electronic phototypesetting, new techniques to prepare camera ready copy, and optical character recognition equip­ ment. The International Typographer's Union has been fighting to maintain jurisdiction over the latest and fastest CRT (Cathode­ Ray Tube) Scanner computer typesetting system. The system, which would permit bypassing the composing room, and ITU jurisdiction, was the subject of arbitrations covering agreements in 3 cities. In two, arbitrators found that the ITU had a juris­ dictional interest in the system, while in the third the award was negative. In one award, the arbitrator spelled out the specific job assignments for composing room employees. He also granted lifetime security against layoffs related to the operation of the editorial CRT-scanner system.27 The settlement of the long-standing issue of acceptance of technological change by New York Typographical Union No. 6

•• BNA, RetailjServices Labor Report No. 1.!141, April 17, 1975. 111 The Typographical Journal, November, 1974, pp. 188-189. 36 COLLECTIVE BARGAINING AND PRODUCTIVITY in its agreement with New York newspapers in July 1974 repre­ sented a major breakthrough for fixing the job security terms for a free hand for management in automating, for flexibility in job assignments, for determining manning, and for eliminating bogus and dead horse. Under the terms of the l 1-year agreement, all of these terms are now available to management. In return, the regular and substitute employees were assured lifetime employment, even if there were other layoffs for economic reasons. Annual increases combining a 3 percent adjustment, like the automobile annual improvement factor, and cost of living adjustments were provided for. Pensions were liberalized, with a bonus of $2,500 to those retiring within 6 months of the contract approval date. With the 6-month productivity leave available to all members, an early retiree would receive a $10,000 lump sum payment. The agreement was preceded by a stoppage at one newspaper. The stoppage demonstrated that a single craft union could not halt production in the face of technological changes permitting non-union secretarial and other personnel to operate electronic typesetting devices, when the single local did not receive the support of the other local unions at the newspaper.28

MEATPACKING The Armour Automation Fund established in 1959 was a much publicized approach to private manpower planning. Na­ tional meatpackers were confronted with growing competition from small packers who were able to establish themselves with small amounts of capital in livestock-producing areas with lower wage rates, to prepare processed meats which could be transported cheaply in refrigerated trucks. National packers in the late fifties closed high cost urban plants, and constructed smaller, more efficient, mechanized plants in the livestock areas. In the late fifties, Armour and Company closed eleven of its older plants, reducing production and maintenance employees from 25,000 to 15,000. In the 1959 negotiations, the major issue was that of job security. A company offer to establish a fund to be administered by a committee with union and management repre-

28 A. H. Raskin, City Papers on Threshold of Future as Result of 11-year Automation Pact, New York Times, July 29, 1974. THE PRIVATE SECTOR 37 sentatives and an impartial chairman, was accepted. The com­ mittee was to study problems resulting from the modernization program, and was to make recommendations for training and re­ training employees for new and changed jobs, and for transfer rights to other company plants. Existing severance payments were not changed. The combination of contractual provisions and formal plan­ ning under the terms of the fund's arrangements, resulted in the development and improvement of techniques for meeting, at least to some degree, the training and job requirements of the dis­ placed workers. Severance pay had been available to displaced workers formerly. The effort, however, was to provide employ­ ment. Under the agreements, advance notice of plant closings was provided, and in 1967 this advance notice was extended from 90 days to 6 months, and, in fact, this has been extended further by the company where necessary. From 1960 on, the automation committee has opened an office in the city in which a plant was to be closed. The office developed a comprehensive manpower program drawing on city, State, re­ gional and Federal officials to assist. A description of the eval­ uation of the experience with this planning in the case of Omaha in 1969, indicates how extensively community resources were marshalled in the locale of the closing to provide counselling and placement. A tight labor market situation in Omaha aided in providing job opportunities for many without transferring else­ where. The interplant transfer plan had not worked well originally. Few were prepared to sever community relationships, particularly since opting for an Armour job at another plant resulted in in­ eligibility for a lump-sum separation payment averaging $2,000. When "flowback rights" were subsequently established, with workers able to return within the first few months of transfer, and receive severance pay, transfers became more widespread. There were also liberalized pension payments, 1 1;2 times regular retirement benefits for employees 55 to 62 years of age with 20 years of service.29

29 James L. Stern, Evolution of Manpower Planning in Armour's Plant Closing, Monthly Labor Review, December 1969, pp. 21-28. 88 COLLECTIVE BARGAINING AND PRODUCTIVITY

RAILROADS The attention given to the operating crew manning disputes, and particularly the diesel firemen issue for much of the past 15 years has left the impression that collective bargaining was in­ adequate to deal with the needs of technological change in the railroad industry. Closer examination, however, indicates that the special arrangements in the railroad industry have, in fact, provided a basis for meeting many of these problems. The in­ stability in railroad labor-management has been the result of a reduction of over 60 percent in railroad employment in the post World War II years, distributed unevenly but widely throughout the labor force. The causes were due to changes in operations, demand for rail services, and product mix, along with technolog­ ical changes. The basis for much of the later worker protection to meet the · introduction of technological change was laid in the Washington Agreement of 1936. Negotiated by national railroad labor orga­ nizations and carriers, it provided protection for employees who would be adversely affected by "coordination" of carriers (e.g., unification, consolidation, merger or pooling) . This agreement provided for 60 percent of earnings, for up to five years, for em­ ployees deprived of employment, along with continuance of free transportation, pension and hospitalization. Employees bumped to lesser paying jobs received the difference in pay for 5 years. Transportation, moving ;;md loss in sale of home was paid by the · railroad to employees required to move to continue to work. Under the special procedures of the Railway Labor Act, Emer­ gency Boards have been established to make recommendations in unresolved disputes involving technological change cases. These along with the Presidential Railroad Board, and Arbitration Boards have uniformly recommended against lengthy retention of positions found unnecessary and against undue holding back of technological change or other changes to increase efficiency. Simul­ taneously, they have recommended a variety of worker protec­ tions against the adverse effect of change. And the unions have sometimes obtained more in negotiations than the neutrals recom­ mended. The diesel firemen issue referred to earlier was only tempo- THE PRIVATE SECTOR :39

rarily resolved by the board established by the first Congressionally enacted peace time compulsory arbitration law. The Board held that 90 percent of firemen's jobs on diesel freight and yard engines were unnecessary. All firemen with ten years' seniority were to be retained, unless offered comparable jobs. Those with two years' service were to be discharged, with severance pay. The Board's award was effective for two years during which 18,000 firemen jobs were eliminated. The union never agreed to the award. The issue was not finally settled until 1972 when the carriers and the United Transportation Union agreed to the eventual elimination of the firemen positions on diesel freight locomotives either through attrition or promotion. The existing work force of 18,000 firemen on freight trains would be employed until promoted, retired, resign or die. Retirement was · made compulsory at 65. In the case of the railroad shopcrafts, an employee · protection agreement was concluded in 1964 following on the recommenda­ tion of an Emergency Board. Here, the income guarantees of the Washington Agreement of 1936 were applied to a wide .range . of job displacing factors including technological change, con­ tracting out and transfer of work. Provision was made for ad­ vance notice of any intent to subcontract. In the case of the nonoperating railroad crafts, individual unions had sought to obtain job security in the late fifties, gen�r­ ally making limited gains, or significant gains with individual carriers. In 1963, the five nonoperating unions joined in a notice to all major carriers to limit further job declines. Following Emer� gency Board proceedings, agreement was reached on a broad j.ob protection agreement. Active employees with two years of service would be retained in service, with protection of pay. Even though the agreement otherwise might permit greater cuts, the number of "active" employees could only be reduced by natural attrition; but by no more than 6 percent in a year, in permanent reductions related to technological or organizational changes. If business dropped by more than 5 percent below the 1963-64 average, a carrier could make greater employment reduction, with furloughed employees to be reemployed when business improved. In return, the carrier could transfer work and employees from one seniority 40 COLLECTIVE BARGAINING AND PRODUCTIVITY district or roster to another under properly negotiated agreements. Union jurisdictional lines were not to be crossed.30 In more recent negotiations, work rule issues resulted in selec­ tive strike action by the United Transportation Union, and a national strike of railroad signalmen, in 1971. The first resulted in retaliation by the nonstruck railroads in unilaterally introduced interdivisional runs, and yard crews performed broader work. Subsequently, agreement was reached on joint committees to work out interdivisional runs. In the latter, Congressional legislation granted the union an interim wage increase. In early 1973, the carriers and 15 railroad unions reached an agreement on wages and pensions well in advance of the termina­ tion date. This was a signal development in a labor-management relationship which has generally seen all of the steps of the Rail­ way Labor Act utilized, and some additional special procedures, before agreement could be reached.

LONGSHORING The radical transformation of the shipping industry during the past 15 years contrasts with the limited changes in ship oper­ ation and cargo handling during the previous half century. Long­ shoremen have been affected directly by the changes in the car­ riage and handling of general cargoes. Wi th the persistence of the casual nature of long-shore employment, the longshoremen and their unions sought to obtain and retain fixed gang manning, and work rules for gang operation, sling load and crane operation. In the past, there was resistance to the gradual introduction of forklifts and prepalletized earnings. Containerization and more recent developments in ship modern­ ization are obliterating established patterns. Manual labor of loading and unloading these ships has been virtually obliterated. Marshalling areas for containership operations are frequently away from long-established areas of employment. Longshoremen are in­ creasingly required to be more mobile and to acquire new skills to meet these developments.

30 Discussion based largely on Harold M. Levinson, Charles M. Rehmus, Joseph P. Goldberg and Mark L. Kahn, op. cit., pp. 138-214. THE PRIVATE SECTOR 41

On both coasts, the concerns with the effects of impending technological changes were increasingly apparent in the fifties, stimulated in part by the widespread concern with automation. The paths taken by the Pacific coast International Longshoremen's and Warehousemen's Union and the east coast International Long­ shoremen's Association differed. The coastwide negotiation structure for bargaining on the west coast, through the Pacific Maritime Association and the ILWU, as well as joint control of the longshore labor force through the dispatch halls, were basic features of the west coast relation­ ship. Out of a slow and steady process of negotiations, in which the government role was clearly not desired, the parties concluded the Mechanization and Modernization Agreement in 1960. It was basically a "buy out" of the restrictive provisions and prac­ tices in cargo handling. The "buy out" was achieved through annual payments. Reductions in gang size and increased flexibility in manpower use were permitted. In return, it was agreed that none of the regular work force would be laid off. Early voluntary retirement was encouraged with payments of $7,920 to fully regis­ tered longshoremen, with 25 years of service who retired between 62 and 65. A fund guaranteeing a minimum 35 hours of work or pay per week never had to be activated. The 1966 renewal and 5-year extension was ensured by the increased productivity achieved. In the period following 1966, the Pacific containership explosion resulted in efforts by the ILWU to have container stuffing and discharge performed at or adj acent to the docks by longshoremen. A transitional agreement was nego­ tiated to give the ILWU such jurisdiction. The 197 1-72 strike, the first breakdown in contract negotiations since 1948, occurred in the face of a substantial decline in hours worked by the regis­ tered labor force, as the result of containerization in the Pacific trades. The matter of work or earnings guarantees was a live issue, along with jurisdiction over container loading. Both were covered in the terms of the 1971 and 1973 agreements. Fully registered class A men are guaranteed 36 hours of pay per week, and limited registered Class B men, 18 hours. The role of the Department of Labor study in the east coast longshore adjustment to increased technology and efficiency has been described earlier. The parties agreed to a two-stage reduc- 42 COLLECTIVE BARGAINING AND PRODUCTIVITY tion in the size of gangs in the port of New York and greater flexibility in the use of gang members. Retirement benefits were liberalized to facilitate attrition of the labor force. An annual income guarantee, originally of 1,600 hours, now 2,080 hours, was established. Guaranteed annual income plans were established in all of the ports. On both coasts, the continued inroads of container use on the availability of work have been met by efforts to retain some por­ tion of the work of loading containers. On the east coast, manu­ facturers or shippers fully loaded containers are subject only to royalty payments and allowed to move without stripping or stuffing. These are the great majority of containers. All others, containing less than full loads or consolidated loads, and coming from within a 50-mile radius of a designated point are required to be stuffed or stripped by ILA longshoremen. On the west coast, a somewhat different clause is in effect. The success of the agreements on both coasts has been the result of the spirit of the labor-management relationships which exist. On the Pacific coast, the role of the Joint Labor Relations Committee has been a key element in the successes since 1960. The Committee has served as a means for discussing newly developing problems, as well as broad industry concerns, and for seeking solutions, rather than presenting impasses. On the Atlantic and Gulf, the parties have extended the scope of bargaining authority of the Council of North Atlantic Shipping Associations to insure uniformity in the application of container rules. In the port of New York, the agreement has extended the role of the New York Shipping Association-International Long­ shoreman's Association Contract Board to policy matters involving all of the specialized joint boards. There has been close cooper­ ation between the parties in matters relating to preservation of traditional patterns of cargo handling by east coast ports.a1 A notable achievement in 1974 was the ability of the parties to con­ clude agreement well in advance of contract expiration, an inno­ vation in a relationship in which contract expirations have been accompanied by strikes in almost every post-war negotiation.

81Joseph P. Goldberg, Longshoremen and the Modernization of Cargo Handling in the United States, International Labor Review, March 1973. THE PRIVATE SECTOR 43

CoNCLUSION

The past 15 years have established the social orientation in the United States to the acceptance of technological change and operational modernization. This orientation is the product of governmental and neutral expressions, and of collective bargain­ ing developments in individual industries. The effect of this development has been the recognition that the economic gains of technology and modernization to the company, the industry or to society at large are to be shared with the workers who are affected by the change. To the extent possible, without unduly impeding constructive change, the workers' job rights will be protected. If this is not entirely possible, payments are to be made to protect his income, to permit moving to a new place of work, to retrain, to retire early. So long as work is provided or available, which meets the skills and experience of the worker, a suitable exchange is provided. As is well established, adjustments to change are best effectuated in periods of expanding job opportunities. The varied industry and company situations dealt with in telescoped and incomplete terms in this article indicate how diverse are the adjustments, how intricate the elements, and how ingenious the combinations which have developed in the bargaining situations. The less obvious situations involving change, because of the more gradual nature of developments, are equally significant with the more spectacular and better publicized "productivity bargains." But these also evolve as they become part of the established relationship. The test of their durability is in the joint labor­ management structure which administers the agreement. The durable agreements show an increased awareness of the joint interest of labor and management in the economic position of the industry generally. The continued and apparently growing concern with produc­ tivity of American industry is more than an extension of produc­ tivity bargaining. Whether conscious or not, it represents a concern with the position of American industry in a period of economic uncertainty. In such a climate, productivity bargaining is a dif­ ficult and limited factor. It flourishes best in an expanding and flourishing economy.

CHAPTER 3

An Evaluation of Productivity Bargaining * in the Public Sector

RoBERT B. McKERSIE Cornell University

PRODUCTIVITY IMPROVEMENT IN THE PUBLIC SECTOR Many people feel that productivity improvement in the public sector is "a bad idea whose time has come." Speedups and work­ force reductions are envisioned when management talks produc­ tivity improvement programs. Other people feel that productivity improvement is a good idea whose time should come but, thus far, the country has witnessed a lot of rhetoric and very little action with respect to this idea. One thing is clear: productivity is a very much talked about and thought about concept in the field of governmental operations and industrial relations. As Sam Zagoria has said: "In local gov­ ernment circles productivity is a magic word."1 The main reason why productivity has become a much-talked about theme is that a crisis in enterprise economics has developed in many governmental jurisdictions. For one thing, operating costs have been rising very rapidly, in part due to the rapid in­ crease in compensation costs over the past ten years as salaries and fringes have been advanced to a basis comparable with the private sector. (See Table 1.) For another, taxpayers have been ex­ pressing resistance to the idea of financing these increased costs

• I would like to express my appreciation for the cooperation extended by Vincent Macri of the Multi-Municipal Productivity Project and Sam Zagoria and Roger Dahl of the Labor-Management Relations Service in gathering­ material for this article and to acknowledge that some of the ideas developed in this article first were put into form and exposed for discussion at the 1974 annual meeting of the Society of Professionals in Dispute Resolution. 1"Boosting Urban Efficiency,'' Business Week, January 5, 1974, p. 37. 45 46 COLLECTIVE BARGAINING AND PRODUCTIVITY

TABLE 1• Annual Percentage Changes in Average Monthly Earnings, Municipal Employees, By Category, 1964-7 1 1971 1970 1969 1968 1967 1966 1965 65--71 All Func;t;iO[lS '7.0 9.7 6.4 8.4 6.3 5.2 3.9 57.5 ------Common Functions 7.6 10.0 4.9 9.7 6.5 4.5 4.1 58.0 Highway 7.1 6.3 6.7 6.5 6.3 3.3 4.7 48.6 Police 6.9 12.8 -1.0 14.6 6.5 5.0 4.2 59.5 Fire 6.1 10.1 10.1 7.9 5.2 6.1 4.3 61.2 Sewerage 11.1 9.7 2.9 8.1 5.2 7.8 1.4 55.2 Sanitation 8.0 10.2 3.8 8.7 4.8 5.5 2.7 52.6 Parks and Rec. 12.0 5.2 8.7 7.8 2.5 7.7 3.6 58.0 Libraries 11.3 7.6 7.3 2.9 12.2 3.1 4.4 59.8 Financial Adm. 6.3 9.8 5.9 6.3 6.2 6.0 3.4 53.0 General Control 10.0 10.9 6.7 7.8 6.1 0.6 4.3 56.3 Water Supply 5.4 6.5 8.7 7.2 4.4 5.9 5.1 51.2' ------Variable Functions 6.6 9.4 8.1 6.8 7.5 4.4 3.5 56.3 Education 4.5 9.1 11.9 5.0 6.5 1.7 2.5 48.9 A.ll Others 8:5 10.0 4.7 8.3 8.3 6.1 4.4 62.6 ------Private Nonagric. 6.2 4.3 6.4 5.8 3.0 3.9 4.2 39.0 (Average · Weekly

· Earnings) . Calculated from data in U .S. Bureau of Census, City Employment in (year)- various issues-and U.S; Department of Labor, Manpower Report of the Presi- dent-1973. through higher taxes.2 At the same time, the public continues to demand both higher quality and more comprehensive services

• Ronald G. Ehrenberg. "An Economic Analysis of Local Government Em­ ployment and Wages" (Final report of research conducted under grant from U::S. Department of Labor, Manpower Administration, 12/31/73) • Aside from the resistance that taxpayers instinctively evidence to all proposed tax increases, they have increasingly opposed tax increases as a matter of principle. This development can be analyzed in terms of the concept of distributive justice. ' · Ten years ago the production function for most governmental units was in equilibrium. ProductiV1ty may have been low but pay was correspondingly low and the consumer (taxpayer) got the services he felt he was paying for. Government employees were willing to work for less than comparable salaries in the private sector because of job security and the other perquisities that went with being on the public payroll. For example, New York City offices would close early during the summer. This practice was tolerated by the public because it was accepted as part of the terms of trade. · With the rapid rise of salaries and benefits for public workers (te a point where they are at least on a par with salaries and benefits for comparable workers in the private sector) the public feels that the concept of fairness has been ·violated. In effect, taxpayers have been asked to finance higher levels of compensation without receiving commensurate returns in the way of in­ creased '. or improved public services. PUBLIC SECTOR: EVALUATION 47· from their municipalities. In the face of this "crunch," produc­ tivity improvement emerges as a natural solution. If productivity could be increased, then the higher employment costs could be financed out of the higher productivity without passing on the burden to the taxpayer, or so the reasoning runs.

EXTENT OF PRODUCTIVITY IMPROVEMENT PROGRAMS Despite all of the headlines and conversations, . productivity pro­ grams have been installed only on a limited basis thus far in the public sector. At · the state and local levels, productivity efforts have been identified in 13 percent of the jurisdictions.3 And in most cases, the emphasis of the productivity programs has been on work mea­ surement, i.e., providing the organization with more information about results. At the federal level, the activity of work measure­ ment has been extended more widely. A recent report indicates that 60 percent of all manchours worked are now covered by some type of measurement that relates inputs to outputs.4 It should be noted that the federal program has concentrated on measurement, and there has been little emphasis on instituting productivity im­ provement programs. Thus, while there has been a relatively large increase in the attention paid to productivity (compared to a situation of no em­ phasis just a few years ago) , the absolute level of activity and in­ terest is still limited-certainly when compared to the role of pro­ ductivity as an operating concept in the private sector. Public management has not evidenced thus far an orientation to economizing in the sense that economists use the term. In the private sectors, as unions push wage and benefit costs higher, man­ agement responds and develops programs to offset these costs by using less labor through efficiency drives and often through the introduction of new technology. These employment effects of

8 John Greiner, et al. "Making Work Rewarding and Productive: The Use of Employee Incentives by State and Local Government" (Washington, D.C.: Urban Institute, unpublished report, June 1974.) • Charles Ardolini and Jeffrey Hohenstein. "Measuring Productivity in the Federal Government," Monthly Labor Review, Vol. 97, No. 11, 1974, p. 13. 48 COLLECTIVE BARGAINING AND PRODUCTIVITY higher compensation costs have not been evident in the public sector.5 What explains this state of affairs? A major factor is management. Simply stated, management in the public sector has not given high priority to the subject of improving productivity, because it has been forced to pay more attention to other priorities. At the level of the elected official, the obvious concern is to remain in office. Usually this has involved expanding public services and adding manpower in order to keep the public happy, rather than conserving resources. At the departmental level, management seeks to minimize the possibility of "maximum regret," in other words, to avoid the complaint or the political flareup. Generally, department heads have concerns that are the inverse of increasing productivity. They want to expand their staffs in order to handle peak demands. (In some cases this also affords a way of hiring the party faithful, and certainly in all cases this affords a way of enhancing the prestige of the departments involved.) The generally low level of interest in productivity improvement by management in the public sector is easily understood, given the even lower level of interest in the subject on the part of the public. The public does not ask for productivity as an outcome of governmental operations. Rather, it is interested in the quantity and quality of services received and the resulting costs in the form of taxes that are required to finance these services. Even assuming that the public wants and expects high quality

• Ronald G. Ehrenberg. The Demand for State and Local Government Employment: An Economic Analysis (Lexington, Mass.: Lexington Books, D.C. Heath &: Co., 1972) . This point is valid at the time of writing (late 1974) , but there are growing signs of impending layoffs in the public sector. The absence of an observable inverse relationship between increasing salariesfbenefits and employment in the public sector may be explained in several ways. First, the demand curve for labor may not be a SJilOOth function sloping up to the left. Over a wide range of compensation costs the same employment may be re­ quired by the governmental unit. Second, as long as salanes and fringes for public employees remained below those for private industry, the demand curve was vertical in the sense that taxpayers were willing to pay higher taxes to finance the pay increases. But now that compensation in the public and private sectors is comparable, the demand curve for labor has become elastic. Thus, the empirical studies using data for the past ten years may not be very helpful for estimating employment effects of future increases for salary and fringe items for public employees. PUBLIC SECTOR: EVALUATION 49 services in a sufficient array to meet important needs and further that the public wants these services delivered at an acceptable cost, it is not obvious that productivity will be the rallying point for the public's expression of confidence or lack of confidence at election time. The subject of productivity is very subtle and complicated. Where the evidence exists about the extent to which the average citizen understands the concept of productivity, it seems that the extent of comprehension is not great. At one conference recently a citizen remarked that productivity meant keeping the truck drivers for the city on the job for the full eight hours. What this particular individual was referring to was duration of effort; not to mention intensity of effort; not to mention effectiveness with which the effort input of the employee gets combined with tech­ nology and other resources; and not to mention the overall effi­ ciency with which these inputs are translated into usable outputs of acceptable quality. Voter apathy with productivity is one posture. Another and even more troublesome one for the prospect of elected officials embracing the concept of productivity is the reaction recently heard at a public meeting on Long Island when public officials described a major reorganization of the sanitation department: "Why did it take you so long to reorganize?" Any productivity improvement program can be characterized by the opposition as an open admission by the public officials that governmental oper­ ations have not been running too well.&

THE OUTLOOK FOR PRODUCTIVITY IMPROVEMENT It is not surprising, therefore, that, at least thus far, produc­ tivity improvement has not become a rallying point for govern­ mental reform. The prospects for this development are somewhat mixed. On the positive side are several developments. One of

• Corroboration for this point about the political vulnerability of going public with a productivity improvement program comes from a recent survey conducted by the Labor-Management Relations Service of several hundred participants who attended a conference on productivity improvement in the public sector. Of the jurisdictions involved, 58 percent were engaged in efforts to improve productivity, but only 14 percent of the total had taken any steps to obtain public support or understanding for such efforts. (Taken from an un­ published survey) 50 COLLECTIVE BARGAINING AND PRODUCTIVITY these relates to the thrust of consumerism and the growing ten­ dency of citizens to voice complaints and to demand high quality services. Some scorecard and rating panel projects have developed, and other techniques have begun to emerge which enable the public to monitor the quality and quantity of governmental services. Most importantly, to the extent that the "economic crunch" continues the public will become more and more aware of the relevance of productivity. On the negative side are some powerful forces that have kept productivity on the sidelines and are likely to continue to do so for the foreseeable future. Citizens tend to emphasize other con­ cerns when they go to the ballot box to express their preferences for political candidates. Even though they may have been dis­ satisfied at the "point of purchase" with the services received, when it comes time for the "moment of truth" they may vote more on party, ethnic, or ideological grounds. The point that we have been building towards is that govern­ ment officials will hold a sustained interest in productivity only when the citizenry holds a sustained interest in productivity. The simple fact t�at very few politicians have run on platforms of efficiency in recent .years is strong evidence of this point. . The possibility should not be dismissed that a limited number of politicians will embrace productivity as a theme, and indeed there is strong likelihood of some movement in this direction with­ in the next several years. Strengthening this likelihood are several developments that could bring about increased efforts to improve productivity. One of these is revenue sharing and the strong possibility that something close to productivity standards (e.g. performance goals) will be imposed as a condition for the dis­ bursement of federal funds to localities. A second development has to do with the growing professionalization of management in the public sector and the development of self-awareness on the part of many managers that they should be performing effectively and using all the tools of ''best practice."· This means planning, analysis, and a constant scrutiny of the operations to get the most available resources. This orientation to "management must man­ age" is much more pronounced at the federal level than has been the case, thus far, at the county or municipal levels. PUBLIC SECTOR: EVALUATION 51

COLLECTIVE BARGAINING AND THE PRODUCTIVITY IsSUE In many respects the intersection of productivity and collective bargaining in the public sector has been similar to the experience in the private sector. For example, in the uniformed services, where management has made productivity improvement an important goal, most contract negotiations have grappled with the subject, usually in terms of manning levels, schedules, and response patterns. This is similar to the experience of the manufacturing sector where most contract negotiations have involved the subject of productivity, either ex­ plicitly or implicitly. Carrying the comparison one step further, a number of the contracts signed for uniformed services have embodied an enabling clause similar to the classic language of the 1948 UAW-General Motors agreement:

Professional Standards The Union recognizes the necessity of continuous im­ provement in efficiency and effectiveness throughout the employer's operations covered by this collective bargain­ ing agreement, and in this connection, it will urge its representatives and mempers to cooperate with the em- ·· ployer in accomplishing this result.7 But, just as many (and probably more) collective bargaining negotiations and agreements in the public sector never are touched by the subject of productivity. These are the collective bargain­ ing relationships for functions such as: license bureaus, Clinics, and the courts--where either management has not embraced. the subject of productivity or if it has taken action, the unions in­ volved have been too weak to make an issue of productivity in the face of firmly held managerial perogatives. The Urban Institute Survey,s mentioned earlier, estimated that approximately 5 percent of the jurisdictions joined the subjects of productivity improvement and collective bargaining. In other words, in about 40 percent of the cases where a productivity im-

• Taken from Contract between the City of Rochester, New· York and the Rochester Public Locust Club, Inc. 8 John Greiner, et al, op cit. 52 COLLECTIVE BARGAINING AND PRODUCTIVITY

provement program was underway, management and the union grappled with some of the attendant issues through collective bargaining.

THE ExTENT OF PRoDUCTIVITY BARGAINING Productivity bargaining represents a distinct approach within the set of cases formed by the intersection of productivity improve­ ment with collective bargaining. One way of defining productivity bargaining is as follows: Productivity bargaining means different things to differ­ ent people. One common alternative has been to use the payment system as a means of functionally relating the output of the worker or work-group and the pay received. In this approach, productivity bargaining operates through the payment system, providing the continuing formula for the on-going benefits of improved produc­ tivity. A second approach places the consideration of means of improving productivity performance directly in the con­ text of wage bargaining. It involves the parties to the bargaining process in negotiating a package of changes and working methods of organization, agreeing on the precise contents of the package, their worth to the parties, and the distribution of the cost savings between the reward to labor and other alternative destinations such as the return to capital or the reduction of the product price.9 In passing, a few comments can be made about the require­ ments of productivity bargaining. As a threshold condition, guar­ antees usually are given to the workers assuring them that improvements in productivity will not createa reduction in employ­ ment or loss in income. Considerable planning is required, espe­ cially on management's part, to establish the feasibility of certain productivity improvement programs. Beyond these preliminary probes, the work is a joint effort and it is the special feature of

• Robert B. McKersie and Laurence C. Hunter. Pay, Productivity and Collective Bargaining (London: Macmillan, 1973) pp. 4-5. PUBLIC SECTOR: EVALUATION 53 productivity bargaining that the energies of both sides are used to fashion imaginative solutions. A natural subject for productivity bargaining, for example, would be the question of scheduling manpower. If the demand for a given public service varies throughout the week or through­ out the year, it should be possible, with careful planning, to match the availability of manpower to the exigencies of demand. Such a plan would require considerable analysis of the operations, as well as direct consideration of employee needs. Some employees may like staggered work patterns, others may not. It is the pur­ pose of productivity bargaining to put it all together into a work­ able plan. Several subspecies of productivity agreements can be distin­ guished:

Buv OuT The best example of the buy out is the program introduced several years ago under the Lindsay administration in New York City.1o Books of information on standardswere assembled. Targets were set for improved performance and a system of quarterly reports instituted. Some of the changes that were implemented were fairly complicated, such as· the prescheduling of routes; others were quite simple, such as asking meter readers to increase their output by a certain percentage. Some changes entailed the introduction of new technology, such as the use of slippery water in the fire department (a chemical is added to reduce friction, thereby allowing more water to be pumped through the hoses) ; others involving more training and the hiring of additional main­ tenance people so that expensive pieces of equipment could be used for a longer life. The buy-out approach is similar in some respects to the man­ agement-must-manage strategy since management defines the prob­ lems and selects the various solutions. The fundamental difference is that management goes to the bargaining table before imple-

10 Edward Hamilton. "Productivity Bargaining and the Police" in Na­ tional Symposium on Police Labor Relations (Washington, D.C.: Labor-Man­ agement Relations Service, 1974) pp. 51-58. Herbert Haber. "New York City Productivity Bargaining," Labor-Manage· ment Relations Service Newsletter, Vol. 4, No. 6, June 1973. 54 COLLECTIVE BARGAINING AND PRODUCTIVITY menting the program of change. The purpose in going to the bargaining table is to secure acceptance of the program from the union and employees. In this fundamental sense, the buy out represents the quid-pro-quo variety of productivity bargaining. In the buy-out approach the emphasis is on obtaining agreement from the union for the proposed plan and working out rewards that are the necessary quid pro quos for the productivity improve­ ment program.

INCENTIVE FoRMULA The best example of this approach is the program now oper­ ating for sanitation workers in Detroit.U A multi-factor formula was negotiated between the parties in December 1972 and the employees have been participating in a type of large-group bonus system. The formula includes factors for work load, completion of routes, reduction of overtime, and quality. During the first year of the program the employees earned individual bonuses of $400 and the city saved at least $2 million. Another example of incentive compensation can be seen in the program operating between Orange County (California) and the Police Association. Police officers receive a bonus based on a drop in the reported incidence of burglary, robbery, rape, and auto theft. The first payment in 1974 amounted to 2 percent, while the index for the number of reported major offenses had dropped 18 percent.

GAIN-SHARING This strategy involves considerable participation on the part of the total organization in the definition of problems and the iden­ tification of solutions.12 The process typically involves joint labor­ management committees that formulate experiments and put these ideas into practice. In the private sector, this form of productivity bargaining has taken place under the banner of the Scanlon Plan.

u "Improving Municipal Productivity: The Detroit Refuse Collection In­ centive Plan" (Washington, D.C.: National Commission on Productivity, n.d.) 12 For a discussion of gain-sharing see George P. Shultz and Robert B. Me• Kersie. "Stimulating Activity: Choices, Problems and Shares," British journal of Industrial Relations, Vol. V, No. I, March 1967, pp. l-18. PUBLIC SECTOR: EVALUATION 55

In the public sector, the best example to date is the joint Multi­ Municipal Productivity Project taking place in Nassau County on Long Island. The Nassau Project. At this point it is appropriate to sketch out the general outlines of the Nassau Project which is the shorter label for the Multi-Municipal Productivity Project involving the Civil Service Employees Association (CSEA) ; the County of Nas­ sau; and the Towns of Hempstead, North Hempstead, and Oyster Bay; with some 30,000 employees in total. One way of assessing the Nassau experience is in terms of the typology of a participation·achievement-reward system.13 This feed­ back works in the sequence outlined: labor-management partici­ pation produces additional productivity and savings which in turn can be shared with employees-this reinforcement leads to · in­ creased motivation and the impetus for increased productivity on a continuing basis. Participation. This has been a bedrock principle of the project from the beginning. In formulating the proposals to the funding agencies, both management and labor were involved and the project has had the imprint of the union from the very beginning. This principle of joint sponsorship has been implemented in several ways. A voting team of eight members, four management and four union representatives from the respective jurisdictions, has met weekly and has approved all phases of the project. For ex­ ample, a department's proposal for a productivity improvement experiment is not implemented until the voting team has studied the proposal and acted affirmatively. In addition, at the depart­ ment level both management and union representatives have par­ ticipated in the formulation of plans. In some departments labor­ management committees have functioned, and the process of defining problems and fashioning solutions has involved the work of many people and many committees. Achievement. The motto of the Nassau Project has been to "work smarter, not harder." This has meant that the emphasis has been on encouraging employees to think of ways in which the operation can be performed more efficiently through the rearrange-

13 For a discussion of the PAR paradigm see George P. Shultz and Robert B. McKersie. "Participation-Achievement-Award Systems (PAR) ," The journal of Management Studies, Vol. 10, No. 2, May 1973, pp. 141-161. 56 COLLECTIVE BARGAINING AND PRODUCTIVITY ment of manpower, redesign of procedures, and incorporation of feedback-in other words, basic systems analysis. There are a variety of ways in which sources of productivity improvement might be categorized. The New York City analysts have used the following scheme:14 improving the relationship be­ tween inputs and outputs (for example, getting more tons of gar­ bage collected and more potholes filled), introducing new tech­ nology, redeploying the work force, and changing the flow of paper. Using this scheme the thrust of the Nassau Project has embraced heavily the latter two categories. Rewards. The parties are in the process of negotiating some type of deferred compensation thrust that will provide the vehicle by which savings in operating costs get shared with employees. The measurement (but not the distribution) of savings is on a department-by-department basis. This means that each produc­ tivity improvement experiment must specify the manner in which progress towards the target will be measured. This is in line with the fact that the outcomes are varied and complicated in the public sector and need to be specified on a unit-by-unit basis. In the fu­ ture, the various budget divisions will be brought into the picture before a productivity improvement experiment is approved for implementation. This will enable the financial types to examine the adequacy of the indicators for assessment purposes and to audit the various statements that are made of progress throughout the life of the productivity improvement experiments. At this point the three approaches to productivity bargaining can be summarized and compared as follows:

Buy Out Formula Gain-Sharing Initiative Management Management Management-Labor Nature of Specific changes Measureable Systems Achievement in work rules results improvement Time Frame Limited duration, Open ended Open ended usually during the life of the contract Timing of Before plan is in- After results After results Pay Outs stalled and usually are realized are realized as a J.lart of the enablmg agreement

u Herbert Haber, op. cit. PUBLIC SECTOR: EVALUATION 57

EVALUATION OF PRODUCTIVITY BARGAINING Generally speaking, the buy-out approach can produce sub­ stantial savings. Several authorities have estimated that New York City has saved over $200 million as a result of the productivity im­ provement program initiated there several years ago. The buy-out approach is effective for a direct, "surgical" ap­ proach to improving productivity. It is not a long-run approach and can probably only be repeated once or twice before it has ex­ hausted its usefulness. One of the problems with repeated use of the buy out is that workers learn the unfortunate lesson that loose­ ness is worth money and management finds itself paying higher and higher prices for elimination of inefficiencies. By contrast, the formula approach to productivity improvement can operate successfully over a longer term period. However, the period of effectiveness is probably not greater than seven to ten years, based on the "bios and pathos" of wage incentives in the private sector.15 The design and implementation of an incentive formula pre­ sents all of the classical problems that have been well described in the literature on incentives. One of the problems, and one that may be present in the Orange County experiment, is that people learn ways of qualifying for the bonus without improving produc­ tivity. Just as it is possible to "finagle" on the count of a piecework bonus system in a manufacturing plant, it is possible for people re­ sponsible for the reporting of crimes to forget to report a crime if the monetary payoffs for such forgetfulness are attractive. A second dilemma, and one encountered in the Detroit sanita­ tion program, is that the incentive formula needs to be reasonably elaborate in order to capture the essential features of the achieve­ ment that is desired and also to insulate the plan against windfalls and other vicissitudes. However, the result is often a plan that is so complicated that only a few key designers understand the way in which the savings have been calculated. Results under gain-sharing in the public sector are difficult to assess since the only major plan, the Nassau Project, has not been in operation sufficiently long for a clear evaluation to be possible.

15 See the chapter on wage incentives in Sumner H. Slichter, et al. The Impact of Collective Bargaining on Management (Washington, D.C.: Brookings, 1960) pp. 490-529. 58 COLLECTIVE BARGAINING AND PRODUCTIVITY

However, several observations about how the process of improving productivity through labor-management cooperation has succeeded can be made at this time. The most noteworthy feature of what has happened as a result of the Nassau Project has been a "loosening up" of the organiza­ tion. Prior to the establishment of the project the impetus for change, if any existed, came from the top of the organization. Now the initiators of the change are spread throughout the or­ ganization, at all levels and perspectives. In some departments the impetus for change has come from front-line supervisors and in other departments, from managers at the middle level, who were thwarted in the past by insensitive or inept top management from making their contributions. Another important quality of the process has been the iden­ tification of top union leadership with a problem-solving process aimed at improving the . productivity of the overall enterprise. Rather than solely focusing their energies on negotiating and administering labor agreements, the top leaders have met with their counterparts from management at least once a week to dis­ cuss productivity and employee needs-and to determine ways of enhancing both of these through a cooperative program. To a researcher steeped in the traditions of the private sector it has been amazing to see the support that union leaders have given to the improvement of productivity. Often their support exceeds that of management which has other consuming priorities. For example, the union has called for a stabilization of employment and the ending of the patronage system in clear and commanding terms. Finally, a pervasive result of the project has been an increased sensitivity on the part of all employees to the subject of produc­ tivity and to some of the economic realities facing government today. Just how extensive and thorough this education has been will be easier to gauge after the passage of more time. But it is inevitable, given the frequency of meetings, discussions, and com­ munications, that the hundreds of employees who have been in­ volved as liaisons or just as participants in local departmental meetings will have learned a good deal about enterprise economics.

THE MEASUREMENT AND DISTRIBUTION OF REWARDS All of the approaches to productivity bargaining share in com- PUBLIC SECTOR: EVALUATION 59 mon the challenge of measuring accurately and distributing ade­ quately the economic gains from increased productivity. Productivity measurement is easiest in operations where the output is physical and the operation can be analyzed by standard industrial engineering techniques. This is probably the reason why many of the productivity improvement programs that have sprung up thus far around the country have been in the function of sanitation where it is quite straightforward to specify the de­ sired outcomes and to measure performance against agreed-upon standards. In many of the other areas of the public sector, the outcomes are much more intangible, and yet productivity improvement is just as essential. It is in these areas that the Nassau County Project has been exploring various concepts for measuring improvement. Several of these issues and perspectives can be enumerated: -It is necessary to insure that an improvement in productivity has not been realized at the expense of quality of services deliv­ ered. In the case of the Nassau Project considerable emphasis has been placed on the factor of consumer acceptance. A survey has been designed that can be administered to recipients of public services asking them to rate the overall quality of services. This type of index is used as a discount factor for adjusting the quan­ tity index. -Another concern is that average productivity not be increased at the expense of variability in the delivery of services. For ex­ ample, citizens may benefit from a reduction in average waiting time, but if some are required to wait extensively longer than be­ fore, this deterioration in the dependability of the service should be measured and incorporated into the overall index of per­ formance.16 -The attainment of productivity improvement may not always be synonymous with the realization of savings. In most cases the two go hand-in-hand, but in some situations productivity and sav­ ings are not parallel. For example, in one of the departments in the Nassau Project, expensive computer software was installed as

18 For a discussion of this concept and related matters, see Vincent Macri. "Nassau County Multi-Municipal Productivity Project," in Chester Newland, et al, MB O and Productivity Bargaining in the Public Sector, Public Employees Relations Library, No. 45 (Chicago: International Personnel Management Association, 1974.) 60 COLLECTIVE BARGAINING AND PRODUCTIVITY a way of saving manpower. The rental costs of the equipment had to be deducted from the man-hours saved before the savings could be determined. In this particular department, productivity has increased dramatically, but savings as a percentage of the overall budget of the department represents a much smaller gain. -Another tough issue is the question whether the rewards for increased productivity are viewed as an extra on top of the finan­ cial settlement or whether they are made a part of the settlement. Management would like the increased productivity to help finance the large salary increases that the union demands. On the other hand, the union feels that the regular settlement should be deter­ mined by cost-of-living considerations and settlements elsewhere, and any gains realized through a productivity improvement pro­ gram should be viewed as an extra.

A whole host of other questions with respect to the measure­ ment and allocation of rewards are involved, but this is not the place to go into a discussion of the various ramifications associated with these issues. Suffice it to enumerate some of the questions that are involved: How often should the size of the productivity improvement or the resulting savings be reckoned? Should the calculation of savings and the resulting bonuses be done on a department-by-department or governmental wide basis? Should the allocation of rewards only be done after the fact, in other words on a C.O.D. basis; or is it advisable for some of the rewards to be paid on account? Should the rewards be paid on a floating basis or be factored into the base rates? What is the proper share of the savings to be retained by taxpayers?

OUTLOOK FOR PRODUCTIVITY BARGAINING IN THE PUBLIC SECTOR Between now and the end of the decade productivity bargain­ ing will be embraced by a substantially larger number of govern­ mental jurisdictions. The extent of utilization will probably not exceed 10 percent. Given an incidence of only 1 percent17 in 1974, this projected spread represents a large relative increase. And given the fact that at the state and municipal levels, less than half of the jurisdictions are unionized (the practice of productivity bargaining is only relevant to this segment) , productivity bargain-

17 John Greiner, et al. op. cit. PUBLIC SECTOR: EVALUATION 61 ing will be a reasonably persistent theme in public sector labor relations. What factors explain the projected growth of productivity bar­ gaining? First, the universe of jurisdictions involved in produc­ tivity improvement programs will grow. Within this set, the man­ agement-must-manage approach increasingly will not suffice as a complete strategy. In the face of growing union strength, man­ agement will conclude that in its quest for increased productivity it will have to go the productivity bargaining route. In some cases management will embrace productivity bargain­ ing out of the belief that management can never do on its own the complete task of improving productivity. Management has the most important vantage point for looking at the problems of the enterprise, but it looks at them from only one vantage point. It goes without saying that those people who are closest to the operation have ideas about how the operation might be performed more efficiently. The management-must-manage approach does not tap this latent potential. For their part, unions increasingly will be willing to engage in productivity bargaining. There are several reasons for this likely response. Most union leaders are aware of the dimensions of the economic "crunch" present in the public sector. In this setting and faced with a public attitude that blames some of the financial difficulties of government on unions, the leaders are apt to be look­ ing for ways of making a constructive response. Recently, a num­ ber of union leaders have given strong support to the idea of improving the morale of the work force, inculcating concepts of service, and stimulating the public servants to deliver the required services with a "smile on the face" and with considerable care and efficiency. Productivity bargaining represents a means for achiev­ ing these objectives. An additional factor prompting an interest in productivity on the part of unions has to do with the emerging priority of improv­ ing the quality of work. Productivity is a broad term and can em­ brace elimination of hurdles and handicaps in the job situation as much as it can involve a quickening of the pace of operations. Indeed, in surveys that have been conducted with workers about the sources for productivity improvement, the most frequently 62 COLLECTIVE BARGAINING AND PRODUCTIVITY asked for change is the provision of better equipment,ts i.e. the facilitation of productivity improvement by providing workers with the supplies and other resources that they need to get the job done. Perhaps the most important reason for a growing interest on the part of unions in productivity bargaining is a pragmatic one: more money. To the extent that productivity bargaining produces savings, then higher wage increases may be in order. And this is likely to be true even in the presence of wage stabilization. The guidelines of Phase II, for example, provided for above norm in­ creases where such "extras" could be justified on the basis of pro­ ductivity improvement programs. During Phase II, a number of unions in the public sector, especially AFSCME, took a very pos­ itive approach to the incorporation of productivity principles into collective bargaining agreements as a way of enabling their mem­ bers to exceed the guidelines.

SUMMARY 1. There has been considerable interest in productivity improve­ ment within the public sector for the past several years. 2. However, in terms of actual productivity improvement programs only a handful of efforts can be identified. 3. This handful represents a substantial relative change, so the rate of increase in productivity improvement programs has been substantial. 4. The future will probably show some increase in productivity efforts, but at the county and municipal levels, the idea will never become a fad. 5. Most productivity improvement programs initiated in the future will run the "gauntlet" of collective bargaining. Management will be forced by the realities of increasing union strength and interest as well as the advantages of collaboration to bring their productivity plans to the bargaining table, i.e. to engage in productivity bargaining. 6. In a limited number of cases management and labor will follow the joint partnership route which has been pioneered in the public sector by the parties in Nassau County.

'" Thomas Kochan, David Lipsky, and Lee Dyer. "Collective Bargaining and the Quality of Work: The Views of Local Union Activists" (Paper presented at annual winter meeting of Industrial Relations Research Association, December 1974) . CHAPTER 4

Bargaining and Productivity in the Public

Sector - A Management View SAM ZAGORIA Labor-Management Relations Service

Public service as the phrase indicates involves services to the public. Improving the quantity and quality of such services rests most importantly on public employees, the men and women who carry out public policies and furnish the day to day services that keep an urban society functioning. This is probably more true of the public sector than the private for services, rather than prod­ ucts, are the end result of most governmental activity. The atti­ tude and performance of individual workers are likely to have more impact on improving services than new technology or engi­ neering efficiency. In public service anyone concerned with bettering the delivery of services has to face a whole range of obstacles: Limited public funds, the restrictions and limitations of traditional civil service, the expectation that government will hire some personnel as a contribution to welfare rather than efficiency, the necessity that government engage in some functions that the private sector has found unprofitable and importantly, a poor self-image of govern­ ment workers. Over the years, residents too frequently have thought of many public employees as unimaginative and uncooperative, insulated from the competitive pressures of the business world by a system of security that makes most jobs lifetime in nature. Unfortunately some public employees have accepted this view and have slipped into an unwholesome role. A national conference report on "Productivity in the Public Sector" a few years ago commenced with these observations: "There is a widespread feeling that government-from the little neighborhood school to the most sprawling federal agency­ is doing too many things too poorly at too high a price. Among the bleaker complaints, we hear how: 63 64 COLLECTIVE BARGAINING AND PRODUCTIVITY

"-Waste, mismanagement, bureaucratic empire building, and slipping services feed on each other; "-Soaring government costs outstrip revenue, fan the flames of inflation, and strain some taxpayers to the point of rebellion, while still leaving a large number of social needs unmet; "-Archaic civil service rules cripple efficiency, and some of the tactics of public employee unions puff up budgets with no particular increase in output; "-Government managers, no less than their brethren in pri­ vate enterprise, are affiicted with many workers who see them­ selves engaged in dehumanizing chores and no longer care about performance."

Given the chance, I suspect that each of us could cite an ex­ ample of stupid, calloused, bureaucratic behavior inflicted upon us personally. This, I would suggest, is partly a heritage from the days when government workers were virtually dismissal-proof and residents were a captive customer force, living out their lifetimes in one community for the most part. It is also a reflection of the emerging bigness in government, which often constitutes such a maze of departments, sections, commissions and bureaus that indi­ vidual workers, as well as citizen-consumers, have a difficult time making their way through it. However, lest we bestow a monopoly on government for such conduct, let me share a recent experience with a major insurance company-a free enterprise, profit-making establishment-which twice paid claims on one of our offspring's vehicles before a bill for the initial premium was ever rendered. On each occasion a conscience-stricken customer reminded that a bill had not yet been tendered, only to be told, "That's not my department." But these conceptions have been altered by events. The eco­ nomic disasters of the Thirties broadened the role of government generally, creating a need for more expert, more professional people. This influence carried through the next few decades and in the Sixties, public employers found on their doorsteps more and more young people, perhaps turned off by the materialism and monotony of the industrial world, ready to begin public service careers. They brought with them increased education, the con­ fidence of increased travel and of growing up in a financially secure PUBLIC SECTOR: A MANAGEMENT VIEW 65 era plus an independence of mind and attitude. They wanted more out of jobs than perspiration and pay. In recent years there has been a noticeable shifting of respon­ sibility-and to a less extent of funds-from the centralized fed­ eral government to the levels of state, county and city governments, and from the private sector certain unprofitable functions have had to be taken up by the public sector. City officials, particularly, have taken on new and unaccustomed responsibilities in running public bus systems, providing pre-maternal counsel to mothers, administering day care facilities, monitoring and improving air purity standards, to mention only a few. As a result state and local work forces expanded dramatically, from 7.2 million in 1963 to 11.4 by the end of 1973. Indeed, for the decade the record showed when federal workers were counted in the total, an average of 1200 persons a day were hired for public jobs, boosting public employment to almost 1 of every 5 jobs in the nation. The U. S. Labor Department predicted this sector of the work force would turn out to be the fastest-growing sector in the nation during the 1970s. The Department projected a 52 percent increase, a huge expansion particularly when com­ pared to an overall work force growth anticipated at only 23 percent. But at the tail-end of 1975, as the country stood confounded by "stagflation," cities found themselves wrestling with two for­ midable opponentS-declining revenues and soaring costs. At a time when sales tax revenues slumped, real estate taxes were no longer booming and collections were slower coming in and income taxes showed the pinch of a declining economy, municipalities found that everything had gone up in price-fuel bills for build­ ings and vehicles quadrupled, cost of capital borrowing almost doubled and costly welfare rolls grew, demand for health services expanded and were increasingly expensive to provide. In short, a dismal fiscal situation and a grim 1976 ahead. In these circumstances, the grow and grow syndrome is bound to taper off; indeed some communities have already decreed job freezes and shrinking work forces by attrition and a few hard-hit central cities have had to resort to actual layoffs. This has left them with a new interest in productivity-how to provide the present level of services with the same or smaller work force. 66 COLLECTIVE BARGAINING AND PRODUCTIVITY

The comfortable living of the early Seventies when some poor performers, no-shows and sometime-shows could be absorbed in the tremendous expansion without seriously impairing essential services is ending. The concept of comparability between public and private sec­ tors is taking on two new dimensions. Public administrators have pretty well convinced taxpayers that total compensation-wages and fringes-has to keep up with the private sector. But now there are also (1) growing murmurs from the public that individual performance has to keep up with the private sector and (2) in the layoffs and reduced work forces there are reminders that, as in industry and commerce, government jobs are not necessarily forever. As so often happens, the first thrusts came in New York City. The insistence that unit costs in the public sector should compare favorably to those in the private sector led the government of New York City to begin citing the private garages' flat rate work book to its sanitation truck repairmen in arguing that their own efforts should be comparable. It took time to negotiate performance standards, but they are working. Additionally, taxpayer groups highlighted the tonnage price charged by private cartage men for removing residents' household garbage and urged either attaining comparability or considering the wisdom of subcontracting. (Some communities do employ private firms on such tasks as collecting garbage already.) Productivity-a commonplace word in the lexicon of business and industry-is beginning to be heard increasingly in govern­ ment circles and with a new note of urgency. Much has been started by managerial initiatives although even managers need to be jogged periodically that they have a duty to manage, not merely process work. For example, new and imaginative efforts have been launched to make use of the computer, in some cases bringing one on board for the first time and in large communities to devise new uses-in addition to automatic billing, check-writing, recording, and calcu­ lating, new uses such as matching of work shifts with service needs, routing of vehicles to provide most advantageous routes, and co­ ordinating policemen's schedules with court requirements have been developed. The development of plasticized "slippery water" PUBLIC SECTOR: A MANAGEMENT VIEW 67 for better firefighting, mechanized trash pickups and the like has been pioneered and is being copied. A new organization, Public Technology, Inc., has been established to further research in other municipal service needs and broadcast results to potential users. In firefighting, a very costly city function, computers have helped in relocation of fire companies to better relate to popula­ tion patterns (often changed since the fire house was erected) . Computer review of fires--when, where and what equipment was needed-has led to reconsideration of minimum crew requirements and computer data on residences of firemen has led to fire house assignments lessening their use of gasoline in reporting to work. In sanitation, another major item in any city budget, as a re­ sult of data collection and analysis there has been a better match of resources and needs--scheduling of vacations away from the busy summer months, fattening of staff on Mondays when collec­ tions are usually heaviest, rearranging routes by computer to pro­ vide for the most economical path to the disposal facility, rebal­ ancing of collections so that some workers are not overworked while others are on short days, adding larger capacity equipment and experimenting with collection teams of different sizes. While this is all to the good, public employers recognize that the primary activity of government is furnishing services and this depends on people, each one an individual, the product of his own set of heredity and environmental factors. If they are to be in­ volved at their maximum capability, skilled and efficient manage­ ment is a must. Management can-and has--improved govern­ mental productivity by doing a better job in recruiting, assigning, scheduling and in general creating an atmosphere in which workers can do their best and find self-realization in the course of doing so. One route being explored by some venturesome community administrators is participative management-planning directly with the people who do the jobs. This approach is particularly wel­ comed by the young people in the work force, a sizable number (22.5 million of the total national work force of 85 million are less than 30 years of age) . As the Wingspread Productivity Conference suggested to Wis­ consin Governor Patrick Lucey: "-Make sure that state workers genuinely understand why 'the squeeze is on' and what they are expected to do. 68 COLLECTIVE BARGAINING AND PRODUCTIVITY

"-Emphasize 'participative management,' wherein state em­ ployees who may be feeling 'insecure,' are solicited for their reac­ tions and recommendations. "-Capitalize on the energy and enthusiasm of younger workers 'who want to participate' in the pursuit of larger objectives. "-Recognize that 'a visit to the govenor's officefor a handshake and a picture to frame over the mantlepiece is perhaps even more valuable than material rewards.' "Look for 'points of comparison' with the private sector as a standard for measuring performance, and seek advice from private business on a selective basis. "-Expand mechanization but also 'plan with people' when in­ troducing technological change so workers are not 'thrown on the human scrap heap tomorrow.' "-Consider ways to 'share the savings' yielded by greater pro­ ductivity. Such financial incentive plans are now noticeably lack­ ing in government."

A few examples: In Vancouver, Washington, a city of 45,000 with 400 municipal employees, proposed changes in city activities are put on the table by the Manager, Allen Harvey, and discus­ sion and consultation by employees is invited. In matters affecting wages, hours and conditions of employment, in the broadest sense, the local labor coalition is also kept informed, Harvey indicated. In Simi Valley, California, the top management team has been expanded to include three lower level employees, each serving for three months at a time. In Scottsdale, Arizona, field staff from the Recreation Department were given a chance to help design and plan new park facilities; the custodian offered suggestions for easier maintenance and the parks repairman counseled, from his exper­ ience, on the type of lighting fixtures to be used. Washington, D.C., has negotiated a sanitation contract provision bringing to­ gether city workers and supervisors for a monthly review of com­ plaints and service problems and how to solve them. In seeking improvements a major obstacle is developing pro­ ductivity measurements. It is not easy since municipal services are difficult to quantify. The Urban Institute has put together an il­ lustrative set of workload measures structured so as to include a measure of units as well as the quality factors so important in ser- PUBLIC SECTOR: A MANAGEMENT VIEW 69

vices. One caution in looking at municipal yardstickS-much of what government does is thrust upon it because profit-making en­ terprises find it unprofitable, so unit costs are not the only relevant criteria. Another aspect of measuring is suggested by Daniel Bell, noted writer and professor. In writing about the country's Gross National Product, he noted "that in assessing public services we do not have a means of estimating actual benefits or values. In items that are sold in the market, such as automobiles or clothing, we have market prices as the value individuals place on the products. But how do we value publicly provided services such as health, or education, or protection? Our accounting system does so only by the 'input' costs, not by the output values. Thus the 'output' of police services is measured by salaries paid to members of the Police Department, the costs of police cars, etc., not by the social and economic value of crime prevented or violators apprehended; the value of health services is measured by the costs of doctors' fees and drugs, not by the reduction of time lost on account of illness; the value of educa­ tion is measured by the cost of teachers' salaries, equipment, etc., not by the value imputable to the gain in pupil knowledge. This is a central problem in the question of how much money should be spent on 'public goods.' People grumble over taxes, but there is no way, at present, of showing that the benefits received for these services may be far greater than the costs. And while there is no way of knowing, it is likely that public services of this kind are 'undervalued' and therefore less appreciated." Professor Bell raises another consideration culled from his youth. "In New York City when I was a boy, snow was removed from the streets by the hiring of extra trucks which would cart mounds of it away and dump it in the river. Many years later, Paul Screvane, who was the Commissioner of Sanitation, ordered his men to push the snow into the middle of the streets, where it was churned into slush by passing cars. Perhaps he did it because the costs of hiring trucks had gone up exorbitantly, or because he wanted to demonstrate an outstanding record in office so that he could run for mayor. The sanitation department showed a com­ mendable record of economy. But (as I figured out from the rec­ ords of the Industry and Commerce Association) , after each snow­ fall the cleaning and dyeing bills in the city went up substantially, 70 COLLECTIVE BARGAINING AND PRODUCTIVI'IY because the passing cars would splatter the clothes of the innocent bystander. "Now, which was the 'rational' solution? One could say that Screvane's method was highly irrational, because it passed the costs of snow removal onto the backs of the unfortunate pedestrians, and if the cleaning and dyeing bills were higher than the cost of hiring additional trucks, it was truly a misallocation of resources. Yet one could also say that if the trucks had been hired, direct city expenses would have been increased and taxes would have to go up, in­ creasing the resentments of the taxpayers in the city, so that the system of 'Russian roulette' whereby a random group of bystanders bore the costs might have a greater 'political' rationality than eco­ nomic cost benefit analysis." Now we come to the third obstacle-the stultifying effect of traditions and structures. Obviously the answer lies in developing flexibility and innovation in use of personnel resources. In two LMRS California workshops on productivity, government leaders were addressed by William Donaldson, now Manager of Cincin­ nati, Ohio, who described several Tacoma, Wash., projects, each one starting from the premise that "employees are creative" and that once faced with a problem talents and abilities rarely energized in their daily tasks can be excited and exercised. He has two exam­ ples involving the Tacoma Fire Fighters Union-in one the firemen wanted a reduction in the work-week and through a joint labor­ management exploration came up with a plan for more productive use of manpower and equipment and, happily, in a shorter work-week at no extra cost to the city; in another, the Fire Fighters Union, with the help of the city Personnel Department, recruited minority member job applicants, provided pre-employ­ ment training and got them on the Civil Service list without any special certification. Donaldson's view is reinforced by a 1973 Gallup poll which showed that half of all the wage earners queried said they could accomplish more each day if they tried, particularly the young workers. Donaldson urges managers to "spend some time talking to some of your employees about themselves and what they do when they are not at work. . . . He may build houses, make wine, raise bees, invent toys, or engage in a variety of creative activities which demonstrate abilities you failed to see in him as an employee." PUBLIC SECTOR: A MANAGEMENT VIEW 71

In New York City the productivity program commenced under Mayor John Lindsay with a systematic review of all city functions by analytic specialists, efforts to quantify output and then to deal with reducing obstacles to improvement with quarterly reports on progress. Imaginative use of computers helped; new technology was developed and harnessed. Much of the achievement has come from better scheduling and development of personnel-heavier work forces when trash collection is heavy, more police when and where crime-loads peak; smoothing of vacation scheduling so trash­ men are more plentiful in the summer when garbage is most plentiful, for example. Properly energized unions have played an important role, too. Herbert L. Haber, then Director of Labor Relations for New York City, quoted an official of the city's largest union as saying, "Where there's no consultation, there's likely to be no cooperation. . When we're consulted first and a productivity program comes out as a joint effort, we're more than willing to pitch in." There is no reason, other than misplaced management pride, why unions should not be called upon to join management in the goal of better performance. Since unions now represent an estimated I of every 3 govern­ ment workers, the importance of a continuing dialogue, where they have been chosen as representatives of the employees, is ob­ vious. In some cases the initiative may be on the other foot-in New York City District Council 37 of the AFSCME union has reported that "at the union's insistence, the city agreed to reor­ ganize its highway department to provide for small, highly mobile asphalt gangs, called 'Integrated Asphalt Gangs,' to repair city streets. . . . and already the productivity of the men has increased by as much as 50 percent." In the public sector productivity has sometimes been encour­ aged by the material incentive of productivity bargaining. Three types seem to have emerged: I. In local governments where there are traditional practices or contractual provisions which hinder productivity improve­ ments, these have been negotiated out, or at least watered down, by trading dollars for managerial flexibility. Examples are min­ imum crew requirements, scheduling limitations or work quota systems. In some cases the cost may be less than indicated, par- 72 COLLECTIVE BARGAINING AND PRODUCTIVITY ticularly in this inflationary period when wage improvements would be demanded anyway. Management thus derives benefits as a partial return for a wage package. 2. Another plan has involved productivity improvement of a kind which can be measured in actual dollar benefits and a formula has been developed at the bargaining table for a division of such gains. For the city the productivity gains could be reduced overtime cost, savings in processing fewer complaints, savings in fuel and wear and tear of equipment and perhaps a theoretical measure of the value of improved services to the community. One agreement of this kind can be seen in the Detroit sanitation productivity agreement, which provides for quarterly bonuses to work crews based on savings in overtime, reduced complaints and other factors. Another unique plan is incorporated in an agreement between the city of Orange, California, and the Orange Police Association covering pay increases and productivity bonus. The actual provi­ sions follow: 1. 7Y2% salary increase beginning July 1, 1973. 2. And, if the crime rate for rape, robbery, all burglaries (in­ cluding burglary from auto) , and auto theft are reduced by 3% for the period from July I, 1973 to Feburary I, 1974, as compared to the same crimes for the period July I, 1972 through June 30, 1973, an additional salary increase of 1% shall be granted effective March 1, 1974. Or, if the same crimes are reduced by 6% as com­ pared to the base period, an additional salary increase of 2% shall be granted effective March 1, 1974. If the population increases in increments which exceed 1500 persons, these same comparisons shall be made and the percent reduction of crimes shall be computed on the number of these crimes per 1000 population. State Depart­ ment of Finance population estimates shall be used for the com­ putation of these population figures. 3. A 6% salary increase on July 1, 1974 or the cost of living, based upon the figures of the U. S. Bureau of Labor Statistics in Los Angeles-Long Beach metropolitan area, whichever is greater. 4. And, if the crime rate has been reduced 8% for a period of 20 consecutive months beginning July 1, 1973 as compared to the base period of July l, 1972 through June 30, 1973, salaries shall be increased 1% on March 1, 1975. If the crime rate has been reduced 10%, salaries shall be increased 2%. If the crime rate has been PUBLIC SECTOR: A MANAGEMENT VIEW . 73 reduced 12%, salaries shall be increased 3% on March 1, 1975. If the population increases in increments which exceed 1500 persons these same comparisons shall be made and the percent reduction of crimes shall be computed on the basis of the number of crimes per 1000 population. Monitoring-Radio call slips, regardless of source, which indi­ cate that a police report is necessary, shall be given to the Watch Commander on duty, who shall place a copy of the call slip in a folder kept in the Watch Commander's office. At the end of each watch, these slips shall be compared to the reports submitted by the officersby the on-duty Watch Commander, who shall reconcile any differences. Once every two weeks a member of the City Manager's staff shall review the disposition of the call slips with the Administrative Captain as to accuracy and disposition. Each month, the number of cases which prove to be unfounded through investigation shall be subtracted from the total. This will be done according to the Manual on Uniform Crime Reporting, and shall coincide with the same statistical data submitted to the California Bureau of Criminal Statistics. The Monthly Crime and Clearance Report indicates each month the number of offenses reported unfounded, and the number of actual offenses. Each month, these reports and the statistical data relating to the four repressible crimes shall be reviewed by the Chief of Police for accuracy. (The plan ended in 1975 and was not renewed.) The city of Yonkers, N.Y., has signed an agreement with Teamsters Union Local 456, which represents most of the blue collar workers, for initiation of a Productivity Pool, starting January 1, 1975. The language of the productivity article in the contract follows: Section 1: Since the issue of assuring a community that they are receiving the best services for their tax dollars is of critical interest to both management and labor, labor recognizes that the establishment of such productivity improvements is the right and obligation of management. Such standards of criteria for produc­ tivity shall not be a means of speeding up or the cause of un­ reasonable incentive standards, lay-offs, discharges or dismissalS; To the extent that such productivity improvements as manage- 74 COLLECTIVE BARGAINING AND PRODUCTIVITY ment may decide to initiate result in a reduction of force, such reductions will take place through attrition, retirements or mu­ tually acceptable severance pay, except for discharge for cause. The overriding consideration in the establishment of productivity standards is an honest day's work for an honest day's pay. Failure to perform an honest day's work is recognized as a cause for dis­ ciplinary action. It is further recognized that labor has a right to be informed and participate in the implementation of productivity standards. Section 2: The City shall pay January I, 1975, the sum of $25 per employee for each employee as referred to in Article XX, Section 4, to a Joint Productivity Fund to be established and sep­ arately maintained to be utilized for the inducement and reward of improved productivity. Section 3: There shall be created a Joint Productivity Com­ mittee with three representatives designated by the City and three representatives designed by the Union, for the purpose of deter­ mining the kind, purpose, amount and time for the use and dis­ tribution of such money. Should there be a difference of opinion as to the proper utilization of such monies, the same shall be an arbitrable dispute under this contract. It is understood that the money in this Fund shall inure wholly and exclusively to the benefit of the employees covered within the bargaining unit. 3. A third plan has been to treat improved productivity as a joint labor-management responsibility and to move in this direc­ tion by putting together collaborative committees to review pres­ ent work practices and procedures and recommend more efficient ways to get the tasks done. New York City has clone this in a recent police contract. The text of the Productivity Clause follows: It is recognized that the problems facing the professional police service in a dynamic urban environment require the ability to promptly meet changing patterns by changing methods and pro­ cedures of response. The true measure of productivity in the urban professional police service is the ability to flexibly adapt to chang­ ing social conditions and crime patterns in addition to raising the general level of service rendered to the citizens of the City. The parties also recognize that changing social conditions and crime pattern which occur during the life of a collective bargaining agreement require constant review and re-examination in order PUBLIC SECTOR: A MANAGEMENT VIEW 75 to best effectuate the objective of achieving ma.ximum police ser­ vice for the community. Accordingly, to meet the collective responsibilities that the Police Department and the Patrolmen's Benevolent Association have to the public, the City and their respective employees and members, they have agreed to a method for continuous examina­ tion of the current needs of the Police Department to meet con­ ditions extant at a given time. A committee shall be formed composed of five members: Two selected by the Police Department; two selected by the Patrolmen's Benevolent Association and the neutral selected by agreement be­ tween the Police Department and the Patrolemen's Benevolent Association. The Committee shall meet upon the request of either party to discuss ways and means of implementing experimental or pilot programs brought before the committee by the Police Department which are intended to improve the general and specific level of service being rendered to the public by the Police Department.

I. PoWERS OF CoMMITTEE: (a) The committee shall have the power by unanimous vote of the Labor and Management members to agree upon the imple­ mentation of such management programs that they feel will carry out the intent of this section. (b) The committee shall have the power to agree upon the dura­ tion, location and scope of the management program agreed to in (a) above. (c) Upon termination of the management program implemented as in (a) and (b) above, the committee shall be provided with the results of the concluded program and shall have the power by unanimous vote of the Labor and Management members to recom­ mend that the parties to the collective bargaining agreement meet and negotiate re. the prompt implementation of the program where and as required.

2. PowERs AND DuTIES OF THE NEUTRAL MEMBER oF THE CoM­ MITTEE: (a) It shall be the duty of the neutral member to assist the parties at their request: 76 COLLECTIVE BARGAINING AND PRODUCTIVITY

(i) · in evaluating the programs as initially presented by man­ agement. (ii) in arriving at agreement, whenever possible, on the im­ plementation of the program including such questions as desirability, scope, duration and location. (b) In the absence of unanimous agreement among the Labor and Management members of the committee, the neutral member of the committee shall have the power, in the extraordinary in­ stance where the public interest requires, to direct that the parties bring all or some of the questions of implementation, scope, dura­ tion and location of the experiment or pilot program to a third party arbitration as to whether or not the experiment or pilot program is appropriate, which determination shall be binding upon the parties except that the Police Department may in all events drop their request for implementation which shall terminate the issue for all purposes. 3. Regardless of the results of the experiment or pilot program, no change may be made in the basic agreement, unless mutally agreed to by the parties. 4. Nothing in this appendix shall be deemed to limit the manage­ ment rights or prerogatives which vest in the Police Commissioner. Obviously the three approaches are not mutually exclusive and one plan could conceivably involve two or all three. The third approach suggests that workers are interested in the work they do and bring a first-hand expertise to revamping the work process, that they have a major stake in the changes. It implies a management view of workers as people, who given the chance would rather do a good and useful day's work than to dog the hours and goof off as much as possible. Involved in Number Three is a recognition that there is a lot of unused potential in individual workers, and if they are part of an improvement plan the plan will be welcomed rather than resisted. This may seem like a risky experiment, but consider the con­ straints and the possibilities. Managers can appropriately require that any proposed changes bring about at least as much and as good quality services as presently. This means the only way for productivity to go is up, and if it doesn't there's always the old way easily remembered and reinstated. PUBLIC SECTOR: A MANAGEMENT VIEW 77

The possibilities are immense. This kind of effort can build a team spirit and lessen a we-they relationship; it is reorganization planned by the people on the job and not by outsiders or top­ siders so that there is a likelihood of less complaints and more cooperation; it can stimulate an attitude that doing the job better is a matter of personal pride and achievement. There are some conditions in this route. Employers are ex­ pected to assure that the joint effort will not lead to a loss of job for a participant, or a cut in pay. The usual managerial rights to dismiss or reassign for reasons other than the productivity effort continue in force. In the present economic situation normal attri­ tion and turnover may absorb any overages in employment. Proposed work improvements still are subject to final approval by management, but one jointly developed is likely to attain this. It may be desirable to try out changes on a trial basis ·or in part of a division, perhaps with a control group in the remainder, in order to test out changes before giving them general application. There are other innovations which may perk up employee performance by making the job more interesting, challenging, re­ warding or convenient. Job enrichment, for example, has been attracting a great deal of attention. In government, Governor Lucey's productivity improvement program in Wisconsin counsels managers and supervisors to "go through every job description with employee participation and find ways to enrich the job. (This does not mean to make people produce more; it means to give them more weighty responsibilities and an opportunity to grow.) " In Nassau County, New York, a unique two-year effort is underway to try to increase . worker pro­ ductivity through labor-management teams assisted by behavioral scientists seeking to improve job satisfaction as well as output. The National Commission on Productivity and Work Quality is supplying part of the funding in order to document the effort and make its results available to other jurisdictions. Similar broad­ scale projects have been started in Springfield, Ohio, and Tacoma, Washington, city work forces. Team efforts are another approach to enlarging job satisfac­ tion, permitting employees to work together as a unit in making decisions and carrying them out. The Urban Institute has identified a number of examples of 78 COLLECTIVE BARGAINING AND PRODUCTIVITY

team policing. San Bruno, California; Dayton, Ohio; and St. Petersburg, Florida have tried this and reported improved clear­ ance rates, faster responses to calls, reduced overtime, sick leave and turnover. The teams provide the whole range of police ser­ vice in a given area. Some cities-Claremont, California, and Clifton and Plainfield, New Jersey,-have combined police and fire training with subsequent sharing of duties. St. Petersburg, Florida, has a monthly competition among the city's 13 sanitation crews for the "crew of the month," awarded to the crew achieving the best compaction ratiO-the greatest weight of trash hauled per number of trips taken to the dump. In Dayton, Ohio, management personnel have been organized into various Task Forces to consider and make recommendations on such far-reaching matters as the city's future, racial discrimina­ tion, crime, employment, youth services, housing and similar prob­ lems. Each department head involved is expected to give as much as half his time to the assignment. In Tacoma, Washington, a team of department heads was put together to analyze how to use the city's expected portion of revenue sharing funds. The result was recommendation of a number of multi-departmental projects, rather than renewal of the customary striving for pet projects to be carried out within individual departments, according to Man­ ager Donaldson. Another way to broaden the experience and outlook of govern­ ment employees is through job rotation. A relatively new city, Simi Valley, California, a town of 56,000 people, incorporated in 1969, has established the practice of having each department head serve as assistant city manager on a rotating basis, a month at a time. The result, according to then City Manager Bruce Altman, has been development of "experienced, responsible leadership" for the city and perhaps equally important, "each department head gains a profound sensitivity toward city-wide goals and is better able to relate his department's goals and priorities to organizational goals and priorities." In another thrust, Altman assigned four department managers to other departments as acting heads for a three-month period last year. They retained their usual titles in order to exercise certain £unctions which could not be legally transferred. The manager's evaluation was that the program was a success and helped achieve PUBLIC SECTOR: A MANAGEMENT VIEW 79 not only a widening of capability but a broadening of viewpoint beyond an individual department. Eugene, Oregon, has a similar program by which various de­ partments "loan" city employees to the Mayor and City Manager's offices to serve as the city's Community Relations Officer for a six­ month period. The Officer works closely with the two officials, receiving and investigating complaints filed with the City or with the Human Rights Commission and also working with the news media, carrying out assigned research and general administrative duties. The Officer thus gets an overview of municipal operations, an understanding of citizen problems and some topside manage­ ment experience. Glendale, Arizona, began a job rotation program in 1971 in order to develop an internal manpower pool from which to fill future vacancies and to give employees broader exposure to man­ agement problems. Line employees were rotated into the Personnel Department for three months with their salaries still paid by their departments. They did such tasks as analyzing examinations, re­ designing personnel forms and helped define job specifications. Once returned to their departments they became a reservoir of information to other employees on a whole range of personnel practices, important particularly to minority groups who were often uninformed in these matters. Claremont, California, has a rotation program involving trans­ fers within departments. In the Police Department, for example, new recruits serve as communications officers for two or three weeks. Patrolmen are rotated through the Detective Division for a month at a time. Patrolmen serve as acting sergeants and ser­ geants serve as acting lieutenants, commanding patrols, as needs arise. San Jose, California, gives police officers a chance to designate duty assignment preferences to assist in "career enrichment" as vacancies occur and the Police Chief has to fill them. An unusual kind of rotation affects the secretaries in Placenta, California, who periodically visit their counterparts in other cities and spend the day learning how others perform jobs similar to their own. The City Administrator, Edwin T. Powell, explains that "a majority of our working women have families and are unable to take advantage of educational incentive programs which 80 COLLECTIVE BARGAINING AND PRODUCTIVITY encourage attendance at local educational institutions. These visits expose them to different and perhaps better, ways of performing their jobs." Job ladders have encouraged career development. In Medford, Oregon, a city of 30,000 population with a municipal staff of 265, Manager Archie Twitchell has helped a woman employee with a high school education chart her course from clerk to recorder­ treasurer and ultimately, he hopes, up to finance director. He has an open transfer policy, which has already enabled a good building janitor to transfer to the Park Department and a new post there. Job requirements for college degrees have been tried-and have succeeded-in engineering positions, and a particular success story is that of a planning technician, helped with development of a reading list and suggested training, who showed "great personal growth in 2;.-'2 years" and now is second in command in the Plan­ ning Department. The city of Los Angeles, California, has developed a series of charts laying out promotion lines. This is part of a City Employee Development Program which encourages and offers incentives to personnel. Included are in-service training programs, tuition re­ imbursement plans for college training, evening classes at the Civic Center, jointly sponsored by the City and the East Los Angeles College, and monetary awards for advanced educational achieve­ ment. Inglewood, California, promotes its best garbage truck teams to other jobs in the city. This compilation is by no means intended to be inclusive. One problem with innovations is that there has been too little sharing of results-good and bad. It is important to approach tl1e consultation with the under­ standing that this is not an effort to play the zero sum game-taking away from one side to advance the other-but rather is an exercise in which everybody wins-more production, more job satisfaction, more possibility for mounting the tiger of inflation and bringing him into control. Many of the changes reported here may seem obvious and just plain common sense, but the point is they were not done until a special productivity effort was made. This is not to suggest that these were easily or quickly achieved. Some workers, who hear a different drum, were just as happy to leave things unchanged; some PUBLIC SECTOR: A MANAGEMENT VIEW 81 found that reexamination opened up unexpected new problems, but learning to solve them may be an added bonus for labor and management. Working together for productivity reflects sound motivation, not managerial manipulation. It can lead to double benefits­ improved productivity and increased job satisfaction-and these are achieved not by requiring employees to work harder, but by redesigning the job and work process so that it can produce more. It puts emphasis on mind rather than body.

CHAPTER 5

Bargaining and Productivity in the Public Sector: A Union View

RuDOLPH A. OswALD AFL-CIO

BARGAINING The basic acceptance of collective bargaining is an essential ingredient to productivity growth in the public sector. This sec­ tor is basically labor intensive, and in order to make significant progress towards greater efficiency, the workers must be enlisted into the effort through their representative unions. Productivity gains will not be achieved through one-sided management direc­ tives or by new gimmicks to entrap workers, but rather through mutual collaboration between labor and public management. While productivity gains are generally measured by improve­ ments in output per man-hour, this measure is particularly salient in the public sector because of its high labor intensity. In some functions of local government, such as police and fire departments, labor represents approximately 80 to 90 percent of total expen­ ditures for such services. Output per man-hour is thus not simply the nomenclature for measuring change, it is the basic ingredient for any change. The improvement in the quality of labor over the years has been the major factor in productivity gains in general, and par­ ticularly in the public sector. Today's worker is better educated than his counterpart of a generation ago. In addition to the average higher level of schooling attained, knowledge has also been more broadly disseminated by specialized training programs, books, mag­ azines, newspapers, and even through that all-pervasive instrument, television. Indeed, many governmental units may be able to achieve better productivity results from a serious effort aimed at improvement in labor performance rather than from an investment in new technology. While there is no question that new capital inputs 83 84 COLLECTIVE BARGAINING AND PRODUCTIVITY

can contribute to improved productivity in both the private and public sectors, this paper will emphasize the role of labor in im­ proved output per man-hour; because, in the public sector, this element will have to provide the basic element of growth in output. The role of labor in improving productivity is highlighted in the guidelines for a national productivity policy set forth by the National Commision on Productivity in its Third Annual Report.l While all five guidelines outline a role for labor, the fourth guide­ line highlights this element, stating: "Fourth, it is essential that the human aspects of pro­ ductivity change be given full attention. It is not possible to obtain full cooperation from people if there are no pro­ visions made to take care of those who are displaced­ who either lose their jobs or must learn new skills. Much improvement is needed nationally in the way that we handle the costs, as well as the benefits derived from pro­ ductivity gains. "Reducing the sources of dissatisfaction on the job that plague workers, undermine quality, and reduce pro­ ductivity must also be pursued. When designed and car­ ried out jointly by labor and management, such projects can increase job satisfaction and pride in workmanship and cut unit costs." Note the emphasis on the "human aspects" of productivity change. This means more than just designing new work methods and imposing them upon the work force. Rather. it seems to be summed up above that productivity programs need to be "designed and carried out jointly by labor and management."

COLLECTIVE BARGAINING: A PREREQUISITE FOR PRODUCTIVITY BARGAINING Perhaps the most fundamental obstacle to real advances in public sector productivity gains has been the resistance of public employers to accept true collective bargaining. Public managers have hidden for years behind the sham of "sovereignty," and refused to deal with their employees. Public management has

1 Third Annual Report, National Commission on Productivity, (Washington: U.S. Government Printing Office, 1974) , p. 182. PUBLIC SECTOR: A UNION VIEW 85 held that it has an inviolate prerogative in directing the work force and in establishing the conditions of employment. This notion has a long history in the public sector-going back to the "divine right of kings," then on through the "spoils system," and up into many of the so-called "civil service reforms." All hold that the public official or the civil service commission has the vested authority for dealing with employees and this authority is not to be shared or abridged by any collective bargaining. Unless this attitude changes, unless public employers accept full collective bargaining with their own employees, the potential of achieving real productivity progress is low. A majority of all public workers have already indicated that they want a voice in the determination of their working condi­ tions. They have shown their desires by joining unions and em­ ployee organizations engaged in collective bargaining activities. In the federal service, 57 percent of all classified employees and wage-board employees are represented by unions.2 Similarly, over four-fifths of the employees of the United States Postal Service are union adherents. And a majority of all full-time state and local government employees belong to unions or employee organiza­ tions, according to a 1972 Census Bureau report.3 While private industry workers for the past 40 years have been guaranteed a voice in the determination of their work en­ vironment through collective bargaining, public employees gen­ erally are still denied this fundamental involvement in a joint determination of their own conditions. However, a number of exceptions exist at all levels of government, including federal, state, and local units. Collective bargaining in the federal sector was espoused in word-but not in deed-by the various labor-management Exec­ utive Orders of the 1960's. For example, Executive Order ll49l states in its Preamble: " ...the well-being of employers and efficient administration of the Government are benefited by pro­ viding employees an opportunity to participate in the formulation

• Unions Show Gains in The Federal Service," AFL-CIO News, (March 8, 1975) , p. 6. 3 Management-Labor Relations in State and Local Government, 1972 Census of Governments, Vol. 3, No. 3 (Washington: U.S. Government Printing Office, Nov. 1974) , p. 1. 86 COLLECTIVE BARGAINING AND PRODUCTIVITY

and implementation of personnel policies and practices affecting the conditions of their employment. . ." However, most policies and practices were placed outside of the scope of bargaining by re­ strictive agency and departmental regulations, themselves not sub­ ject to bargaining. These Executive Orders so severely limited the scope of negotiations that federal workers' still remain without the right to bargain concerning wages, hours, or most substantive con­ ditions of employment. An exception exists for federal employees of the Tennessee Valley Authority, Alaska Railroad, and Bonneville Power Authority, who had historically enjoyed broad collective bargaining rights. Postal workers were accorded full bargaining rights under the Postal Reorganization Act in 1970. Also, the 1970 Federal Employees Pay Act seemed to provide a mechanism for some bargaining on the methodology for setting white collar salaries, but this legislative goal seems to have been thwarted by the Executive branch. Similarly, another attempt was incorpo­ rated in the 1972 legislation reforming the blue collar wage-setting mechanism. The trend seems clear that the scope of bargaining in the federal sector will expand to incorporate all aspects of the work environment. When this occurs, the stage will be set to allow labor and management to sit down and jointly develop a program to enhance productivity in the federal sector. The collective bargaining situation in the states and munici­ palities is essentially similar to the federal government's role in this area. Not until 1959 did the first state (Wisconsin) enact comprehensive legislation guaranteeing the right of public em­ ployees to bargain collectively. Since then, over half of the states have enacted collective bargaining legislation covering some or all categories of public employees. Some of these laws, particularly the Pennsylvania and Hawaii laws, provide for full collective bar­ gaining. However, the continued refusal of a significant number of states to enact reasonably comprehensive legislation, will shelve the hope for major improvements in public productivity. Where there is no collective bargaining, the worker has no in­ volvement beyond the right to resign. Under collective bargaining, however, the worker has a voice in working conditions: an em­ ployee submits bargaining proposals, selects representatives to negotiate them, votes to accept or reject a proposed contract, and has direct input into the determination process. True collective PUBLIC SECTOR: A UNION VIEW 87 bargaining brings about an understanding and a cooperative at­ titude between employers and employees. Such an attitude estab­ lishes the appropriate climate for discussions on productivity.

CoNTRACTS IMPROVE PRODUCTIVITY Many elements of traditional contracts form the necessary basis for future productivity gains. Wages, employee benefits and work­ ing conditions are the cornerstones of all labor-management nego­ tiations. Equity must have been achieved on these issues, both extrinsically as well as intrinsically. Extrinsic equity would be objectively fair economic and noneconomic working conditions. But intrinsic equity would imply that the objective equity which had been obtained was actually perceived by the workers as an equitable wage-benefit bargain. If the basic elements of the con­ tract are not equitable, then there is no basis for building a pro­ ductivity bargain. Low governmental salaries will not be alleviated by the mere introduction of an incentive pay plan built upon an unfair wage structure-any such program is viable only if built upon a fair compensation structure. The worker must also per­ ceive the equity of the bargain. His voice must have had a role in shaping that bargain: otherwise, he cannot be aware of the essential fairness of the basic bargain itself. Similarly, a well developed grievance procedure, in which the worker can turn to a union for protection, is also necessary for establishing a background for productivity bargaining. A well­ developed union-management grievance procedure, with final and binding arbitration by an outside umpire, gives the worker day­ to-day safeguards against arbitrary and capricious actions by su­ periors or higher management authorities. Under these conditions the worker is assured fair play on the job, and thus is secure enough to enter into productivity bargaining. Even such basic elements of the collective bargaining agree­ ment as seniority clauses affect morale and productivity. For ex­ ample, the job security that the contract itself provides is a factor in employee morale, which is so crucial to high productivity. The use of seniority in assigning work routes and overtime schedules often eliminates favoritism and discrimination by the supervisor. "An employee who feels the burden of discrimination will be less 88 COLLECTIVE BARGAINING AND PRODUCTIVITY inclined to do a good day's work."4 Similarly, the reference to seniority in the promotion clause usually establishes a framework that assures upgrading to the senior qualified employee who bids for a job, provided that worker qualifies to handle the higher­ paying position. Such a contract provision lets a worker know "that if he does his job well and is a satisfactory employee in other respects, he can look forward to advancement on the basis of his length of service. A corollary effect is the greatly improved morale of the work force."5 Productivity is also frequently related to the number of hours worked per day, week or year. The general reduction in hours of work has been accompanied by a substantial growth in output per man-hour. Studies of worker fatigue conducted during World War II showed that long working hours not only led to declining marginal productivity, but to overall reduced efficiency as well. Thus the contract limitations on hours of work and overtime may often be a factor in improving overall productivity gains. Similarly, the vacation period allows workers the time to renew themselves and approach the job again refreshed. Contract clauses dealing with safety and health or other working conditions also affect morale and productivity. An example would be a clause requiring management to provide rain gear to sanitation workers: "A worker who is provided with rain gear on a wet day will collect garbage more effi.ciently."6 Such protection would most likely also cut down on illness and the resulting absenteeism. Other protective equipment would tend to reduce work injuries and the attendant loss of time. All these clauses are part of the usual collective bargaining agreement. Their very existence encourages higher morale and generally higher output per man-hour.

PRODUCTIVITY BARGAINING What, then, is productivity bargaining? Basically it is just another element in bargaining dealing with methods for improving

• Negotiating for Productivity in Sanitation, by George Brooks, Labor­ Management Relations Service of the U.S. Conference of Mayors, (Washington, 1973) , p. 10. • ibid, p. 10. • ibid, p. 12. PUBLIC SECTOR: A UNION VIEW 89 productivity. Frequently, the approach may entail some type of problem-solving or gain-sharing strategem. In reviewing present work practice and procedures, the bargaining committee may recommend more efficient ways to get the tasks done. This may involve changes in traditional occupations, work jurisdictions, job rights or established customs. These are very sensitive areas, and need to be treated cautiously. Work patterns develop a certain tradition, and become institutionalized as "past practice." Further, the changes proposed may pose a threat of unemployment or re­ duced income to the incumbent job holder. These threats must be allayed from the very beginning by guarantees against any layoffs or pay cuts resulting from the pro­ posed changes. These guarantees are elementary threshhold con­ ditions for effective productivity bargaining. Fear of losing jobs can be the dominant force that motivates employees to resist im­ provement efforts. Even "a single layoff can have devastating personal consequences for the individual involved and can under­ mine the morale of the remaining workers."7 If job changes require the abolition of certain jobs, such abolition should not be made in one sweeping gesture, but rather gradually, allowing normal forces of attrition to curtail the number of positions, as well as establishing formal retraining programs and encouraging transfers to areas of greater need. Similarily, guarante�s against income loss can be achieved by so-called "red-circling"-a program that would assure incumbent workers that they would not suffer any cut in earnings, although new hirees could be brought into the job at lower wage levels. It is important to remember that the goal of the program is to improve productivity, not to cut salaries or reduce the work force. Workers, unlike machines, have a personal interest in the tasks they perform, and can bring first-hand expertise to the question of revamping the work process-two important points to remember when seeking improved productivity. The workers know more about how their tasks are actually being performed than any job analyst, or even most superiors. They are in an ideal position for recommending effective improvements in the operation.

• National Commission on Productivity and Work Quality, So Mr. Mayor, You Want to Improve Productivity, (Washington: U.S. Government Printing Office, 1974) , p. 27. 90 COLLECTIVE BARGAINING AND PRODUCTIVITY

In addition to the type of job and wage security discussed above, there should also be a positive motivation for the worker to recom­ mend productivity improvements. That motivation should be a provision that the workers will share in whatever savings result. "Productivity gains are gains in his (the worker's) value and (thus are) grounds for increases in compensation."s Productivity im­ provements have been linked to compensation increases in the public mind by the pronouncements of Presidents Truman and Eisenhower, by the formal wage-price guidelines spelled out in the Economic Reports of Presidents Kennedy and Johnson, and by the formal reports of the Productivity Commissions established under Presidents Nixon and Ford. All of those pronouncements highlight the fact that real gains in compensation have been achieved mainly through increased productivity. So too in the public sector, productivity gains need to be viewed as a basis for increased compensation, as well as reductions in unit labor costs. Another element of productivity bargaining is that it makes the workers and their union a part of the program of change. The importance of this element has been highlighted by Hubert Haber, Director of Labor Relations for the City of New York. He said that a "cooperative attitude by employees, and a willingness to accept and participate in new programs augurs for effective implementation. I say flatly that without positive employee at­ titudes, the boss doesn't have a chance. There is no group of employees anywhere in the private sector that cannot succeed in disrupting operations, even if only by strictly following the letter of their work rules."9 Certainly, then, the workers' compensation must be sought through productivity bargaining in order for work method changes to be imposed.

COMPATIBILITY WITH THE MERIT PRINCIPLE Productivity bargaining is more than compatible with the ele­ mentary merit principles outlined in the Intergovernmental Per­ sonnel Act. These principles, long touted as special standards for the public service, deal with the recuitment, selection and pro-

8 ibid, p. 28. • Hubert Haber, "New York City Productivity Bargaining," (£MRS-Labor­ Management Relations Service, June 1973, Vol. 4, No. 6) , p. 2. PUBLIC SECTOR: A UNION VIEW 91 motion of employees; training, retraining, and separation; fair treatment without regard to political affiliation, race, color, national origin, sex, or religion; and fair and adequate compensation. The issues involved in productivity bargaining go far beyond these elementary principles, yet they do not interfere with any part of this basic code. Thus while productivity bargaining is a new factor in public personnel activities, it is not a repudiation of the tra­ ditional merit principles. Those principles were designed to guar­ antee honest government: the goals of productivity bargaining are to achieve effective and efficient government.

NoT BuDGET CuTTING ••• However, effective and efficient government does not mean wholesale budget cutting. If productivity bargaining becomes nothing more than a budget-cutting device, then the whole notion may just as well be discarded. Such an emphasis would assure employee opposition and resentment. Rather, the approach must be attuned to the needs and aspirations of the workers, and not be just another "incentive" type program. For many, productivity bargaining is just the new catchword for other fad terms of the last decade. They see this approach as basically a cost-effectiveness approach similar to the cost-benefit analysis of the last decade, or the management by objectives school, or PPBS. Indeed, most workers see "productivity" as nothing to cheer about. Seventy percent of the American people believe that pro­ ductivity gains benefit stockholders "a lot," but only 20 percent believe it benefits employees, according to a Louis Harris poll conducted for the National Commission of Productivity. Nearly 60 percent believe that for productivity to increase, machines must replace people and workers must lose their jobs.1o Rather than being something considered beneficial to the worker, the concept of productivity is, instead, a cause of distrust and concern. For many it is just another name for speed-ups, layoffs, or a general reduction in worker security.

10The complete analysis appears in the Second Annual Report of the Na­ tional Commission on Productivity, (Washington: U.S. Government Printing Office, March 1973) , pp. 95 to 103. 92 COLLECTIVE BARGAINING AND PRODUCTIVITY

Management frequently tends to reinforce these notions. For example, when a city management analyst starts a discussion on productivity improvement as follows: "Productivity improvement is emerging as one important way in which public administrators can cope with increasingly severe budgetary restrictions. Faced with the need to cut costs andjor reduce services, administrators are seeking ways to get to the specifics of what can be done to insure that vital services are provided, while at the same time improving efficiency and effectiveness."ll Such language only re-enforces the notion in many workers' minds that this is just another management cost-cutting program. Productivity improvement is a recurrent theme of the Interna­ tional City Management Association, the American Society for Public Administration, the Municipal Finance Officer's Associa­ tion, The National League of Cities and the U.S. Conference of Mayors, the National Association of Counties, the International Association of Chiefs of Police, and many other public management groups. All of these themes involve the cry for improved produc­ tivity. Some recognize the need to "plan with people when intro­ ducing technological change so workers are not thrown on the human scrap heap tomorrow," and they consider "ways to share the savings" yielded by greater productivity.t2 But many solely advocate productivity as a budget trimming technique. No one questions management's right to such means to cut the budget, but management should avoid the temptation to rep­ resent such budget cuts as efforts to improve productivity. The elimination of a public service is not increased productivity. Rather, the focus should be in terms of increased services to be performed by the current work force during the normal duty hours, or the same services in a reduced number of work-hours. This is increased productivity. Questions of worker insecurity brought on by these management approaches must be fully allayed. Workers must be guaranteed that increased productivity will not be achieved at their expense;

11 Gilbert Boreman, "San Francisco Tries Productivity Improvement," (LMRS, June 1974, Vol. 5, No. 6) , p. 6. u Sig Gissler, "Productivity in the Public Sector: A Summary of a Wing­ spread Symposium," Public Administration Review, Vol. 32, No. 6 (November 1972) , pp. 840 to 850. PUBLIC SECTOR: A UNION VIEW 93 otherwise, deep opposition and resentment can be expected. And if possible, the workers will be tempted to sabotage the productivity game plan. All workers in the group affected by productivity programs should be guaranteed that they will not be displaced and unemployed as a result of the productivity program, and that any reductions in the number of job slots will occur solely by at­ trition. Also, they should be guaranteed that they will not suffer any cut in pay as a result of the introduction of a productivity program. Such guarantees of one's job and pay provide the basic security for the worker to progress further into the issues of pro­ ductivity sharing and productivity improvement. In addition to these underlying guarantees, there must be sharing of the gains of productivity improvement. If the worker believes that only management will benefit as a result of the pro­ ductivity improvement plan, then he sees no reason to expend any effort to make the program work. The exact methods for determining how the gains are to be shared are appropriate sub­ jects for bargaining, and management should recognize the im­ portance of this element in the achievement of productivity gains .

. . . NoR INcENTIVE PLANS ••• But in pointing out the need for sharing the gains of produc­ tivity improvement, I am not advocating the installation of wage­ incentive plans. On the contrary, it is my belief that incentive plans in the long run are counter-productive. It is no advance to adopt in the public sector in the 1970's the precepts that Frederick Taylor introduced into the private sector over a hal£ century earlier, and which have subsequently been largely rejected by private in­ dustry. While many of the wage incentive programs in private industry have enjoyed initial spurts in output per man-hour, these spurts generally failed to continue over the long run. The stan­ dards also tend to lose their significance as time passes, and, once adopted, it is rarely easy to alter them. Arbitrary changes in wage standards under wage incentive plans tend to undermine any acceptance of such plans, and result in de­ creasing, not increasing, productivity. Establishing incentive pay plans is particularly difficult in governmental operations because of the absence of adequate measurements for characterizing and evaluating the performance of public jobs. Some of the things that 94 COLLECTIVE BARGAINING AND PRODUCTIVITY can be measured may not be related to the primary function of the job. Thus, for example, the number of arrests made by the police can be counted, but general public safety is not so simple to ennumerate. If police are compensated under an incentive pay plan for arrests, the result may be frivolous arrests and general abhorrence of the police. Rather than increased public safety, there may actually be a decrease in general respect for law and order. The advocates of incentive pay systems for public employees often appear to be simply 1970 Taylorists, who assume that some type of incentive pay system is all that is needed to get greater output. They ignore the problems associated with attempts to accurately measure the output of the public service being per­ formed, as well as the value of the employee's individual contri­ bution to that public service. In spite of its inappropriateness, this methodology is still pursued by many managements. Individual pay incentive systems have historically been fraught with serious abuses in private industry, and there is no reason to believe that governmental entities will not be similarly plagued. Such systems have frequently led to the hated "speed-ups" and "sweatshop" conditions that have so alienated workers throughout the nineteenth and twentieth centuries .

• • • BuT JoB SATISFACTION A more positive approach towards improving productivity is by making the job more interesting, challenging, rewarding, or convenient. The considerable attention that has begun to focus on job enrichment programs over the past few years has brought a new concern for the needs and aspirations of workers. Such an emphasis frequently results in increased productivity, even if pro­ ductivity has not been the stated goal of the job enrichment programs. Increased job satisfaction may well be related to a number of factors. For example, the act of collective bargaining itself enhances job satisfaction by giving the worker a voice in the determination of his conditions. Then as collective bargaining expands to additional areas, and to include productivity bargaining, the scope of the worker's input expands and takes on a broader role in the joint determination of the work environment. The attention of the PUBLIC SECTOR: A UNION VIEW 95 bargainers may turn to redesign of individual jobs in order to provide more varied and satisfying assignments, or to job rotation, so that the worker sees the larger framework in which his job is slotted. The productivity improvement program of Wisconsin Gov. Pat Lucey, counsels managers and supervisors to "go through every job description with employee participation and find ways to enrich the job. This does not mean to make people produce more; it means to give them more weighty responsibilities and an oppor­ tunity to learn and grow."ta This is just one more approach exemplifying the importance of involving the individual worker, a person with needs and as­ pirations, in productivity planning. Clearly, many public employees are challenging traditional assumptions about the role of work in their lives, as well as items detailing the work to be performed such as job specifications and duties. It is somewhat irrelevant whether jobs are changing: what is important is that many workers perceive jobs in a different way than earlier generations performing the same basic tasks. "The fact is that workers, and, increasingly, unions, are responding to the nature of work in a dramatically different fashion than has been the case over most of the post­ war period.''14

UNION AmroDEs The attitudes of unions basically reflect the views of their members, and this is as true in the public sector as it is in the private sector. In general, the unions are more than willing to give productivity bargaining a chance. Labor leaders, including W. Howard McClennan, president of the AFL-CIO Public Em­ ployees Department and of the International Association of Fire Fighters, as well as six presidents of international unions operating in the private sector, serve as members of the National Commission on Productivity and Work Quality. Many of the nationally

18 Sam Zagoria, "The Role of People-Public Managers, Public Workers and Pu blic Unions-in Improving Services of Local and State Governments," Background paper for the Wingspread Conference, ijuly 16, 1973) , p. 15. "Robert B. McKersie, "The Productivity Pro blem and What Can Be Done About It in the Public Sector," (Institute of Public Employment, Cornell Uni­ versity, Ithaca, NY) , (Occasional Paper No. 3, November 1973) , p. 5. 96 COLLECTIVE BARGAINING AND PRODUCTIVITY prominent productivity bargaining gains were negotiated in the private sector such as the famous contracts of the Packinghouse Workers (now part of the Meat Cutters) with Armour, and the Longshoremen (ILWU) with the Pacific Maritime Authority. More recently, the headlines have focused on the Typographical Workers in their settlements with the New York City and Wash­ ington, D.C., newspapers, and the Steelworkers' establishment of productivity committees in the basic steel industry. All of these programs in the private sector influence the attitudes of public sector unions as well. However, unions generally have not taken formal positions on productivity bargaining. This is true both in the public sector as well as in the private sector. Attitudes of the unions can be seen in formal convention resolutions, speeches, newspaper articles, and contract demands. At its 1972 convention, the American Federation of State, County and Municipal Employees (AFSCME) supported productivity measures which promise to improve the quality of public service. Their concomitant demand was that the changes be bargained and gains resulting from new methods be shared with the workers.15 The Teachers (AFT) have frequently bargained on issues dealing with classroom size and other matters related to quality education. The Service Employees have also negotiated productivity provisions: social worker case loads and duties in California and auto and truck repair methods in New York City, for example. Clyde M. Webber, the president of the American Federation of Government Employees, has pointed out that "employee acceptance of changes in production methods hinges primarily on their job security and pay."16 But there is also a certain amount of restraint expressed by various trade union leaders. The Fire Fighters' McClennan told a meeting of the National League of Cities in December 3, 1974, vis-a-vis productivity that " ...city after city has spent good money to hire expensive research outfits that know the answers before they look at the questions. They solemnly 'report' that fire fighters' productivity is low and recommend department cuts. . . A better approach would be a joint study looking in an

15The Public Employee, Vol. 38, No. 7 Guly 1973) , p. 2. 18 The Government Standard, (May 1973) , p. 1. PUBLIC SECTOR: A UNION VIEW 97 unprejudiced way for hard facts and sensible procedures."17 Similarly, Webber of the AFGE told the same group: "Where and when management takes the workers' and their union's concern into account, and genuinely nego­ tiates proper solutions to the problem, little difficulty is encountered in improving practices or work methods, and therefore, in showing productivity increases. On the other hand, where and when management unilaterally-and high-handedly-applies new procedures without consulta­ tion, demoralization occurs. At the very least, there are long delays in realizing anticipated productivity increases. At the very worst, there is chaos for a long, expensive period of time."lB In explaining the participation of AFSCME District Council 37 in the New York City productivity council, the research director of the council, Alan Viani, "emphasized that the union participa­ tion in the council would insure that productivity programs are in no way punitive towards city workers."l9 No one can be against productivity improvements as a general principle, but that does not mean that every suggested change in working conditions will be accepted with open arms. Rather, unions will tend to be rather cautions in their acceptance of new productivity programs. While subscribing to the productivity principle, union leaders may find that they cannot accept some of the subsequent list of specifics.

SUCCESSES AND PROBLEMS Hundreds of examples of various aspects of productivity im­ provements in federal, state, and local governments have been discussed and documented, but only a few illustrations are needed to point out certain critical elements. Many productivity pro­ grams have focused on certain groups of employees such as sanita­ tion workers, police, clerical employees, auto mechanics, fire

"W. Howard McClennan's Speech to the National League of Cities, Decem­ ber 3, 1974, reported in "Government Employees Relations Reporter, (No. 585) , p. B-6. 18 Clyde Webber's Speech to the National Academy of Public Administration, reported in The Government Standard, (May 1973) , p. 12. 19 "Union, City in Productivity Effort," Public Employees Press Publication of District Council 37-AFSCME, Vol. XV, No. 19) , (November 8, 1974) , p. 7. 98 COLLECTIVE BARGAINING AND PRODUCTIVITY fighters, administrative personnel, hospital workers, letter carriers, postal clerks, computer operators and many others. Clearly, specific programs must be devised for each group of employees, rather than some generalized approach. Some of the productivity gains were accomplished by job enrichment programs, or the introduc­ tion of new technologies or work methods, or the acceptance of new performance based incentives. Whatever the approach, much can be learned from reviewing some specific elements in these approaches. The Fire Fighters Union in a joint labor-management ex­ ploration with the City of Tacoma, Washington, came up with a plan for more productive use of manpower and equipment, while reducing the work-week at no extra cost to the city. In another joint activity of the union with the city Personnel Department, they cooperated in recruiting minority member job applicants and provided them with pre-employment training, so that they could be placed on the Civil Service list without any special certification. As a result of this activity, nine minority group members were included in the first eleven names certified.20 Here the designs of both programs were jointly developed, and each group gained from the results. In one the fire fighters enjoyed shorter hours of work, while the city maintained the same degree of fire protection without any added costs. In the second situation both gained by increased minority enrollment in the fire service, at the acceptable levels-of-entry expectation. In Detroit, two unions--AFSCME and the Teamsters--nego­ tiated a specific productivity-sharing arrangement for gains made in the collection and disposal of refuse. These sanitation workers share equally with the city in savings accomplished through im­ proved productivity of the sanitation division. The productivity formula is calculated as the weighted combination of three quanti­ tative factors designed to measure work performed this year and its labor costs as compared to corresponding periods in the past years. These factors are: 1. The savings in per-man-hours per-ton of refuse col­ lected .

.., William V. Donaldson, Participatory Management-Employees are Crea­ tive, (Washington: Labor-Management Relations Service of the U.S. Confer­ ence of Mayors, 1973) , pp. 6 and 7. PUBLIC SECTOR: A UNION VIEW 99

2. The savings in total hours of overtime. 3. The percentage of runs completed on schedule.

A fourth factor is being sought to measure the quality of the work as to its thoroughness, neatness, and cleanliness. In the Detroit experiment each of these factors is given a weight, with the first factor 50 percent and the second and third factors having weights of 20 percent, respectively. Quality, if it can ever be mea­ sured, will be given a weight of 10 percent. The savings are cal­ culated quarterly and divided equally between city and workers.21 In the first year, the city saved approximately $300,000 and each worker received a bonus of $300. Such monetary rewards are inducements for both the worker and the city. In New York City, a productivity project was undertaken during Mayor Lindsay's administration that used 289 indicators to evaluate quarterly 175,000 employees in 16 agencies. Each de­ partment established monthly targets and recorded its completed work against these goals. Some of these 289 indicators were eliminated in the Beame administration, and more emphasis was placed on large-scale management audits of the agencies. In addi­ tion to the productivity clauses and separate productivity com­ mittees provided for in the union-management contracts, the Beame administration established a city-wide productivity council as a formal mechanism to involve union officials in manpower changes to improve productivity.22 With the advent of the severe fiscal crunch on New York in early 1975, various curtailments in municipal services were made to stave off threatened financial disaster. City employees were being laid-off for the first time in the city's history, and in the midst of a general economic slump with its attendant high un­ employment. The resulting trepidation among the municipal workers about employment security took much of the bloom off the productivity program. In Nassau County, New York, a highly publicized productivity plan was threatened by the county's refusal to grant wage increases

"'Jim Neubacher, Detroit Sanitation Productivity-Everyone Wins, (Wash­ ington: Labor-Management Relations Service of the National League of Cities, 1973) , pp. 2 to 8 . .."Productivity Program in the City Changed Drastically," by Beame, New York Times, (February 27, 1975) , pp. 1 and 38. 100 COLLECTIVE BARGAINING AND PRODUCTIVITY recommended by a fact-finding board. The wage boosts recom­ mended were roughly concomitant with the rate of inflation. Failure to reach agreement on the basic wage bargain would undermine the elaborate Productivity Benefit Increase Trust Fund, which was based on the premise that improved productivity should be rewarded financially with part of the savings from employee attrition being earmarked for investment in an employee trust fund. This experience highlights the importance of basic collective bargaining as the cornerstone for effective productivity bargaining. Savings from projected increases in output per man-hour cannot be a substitute for normal wage increases destined to offset the ravishes of inflation. In New York State, the Director of Employee Relations and the staff of the Civil Service Employees Association spent more than a year in mutual exploration of ways to improve productivity. However, when the union rank and file representatives prepared the demands for contract negotiations, they set as a precondition "the elimination of any mention of productivity issues."23 This exemplifies the basic distrust and concern among workers of the general notion of productivity. In the spring of 1975, the Letter Carriers threatened a nation­ wide strike against the United States Postal Service over the issue of unilateral management changes in letter carrier routes based on time and motion studies. The furor temporarily subsided, but it emphasized the importance of productivity bargaining concerning the matter of work loads and other aspects of productivity.

CONCLUSION Productivity improvements in the public sector are peculiarly labor-oriented, rather than technology induced. As a result, greater emphasis must be placed upon labor-management cooperation to achieve productivity gains. However, before one can move to productivity bargaining, there must be a strong underpinning of true collective bargaining. Without that base, there is no foundation to build on for future mutual trust. Job and income maintenance guarantees are also

23 Walter L. Bulk, "Why Don't Public Administrators Take Productivity More Seriously?," Public Personnel Management, (July-August, 1974) , p. 319. PUBLIC SECTOR: A UNION VIEW 101 prerequisites for achieving employee cooperation to change work methods. Only then can the worker approach the changes secure in the knowledge that the productivity program will not threaten his livelihood. Public sector productivity bargaining was dealt a severe setback by the 1974-1975 inflation-recession. These broad economic forces substantially squeezed state and local governmental finances. Many emergency actions to cut spending and to cut payrolls under­ mined the basic premises of productivity bargaining. But if built upon a sound foundation, productivity bargaining is a viable method of developing imaginative solutions for im­ proving output per man-hour. Joint labor-management approaches can develop effective solutions to many productivity problems, and this mutually agreed upon solution is assured of the worker's sup­ port-thanks to the workers' voice in its development.

CHAPTER 6

Bargaining Over Work Standards by Professional Unions FRANCES BAIRSTOW AND LEONARD SAYLES

In seeking to evaluate the unique problems of productivity bargaining and professionals, one must begin by reviewing the professional's view of work and the organiz4tion. Traditionally one would also have to ask the question, "Who are the profes­ sionals" since there are readily observable trends toward increased professionalization.l We shall satisfy ourselves on this question simply by limiting our examples to those occupational groups whose members require extensive, formal training, have mastery of rather profound skills which are not easily comprehended by outsiders, lay some claim to an ethic of public responsibility and continuing education and have significant control over entry. From a naive point of view productivity problems should be minimal in such groups since, for many professionals at least, work is highly fulfilling and an important, not trivial, component of life, and thus there is not the need for as close supervision since the professional (I) is dedicated to some conception of public service and (2) finds that increased performance brings direct returns in the way of personal pride of accomplishment, peer group recognition and even advancement. And, in fact, many professionals are very achievement oriented, drive themselves (and their lesser status associates) and, if necessary, work "round the clock" to solve an important problem. At least, that's the ideal. But life is never simple and the motivated professional can create a variety of productivity problems for the organization; many of which increasingly fall into the realm of collective bargaining.

EFFICIENCY VERSUS PROFESSIONAL STANDARDS The core of most of these management/professional conflicts concern the very definition of productivity itself. As professionals,

1 George Strauss, "Professionalism and Occupational Associations," Reprint No. 203, Institute of Industrial Relations, Univ. of California, Berkeley, 1963. 103 104 COLLECTIVE BARGAINING AND PRODUCTIVITY these employees claim that only they, rather than their bosses (particularly if the boss happens to be an outsider, a lesser or differently trained person, not conversant with the arcane tech­ nologies of his subordinates) know what constitutes high output. So within the work situation such problems as these are typical: Nurses want the right to be able to perform certain medical procedures formerly restricted to MD's on the grounds that good and timely patient care requires that they be authorized to expand their professional repertoire. (Question, "Is this desire for more work a reflection of their legitimate concern that patients may suffer undue hardship if only doctors can perform these procedures or a desire to improve their organizational status vis-a-vis physicians?") Court reporters seek to bar the use of new audio­ recording techniques which they feel will not provide the quality of transcripts currently produced by their human ears and fingers. (Question, "Is this classic resistance to a change to avoid lessening job opportunities also moti­ vated by a desire to maintain a high quality level of work performance?") Many scientists in both public and private laboratories seek tl1e right to refuse assignments which are beneath their competence level and do not provide them with an opportunity to fully utilize their more professional skills. (Question, "Is this simply a desire to have more satisfying, interesting work and to avoid the drudgery jobs or because they are loathe to see the organization waste high priced talent on jobs that could be performed by technicians?") Teachers consistently seek to bargain over the size of their classroom populations and the amount of free time in which they don't have to monitor study halls and do other non-teaching chores. (Question, "Do these rep­ resent demands for less work for the same or more money-the classical work load issues of collective bar­ gaining--or a "professional" concem that large classes and too many administrative chores will detract from high quality teaching and the provision of adequate leaming opportunities?") Many professionals seek to insist that their immediate supervisors be members of the same profession. In fact, WORK STANDARDS AND PROFESSIONAL UNIONS 105

there have been efforts to call nation-wide strikes of physicians in countries with nationalized medical services when governments have sought to place non-physicians in charge of national health services. (Question, "Are these professionals simply worried that an "outsider" won't be able to distinguish between good and poor work or that, not unlike the printers who required their bosses to belong to the same union, they believe that a fellow professional is less likely to impose excessive work standards?") Teachers resist the introduction of standardized ap­ praisal plans which seek to evaluate job performance as "unprofessional" and, of course, invalid. (Question, "Is this a concern that such bureaucratic procedures will cause easily quantified data (such as student test scores) to assume excessive importance at the expense of "real" educational values or simply that any measurement of performance interferes with desired autonomy?")

PROFESSIONAL GoALS It is our contention that there are no objective answers to any of the questions posed above. The heart of management's problem in dealing with professionals is here, in fact. The professional can cloak himself or herself with the mantle of "only I know what's best for the client and you, Mr. Boss, are putting artificial standards of performance ahead of the real, underlying needs of the situation and client." Further, given what we all know about small group dynamics and the perceptual distortions they intro­ duce, it is obvious that professionals themselves can't make these distinctions. At one and the same time, we would assert, in most cases where there are these conflicts, the professional group has convinced itself that it is upholding some overarching critically scarce value. This should make their tenacity greater because it means that the inevitable group coercive comparisons (We're not getting as much as we deserve, given our skills and training as compared to that other group) are exacerbated by the sense of community righteousness: "Those bosses are always trying to cut corners to save a penny but in the long run what they want will endanger the real task we're supposed to be doing." Further compounding the problem is the desire of the pro­ fessional to increase his independence and autonomy. Orders should come only from fellow like-minded professionals, tasks done 106 COLLECTIVE BARGAINING AND PRODUCTIVITY by others which in any way create dependence on those others should be transferred to the professional group itself, and eval­ uations (who gets hired, gets tenure, gets awards etc.... ) should be performed by the peer group and not by outside bureaucrats. The professional ideal is one in which the surrounding organiza­ tion-bosses, other work groups, etc.-are there to serve the pro­ fessional-as service groups, as Staff support-and to facilitate hisfher career. After all, since personal growth and career develop­ ment serve larger societal needs, anything the organization can do to further those individual professional needs are really unselfish objectives. Thus the professional is not bargaining for personal gain at the expense of the organization but representing broader, more altruistic and far sighted values, than layman-dominated manage­ ment. And that's a pretty imposing bargaining stance to counter, particularly when the professionals themselves probably can't dis­ tinguish altruism from self-seeking behavior. One of the authors, with George Strauss, recently summarized research on the likely sources of conflict between the professional and a traditional line organization in how the critical elements of the work situation are viewed. The imaginative reader can without much difficulty envision an endless future source of bar­ gaining controversy on "efficiency" issues inherent in this wide difference in point of view:2 TRADITIONAL LINE PROFESSIONAL (Standards) MANAGEMENT (Standards) Challenging assignment to further Assignment based on organizational knowledge, theory needs, practical realities Elegant, even ultimate solutions; Timely solutions; compromises to meet perfectionist competition or solve problems Completion, closure Rapid shifts to meet budget and schedule requirements; abandoment of projects where payoffs not assured Critical decisions and judgments made Decisions and appraisals by manage­ by peers, fellow experts ment hierarchy Senior colleague guides Manager orders Status as a function of professional Status as a function of managerial ability, knowledge level Indifference to rules and procedures, Emphasis on procedures, discipline, often unorthodox and rules and conventional behavior Organization designed to facilitate Your work designed to facilitate your work organization goals

• Adapted from George Strauss and Leonard Sayles, Personnel, Englewood Cliffs, New Jersey: Prentice Hall, 1972, pp. 58-59. WORK STANDARDS AND PROFESSIONAL UNIONS 107

UNIONS AND PROFESSIONALS We may have come full circle. Not very long ago professionals would have been wary of unionization as likely to tarnish their much valued occupational prestige. Unions were for the low status workers; professionals joined their own associations designed to share new ideas, help one another get jobs and raise the standards of the field. Given the fact that increasingly a profes­ sional plies his "trade" in a large organization, he and she are turning to unionism to protect their professional concerns for in­ volvement in their work and autonomy and not to consciously trade-off a certain amount of professional status for economic rewards. They anticipate getting both: increased economic re­ wards and "better", meaning more professionally satisfying jobs and more of the "bread and butter" items of traditional unionism. And thus pragmatically the professional has expanded his as­ sociations to include trade union functions andfor joined already existing trade unions. As Kleingartner has noted, the distinguishing feature of pro-. fessionals is that they (the professionals) need a high degree of involvement in their work. Lacking any other appropriate mech­ anism for effectuating their concern with the quality of their services, they tum to their collective bargaining organizations to ensure their continuing participation in decision-making. Kleingartner characterizes professional goals as those "centrally related to the mission and content of the functions performed by members of the profession." He lists these as (l) autonomy, (2) occupational integrity and identification, (3) individual satisfac­ tion and career development, and (4) economic security and enhancement. s A compelling argument put forward by the Veterinarians of the Government of Canada in a 1971 Arbitration Brief supports the Kleingartner contention: "Decisions and recommendations formulated within this group are designed to protect Canadians from health hazards and livestock producers from economic losses. They have effects on international and federal-provincial

3 A. K1eingartner, "Collective Bargaining Between Salaried Professionals and Public Sector Management," Reprint No. 236, University of California, Los Angeles, 1973. 108 COLLECTIVE BARGAINING AND PRODUCTIVITY

policies, the availability of drugs required for economic food production, the practice of veterinary medicine, the cost of commercial drug development and production, and Canadian pharmacological research. "It can be readily appreciated that a considerable number of employees in this bargaining unit are more often than not their own manager, consultant and supervisior and to perform their duties effectively, must be allowed to work in an atmosphere more akin to their professional practitioner colleagues, than to that of salaried employees in laboratory coats." The responsible and far-seeing members of the collective bar­ gaining associations equate quality with enhancement of profes­ sional standards, attracting the most competent and innovative of their professions and concerning themselves with ethics, the highest educational requirements and membership restrictions, often in­ terrelated with licensing provisions. Of course there continue to be doubts expressed by critics of professional unions as to whether participating in collective bar­ gaining results in denigration of professionalism. So far, in the authors' view, there is little evidence to support this. Rather it appears that the expressed concern of professional manpower specialists in immigration policy have the same effects as the involvement of teachers in educational policy, of social workers in welfare policies and programs. These are new strengthening dimensions added to the collective bargaining process. Arvid Anderson, Chairman, Office of Collective Bargaining, New York City, in a speech given in 1970 to the U.S. Conference of Mayors, offers a contrary point of view: "The impact of collective bargaining on our society is also evidenced by the fact that a number of public em­ ployee organizations look upon collective bargaining as a means for effectuating social change, as well as a pro­ cedure for improving wages, hours and fringe benefits. I refer to the demand of teachers who want to bargain about the school curriculum or class size; welfare workers who want to bargain about the quality of medical ser­ vices offered; nurses who wish to bargain about the num­ ber of duty stations; policemen who want to regulate the number of men on a patrol or their authority to WORK STANDARDS AND PROFESSIONAL UNIONS 109

make arrests; and air controllers who demand the right to bargain about their equipment and workload. While I consider the public employer and employee organiza­ tions, I do not agree that the collective bargaining process is the appropriate means of resolving all major public policy questions. In some jurisdictions, there are laws and procedures for resolving disputes over the scope of bar­ gaining, while in others, ad hoc decisions are being made." PROFESSIONAL UNIONISM IN THE CANADIAN GOVERNMENT The story of professional unionism, outside of teachers, nurses and some groups of engineers, of necessity means the story of professional employees in the public service, particularly in the federal sectors both in the United States and Canada. Firstly, in the private sector, the number of professional emplo.yees rep­ resented in collective bargaining is very small, so there is little experience on which to draw. Secondly, many enterprises which employed professionals such as hospitals and universities and may have been considered "private" in the past no longer qualify under that heading. In Canada there are now over 1000 public general hospitals. Much of the material included in this section is based on a research study of one of the authors on the professional in the public service of Canada.4 In Canada, there is a remarkable laboratory operating, namely, the workings of the Public Service Staff Relations Act. The turn to professional unionism by 18,000 professional public employees was accelerated by establishment of public policy in Canada in 1967 upon the passage of the Public Service Staff Relations Act.5

• "The Professional Employee in the Public Service of Canada," the McGill Report, 1972, A research m depth study by Prof. F. Bairstow, Director, In­ dustrial Relations Centre, McGill University; Prof. A. Kleingartner, University of California at Los Angeles; Prof. H. Lebel, University of Montreal; Prof. B. Downie, Queen's University, published by the Professional Institute of Public Service of Canada. • In addition to the regular federal governments, departments, there are eight other "separate" employers identified in the Act. They are: Atomic Energy Control Board, Centennial Commission, Defense Research Board, Eco­ nomic Council of Canada, Fisheries Research Board, National Film Board, Na- tional Research Council and Northern Canada Power Commission. . ' Professionals working for the Government are employees within the meet­ ing of the Act and are eligible for inclusion in bargaining units. The coverage of employees in the classical professions, such as law, medicine, dentistry and engineering, represents a departure from the usual pattern followed in all but very few labor relations statutes in Canada arid the United States. llO COLLECTIVE BARGAINING AND PRODUCTIVITY

The stresses of new professional union concerns have been witnessed in the Canadian government experience. Under the legislation, although there is no restriction on the matters that may be discussed at the bargaining table, there are some limitations on the matters that can be embodied in a collective agreement or in an arbitral award. Rates of pay, hours of work, leave en­ titlement, standards of discipline and other terms and conditions of employment directly related are expressly made bargainable. One significant issue that is not bargainable is the merit principle of appointment, transfer and promotion; these matters remain to be dealt with by the Public Service Commission under the terms of the Public Service Employment Act. However, there is something new on the horizon which rep­ resents a significant departure from appointments strictly by merit. A new Data Stream system was first introduced in the Foreign Service of Canada. It provides that qualities and qualifications of various employees can be fed into a central computer. When a position bec.omes vacant, all those with appropriate qualifications will ·have their cards emerge and choices can be made from the one considered to be the best. The professionals included in this system are raising vigorous objections on the grounds that such inhuman and impersonal selection is contrary to the notion of individualism which is an important ingredient in professionalism.

BARGAINING DEMANDS Collective bargaining for professionals contains its own special nature. A cursory perusal of their agreements is not particularly helpful. They read very much like union contracts in private industry. They cover such standard subjects as salaries and fringe benefits; hours and overtime; shift arrangements; transfer, promo­ tion, discipline and discharge; and procedures for processing grievances. But here and there one is starting to notice innovations. Item: Research Scientists' Agreement- Article 12-Professional Papers 12.01 The Employer agrees that original articles and tech­ nical papers prepared by an employee, within the scope of his employment, will be retained on ap­ propriate departmental files for the normal life of WORK STANDARDS AND PROFESSIONAL UNIONS 111

such files; the Employer will not unreasonably with­ hold permission for the publication of such articles and technical papers in professional media and, at the Employer's discretion, recognition of authorship will be given where practicable in departmental publications. Article 26-Career Development 26.01 Education Leave (a) An employee may be granted education leave with­ out pay for varying periods up to one (I) year, which can be renewed by mutual agreement, to attend a recognized institution for additional or special studies in some field of education in which special preparation is needed to enable him to fill his present role more adequately, or to undertake studies in some field in order to provide a service which the Employer requires or is planning to provide. (b) An Employee on Education Leave under this clause shall receive allowances in lieu of salary equivalent to not less than 50% of his salary provided that where the employee receives a grant, bursary or scholarship, the education leave allowance may be reduced. In such cases the amount of the reduction shall not exceed the amount of the grant, bursary or scholarship. 26.02 Attendance at Conferences (a) In order that each employee shall have the oppor­ tunity for an exchange of knowledge and experience with his professional colleagues, the employee shall have the right to apply to attend a reasonable num­ ber of conferences or conventions related to his field of specialization. The Employer may grant leave with pay and reasonable expenses, including regis­ tration fees, to attend such gatherings, subject to budgetary and operational contraints as determined by the Employer. 26.03 Professional Development (a) The parties to this Agreement share a desire to improve professional standards by giving em­ ployees the opportunity on occasion 112 COLLECTIVE BARGAINING AND PRODUCTIVITY

(i) to participate in seminars, workshops, short courses or similar out-service programs to keep up to date with knowledge and skills in their respective fields, or (ii) to conduct research or to perform work related to their normal research programs in institu­ tions or locations other than those of the Employer Item-Administrative and Foreign Service Category Article 28-Publications The employer agrees to continue the present prac­ tice of ensuring that employees have ready access to all publications considered necessary to their work by the Employer. Item-Historical Research and Scientific & Professional Category Article 33-A uthorship 33.01 When an Employee acts as a sole or joint author or editor of a historical publication, his authorship or editorship shall normally be shown on the title page of such publication. 33.02 Where the Employer wishes to make changes in material submitted for publication with which the author does not agree, the author may request that he not be credited publicly.

REDUCTION oF HouRS Although a common negotiating item, reduction of weekly working hours assumes a different aspect when presented in the light of work standards. Take the case of the Air Traffic Con­ trollers who maintain that the stresses and strains involved in actual control duties were not comparable to the responsibilities of mangerial training or clerical tasks often performed by non­ operational controllers. Their claim for reduction of the work week is based on the effects of increasing air traffic densities, the physical and mental stress of the job and the variety and speed of aircraft that must be handled. Even the employer is in agree­ ment with the union that the occupation is a "young man's game." The consequences of advancing technology and the grow- WORK STANDARDS AND PROFESSIONAL UNIONS 113 ing complexity of the work environment may reflect in relatively short occupational careers. Examples of the kind of problems which have arisen for con­ trollers from the introduction of large numbers of "jumbo jet" aircraft such as the Boeing 747, Lockheed 1011 and Douglas DC 10 are those caused by their higher speeds, slower rates of climb and higher cruising altitudes, but the major problem is that caused by the air turbulence left behind by these behemoths as they con­ tinue their sky journeys. For an insight into the problems which this phenomenon causes to controllers, the following quote is cited from an article in "Pilot", the Journel of the Canadian Air Line Pilots Association, Summer Edition, 1973. The article was written by Captain R. M. Kidd, CALPA's Director, Technical and Air Safety. "In December, 1969, the first of the wide-bodied jet transport aircraft, the B-747, was introduced into commercial operations. It was not long before it was realized that the heavy jets (over 300,000 pounds) could produce and compound the wake vortices problem during their operation, which would further endanger the safety of lighter aircraft, who entered the disturbed area ... particularly in congested air space areas of terminals and airways. "At Vancouver International Airport on April 28, 1968, a B-707 on a training flightcom pleted an approach to runway 08 and then a planned go-round procedure. An Aztec was 1 Y2 miles behind the other and entered the wake vortex turbulence which caused loss of control at an altitude too low for the pilot to effect recovery. All on board were killed. "Litigation from this accident in British Columbia courts re­ sulted in damages being assessed against the deceased pilot's estate for $326,000. These damages were awarded to the estates of the families of the deceased passengers." NOTE: The two Tower Controllers on duty at the time of this accident were also sued by the passengers' estates but were found to have discharged their responsibilities correctly and not to be negligent. "The U.S. District Court recently held that the wrongful death of the pilot of a light aircraft in a landing accident was caused by the negligence of air traffic control when it failed to provide adequate separation between aircraft, wrongly advised the pilot to keep his aircraft close behind the preceding 707 jet aircraft, 114 COLLECTIVE BARGAINING AND PRODUCTIVITY

and failed to advise the pilot of the presence and hazard of wake turbulence caused by the preceding aircraft". The controllers in a plea for recognition of the added strain and responsibility imposed by these aircraft, point out that the controllers' burden exceeds even that of the pilots, since the pilots do not share the responsibility of the resulting hazard to other aircraft caused by their wake turbulence! Other contractual clauses on joint consultation, registration fee payments to professional societies, etc. could be cited, but the small sample given here indicates the direction with which profes­ sional negotiations appear to be headed. The point which deserves emphasis is not that professionals are getting professional develop­ ment leave, a type of sabbatical leave provision, since many re­ ceived these benefits in the past even before unionism. It is the recognition in a contractual obligation that it is the right of the professional to receive them which is significant. This means effec­ tively that if he doesn't get what he thinks he is entitled to, he can grieve on the issue. Again, reference to Canadian federal govenrment experience is illuminating. In 1967 when new professional unionism accelerated many of the most active organizers and founders were quickly excluded from the bargaining unit on grounds of managerial designations. The present PSSRA excludes an "employee who has executive (italics mine) duties and responsibilities in relation to the development and administration of government programs". The effect of the new proposals for legislative change contained in the Finkelman Report which are currently before the Parlia­ ment, will be to exclude from collective bargaining, "a person who . . . . regularly participates to a significant degree in the formu­ lation and determination of government policies and programs". Many of the professional groups are determined to oppose these legislative changes. The diplomats in the foreign service group, for example, have estimated enactment will cause their union the Professional Association of Foreign Service Officers, a 90% mem­ bership loss! This matter of managerial exclusions from professional bar­ gaining units has caused much pain and anguish. The line be­ tween who is a manager and who is an employee becomes fuzzier in professional relationships than between bosses and workers in WORK STANDARDS AND PROFESSIONAL UNIONS 115

the blue collar occupations. One need only look at the ready transfer in and out of bargaining units of scientists, film-makers and physicians. On one project they may be bosses, on another a team member. The perceptions of a professional as to what work standards should be sought may have been shaped by his exper­ iences as a manager or his expectations of future career achieve­ ments. If he judges that such objectives as he deems desirable can be attained only by his assuming the responsibilities of manage­ ment, he may reluctantly abandon the quiet life of creativity for the less halcyon rigours of committee or consensual type decision­ making, not unlike that found in universities. But of all the bargaining issues which causes the most concern and occasions the majority of representations, the list would in­ controvertibly be headed by performance pay or merit pay. This concern poses a classical dilemma. George Strauss has noted it in his studies of unionism among engineers: • "Almost every engineering union avowedly supports the principle of allowing people to rise on the basis of indi­ vidual merit. Yet traditional union objective is to get more money for its members on a collective basis".B Lacking quantitative standards for determining the performance of most professionals, subjective considerations may play a large part in deciding the appropriate amounts in relation to merit of individuals. The mind boggles at the problems of determining performance pay in a foreign service bargaining unit of 1000 mem­ bers, scattered around the world, with a salary range of $12,000 to $33,000. It can be argued that professional unions might have achieved greater success and recognition if there were fewer conflicts within the respective groups on the issue of bread-and-butter goals and professional goals some managers in the public service tend to be scornful of economists who demand treatment and recognition as professionals and at the same time negotiate for overtime clauses which in the opinion of these same managers have had deleterious effectson work assignments. On the positive side, managers are pleased with the results of

""Professional or Employee-Oriented: Dilemma for Engineering Unionism" by George Strauss, Reprint No. 237, University of California, Berkeley, 1964. 116 COLLECTIVE BARGAINING AND PRODUCTIVITY joint consultative efforts. They note a constructive attitude of trust and understanding. In the author's view this may be trace­ able to the realization of the professionals that soon they will be occupying these managerial positions, so it would be unreal to adopt "hate the boss" attitudes. CONCLUSIONS A chapter on bargaining over work standards by professional unions may appear to be badly placed in a volume emphasizing productivity. The over-riding objective of productivity is to achieve "more for less". Professionals may not endorse this goal since their concern is with "better" not necessarily "more". In essence, that's what professionalism is all about. The professional believes he has a particular contribution to make to his employer and to his clients or citizenry. He is con­ vinced he can make it if his expertise and ideas are taken into account; and if he achieves recognition both tangible and intan­ gible in nature for his contribution, not for just being there and occupying a position. The new professional employee with the strength of a collective bargaining organization behind him is making new demands on the traditional hierarchical structures of management. He is also insisting on creative work (whatever that means) , meaningful work, work that is socially useful, etc. An articulate group of workers is shaping its unions into prag­ matic forms to carry out a different approach to work standards. Modern professional unions are characterized by an absence of ideology-there is no sense of commitment to the idea of unionism as such or achievement of a concept of justice. Their strategy sessions are replete with phrases such as "strengthening a code of ethics," and the need for "setting up licensing procedures." In the 1967 Kleingartner study on engineers, his data shows clearly that they want an organization that represents them in their job and professional interests, but they show little interest in the idea of cooperating with other established unions or even one that looks like a union. 7 Let us quote from one of the respondent groups in the study previously cited.s

'A. Kleingartner, "Professionalism &: Engineering Unionism," Reprint No. 203, University of California, Los Angeles, 1967. 8 F. Bairstow et al, op. cit. WORK STANDARDS AND PROFESSIONAL UNIONS 117

"Demands for such things as payment for overtime and travel time and insignificant fringe benefits should be dis­ couraged. These are all recognized as expenses by the em­ ployer and may be detracting from our salaries, eroding our professional status and interfering with the merit system. Though the shortcomings of the merit system as it now operates are well known, we as scientists are never­ theless dedicated to its principle. Therefore, our major interests are in such things as more secure retirement programs, liberalized transfer of work leave, short term training sessions in new techniques, more conference travel, more technical assistance and job security. Im­ provement in all these fields would increase our profes­ sional productivity and benefit both ourselves and our employer. We realize that many of these are not bargain­ able items at the present time, still they represent some of our main concerns.

One of the more interesting findings of our study that bears out the earlier findings of researchers into the McGill engineering unionism, is the one regarding the engineers' ambivalent attitudes toward management. Professionals protest that collective bargain­ ing places restrictions on managerial prerogatives. Whereas the traditional unionist strives to limit management prerogatives, professionals believe that "most of the things professionals want can only be obtained by the exact reverse of this process," but where they are part of management! Professional unions are now tentatively invading a new terri­ tory, that of participatory management. Here, the future appears brighter for the professional than for his blue collar counterpart. The professional is tempted, since he identifies with management. The roles of manager and managed are blurred, especially in estab­ lishments that experiment with project management. His function changes constantly, so that one day he may be making decisions, another day he is receiving them. The possibilities in shared decision making attract the profes­ sional, but this way is fraught with perils. If he suggests ideas to improve work productivity, is he endangering his own job security and that of his fellow members? Much work improvement involves layoffs and cutbacks. There are traps-dangers in using profession- 118 COLLECTIVE BARGAINING AND PRODUCTIVITY alism as a restrictive practice when there are no assurances of job security. Does the professional union have a policy on participating in budget decisions? Does the union member share in financial allo­ cations? Does he or she help choose one project over another? Do the union members share in responsibility for failures? It is puzzling that the struggling professional groups have not studied more closely the example of the airline pilots who seem to have combined the best of both worlds of militant unionism and professionalism. The Pilot's official journal reveals that they find it normal and necessary to present subjects to their readers that go beyond the classic wage, hour, and grievance matters. Items such as safety for the crew, safety for passengers, long-range aviation research, legislation, insurance, and international air piracy all come in for attention, giving credit to the Pilots' reputation for professional responsibility. Professionalism may be a myth as an obj ective for union activity, but for many the professional union contains the essence of eco­ nomic reality. It provides the professional with the opportunity of gaining the advantages of collective representation and negotia­ tion, with the assurance that his or her affairs are being managed entirely by members of his or her own or allied professions in ac­ cordance with responsible policies and that ill-considered and self­ destructive militancy is being rejected. What has been described here is a new type of organization which is evolving, one that is rejecting the traditional approach to trade unionism, shaping its organizations to carry out its own objectives, not yet partners with management on a basis of equality but not pure antagonists either. For a student of industrial relations it is fascinating to be a witnesss to this dynamic experience, to perceive the possibilities that are bound to affect the total sum of the relations between employers and employees. In the future it is probable that unions for professionals will continue to develop, and the number will increase. In such unions, the trade union character will diminish, but there will be increased emphasis on professional and career concerns. CHAPTER 7 Productivity Bargaining and Organization Behavior

ARCHIE KLEINGARTNER University of California and Ross E. AzEvEDO University of California, Los Angeles

In the United States, collective bargaining has long been ac­ cepted as a means of reaching accord on matters of concern to both unions and management. Productivity bargaining, on the other hand, is still lacking a generally accepted definition or consensus on the criteria that set it apart from conventional collective bar­ gaining. Scholars involved in the study of productivity bargaining ascribe to it some special characteristics. The distinction between productivity bargaining and collective bargaining is frequently portrayed as at least as much a matter of the motivation of the parties and their relationship to each other as it is one of the con­ tent of the agreements reached. If the desired outcomes of pro­ ductivity bargaining are to be realized within existing collective bargaining relationships, a clearer understanding is needed than we have now of the potential for accommodating our bargaining institutions to the special requirements of productivity concerns. Our emphasis here will be on certain aspects of the American experience with productivity issues in the union-management re­ lationship. The analysis will draw principally on the bargaining experience between management and unions of manual workers in the private sector. A satisfactory working definition of produc­ tivity bargaining, for our purposes, is when unions and manage­ ment bargain over work practices in the expectation that both workers and the employer will benefit from changes agreed upon­ in essence, that management will offer certain incentives to its work­ force in return for anticipated increases in the latter's productivity. This chapter, intended as a modest contribution to the liter-

119 120 COLLECTIVE BARGAINING AND PRODUCTIVITY ature on productivity bargaining, focuses on three general topics: (I) organizational issues that impinge on prospects for produc­ tivity bargaining in the United States; (2) an analysis of negotiated agreements that were approved as productivity bargains under the

Economic Stabilization Program; and (3) the dynamic· elements in productivity bargaining. The existing literature on productivity bargaining is impressive in what it indicates about the enormous gap between the rhetoric and long-term prospects of productivity bargaining and actual ex­ perience with joint union-management efforts to increase produc­ tivity. The proponents of productivity bargaining appear to draw much of their inspiration from the same philosophical and research base that has generated the current interest in devising experiments to improve the quality of working life and increase worker par­ ticipation in management. The examples illustrating the potential of bargaining to increase productivity are drawn from the relatively few cases of spectacular achievement through the introduction of incentive and job enrichment programs (generally in non-union firms) as well as from well-publicized through somewhat unique collectively negotiated agreements (e.g., the 1960 Pacific Coast Longshore Agreement) . The total number of cases available in these categories is small. Often overlooked or ignored in the liter­ ature are the work rule changes that have been made without fanfare in the ordinary course of re-negotiating contracts. Also overlooked are the constraints which exist in established bargaining relationships that affect the ability of the parties to introduce new concepts and approaches. Thus, while changes involving produc­ tivity are continually being negotiated, in only a small number of cases can this be associated with a broad restructuring of the union­ management relationship. Productivity bargaining, as one student of this process has observed, " ...is most effective as a surgical device for removing inefficiency that can be specifically identified."'l

MANAGEMENT AND UNION CONCEPTS OF PRODUCTIVITY IMPROVEMENT Although there is fairly wide agreement on those elements in work organizations that, if changed, would increase productivity,

1 Robert B. McKersie, "The Significance of Productivity Bargaining in Great Britain,'' in B.C. Roberts (ed.) , Industrial Relations: Contemporary Issues (London: MacMillan, 1968) , p. 233. PRODUCTIVITY AND ORGANIZATION. BEHAVIOR 121 unions and employers have approached them from different van­ tage points. From management's standpoint, the value of produc­ tivity bargaining is to gain greater flexibility in such areas as job assignments, eliminating jobs or inefficient operations, setting and maintaining production standards, crew size, overtime, and the number or duration of shifts. Conversely, the traditional union demands for such benefits as improved job-posting procedures, demands for a shorter workweek, and requests for changes in the allocation of overtime are viewed as restrictive and antithetical to the possibilty for productivity bargaining. Unions, while recognizing the relevance of the elements that managers consider essential to increasing productivity, place them in a somewhat different context. Unions will frequently talk in terms of adapting jobs to the mental and physical needs of the workers, letting workers as a group decide which eight hours in the day they use to perform their job, making overtime voluntary, and guaranteeing that changes in work rules will not serve as a thinly veiled disguise for the speed-up or for increased profits with no return to the workers. Thus they view a management request to engage in productivity bargaining as a risky proposition, fraught with the dangers that past and future gains may be surrendered for short-term financial rewards. It has been observed that the cornerstone of the theoretical base of productivity bargaining is the concept that in order to win the necessary cooperation, the initiating party may have to make concessions greater than it considers fair, despite the fact that such concessions may be unnecessary because of prevailing power relations.2 Unions and employers do not generally operate from an assumption which implies that they can reach their re­ spective objectives more efficiently through altruism or mutual positive support. In isolated cases this undoubtedly occurs, but the history of collective bargaining in this country is one of hard­ fought gains, determined resistance, and a rather sharp division between union and managerial roles. The institutional and organizational concerns that impinge on the willingness and ability of unions and management to enter

•see K.�..W. Alexander, Productivity Bargaining and the Reform of In­ dustrial Re ations, Industrial and Commercial Techniques Ltd., (London, England, 1969) . 122 COLLECTIVE BARGAINING AND PRODUCTIVITY

into arrangements to increase productivity are numerous and com­ plex. Yet a central justification for productivity bargaining is in the opportunity it provides for restructuring the union-management relationship. Most of the available literature on productivity bargaining is based on the British industrial relations situation of the 1960s and that country's incomes policy, which placed great emphasis on increasing productivity through collective bargaining. Several prominent studies of successful experiments called attention to the process and prospects of productivity bargaining.3 A number of productivity agreements had been negotiated in British industry before the effects of the incomes policy started to make themselves felt. Among them is the landmark Fawley agreement in 1960, which became the basis for much of the theory and some of the practice of productivity bargaining later in that decade. McKersie and Hunter have commented on the British experience: Many of the so-called productivity agreements between 1967 and 1969 were not preceded by the processes that might be regarded as the hallmark of productivity bar­ gaining in the first place; such as problem identification, joint negotiation or means to the solution of the problem and mutual development of an acceptable trade-off be­ tween changes in practices and changes in pay.4 In the United States, as we have noted, several highly touted agreements which applied the productivity principle have been negotiated in industries such as longshoring, steel, and typesetting. These agreements tended to result from a particular set of cir­ cumstances that operatt d in the industry as well as in the union­ management relationship. For the most part, they have not been analyzed in terms of the behavioral and organizational dynamics that led to the final content of the agreements.5 In the :;c:ction which follows, we will analyze union and man-

• The classic study in this regard is Allen Flanders, The Fawley Produc­ tivity Agreement (London, Faber and Faber Ltd., 1964) . • R.B. McKersie and L.C. Hunter, Pay, Productivity and Collective Bargain­ ing (London: MacMillan, 1973) , p. 62. • Lincoln Fairley, who served for many years as the Research Director of the International Longshoremen's and Warehousemen's Union, has in progress an important study of the Longshore Mechanization and Modernization Agree­ ment. We had the good fortune of being able to read portions of the manuscript. PRODUCTIVITY AND ORGANIZATION BEHAVIOR 123 agement responses to a governmental program offering both parties certain inducements to negotiate work rule changes that would result in increased productivity.

Experiments with Productivity Bargaining in the United States As we have argued, both labor and management are resistant to change, and thus reluctant to move from collective bargaining to productivity bargaining. The British experience demonstrated amply that sufficiently large outside pressure or inducement may push the parties in this direction. In the United States, one ex­ ample of such pressure was the recent experiment with wage/price controls. A modifying amendment to the enabling legislation of the Economic Stabilization Program provided special treatment for productivity incentive plans, whether they were designed by or for a non-union employer or the result of union-management negotiations. The imposition of wage and price controls in 1971 caught most Americans by surprise. Unions and management soon dis­ covered that the bargaining process i tsel£ was to be affected through the newly created Pay Board. The Board, which established a 5.5 percent increase as "the general wage and salary standard," had the authority to approve or cut back negotiated wage increases. This gave rise to concern and confusion, aggravated by the in­ stallation of complicated reporting procedures: units of 5,000 or more employees had to pre-notify and receive prior approval from the Board for any wage increase, and units of between 1,000 and 5,000 employees had to notify the Board and receive prior ap­ proval if they increased wage rates in excess of the 5.5 percent standard. Units of less than 1,000 employees had to notify the local office of the Internal Revenue Service if they wished an ex­ ception to the guideline in order to raise wages more than 5.5 percent. Since-with few exceptions-the Internal Revenue Ser­ vice had to reject these requests, this procedure set the stage for a lengthly appeals process to the full Pay Board if the parties wished to pursue an increase exceeding the standard.6

• These reporting requirements were reduced during Phases III and IV of the stabilization program. In spite of this, employee units could and did file productivity incentive plans although the number of such plans decreased sharply. 124 COLLECTIVE BARGAINING AND PRODUCTIVITY

The confusion surrounding the existence of the controls pro­ gram was not mitigated in any way by expectations as to its possible duration. While the program was announced as being a temporary, short-run measure, no one was able to predict its life expectancy with any accuracy. Thus, the situation facing collective bargainers, particularly those representing small units, was complex. While the larger units, those with over 1,000 workers, could file for an exception from the Pay Board, a process requiring 43 days on the average, the appeals process through the Internal Revenue Service took on the average 204 days-almost five times as long.7 The alter­ natives were either to wait for the process to work itself out or direct the case to the Pay Board through other channels. One such channel was the filing of a productivity incentive plan, which was sent directly to Washington rather than to the regional office of the Internal Revenue Service. Section 201.618 of Pay Board Regulations provided that, while existing productivity plans would be allowed to operate according to their specified terms and conditions, all new plans had to be filed with the Pay Board (or its successor agencies) and receive approval. During Phases II, III, and IV of the stabilization pro­ gram, 93 new plans or revisions were approved, and 15 of these were the result of productivity bargaining between unions and management.9 It is these 15 plans which form the basis for the analysis to follow.

'These averages, calculated from a random sampling of cases in Pay Board files, probably conceal as much as they reveal. Cases which were filed early in the program took much longer to process than those submitted later, when the operating machinery was well established. It is possible that, if the program had been maintained, the appeals procedure for small units could have been speeded up to the point where it would not have been necessary to file a productivity incentive plan in order to by-pass the normal channels for wage increases. For a further discussion of the problem of time required to proceSs cases, see Daniel J.B. Mitchell, "Phase II Wage Controls," Industrial and Labor Re­ lations Revzew, Vol. 27, No. 3 (April 1974) , pp. 359-361. 8 See 6 Code of Federal Regulations (6 CFR) , with Pay Board Recodifica­ tion, effective November 14, 1972. • Copies of the productivity incentive plans filed with the agencies of the Economic Stabilization Program were obtained through a Freedom of Informa­ tion Act request (5 U.S.C., Section 502). Because such plans are considered proprietary, names and other identifying characteristics were removed. This lack of identification has limited the opportunity to perform a complete anal­ ysis of certain aspects of the plans. However, the descriptive material provided was adequate to form the basis for the analysis presented here. It is worth noting that there were some difficulties in assembling these plans. The com- PRODUCTIVITY AND ORGANIZATION BEHAVIOR 125

Because the controls program limited the unions' as well as management's ability to bargain over wages-nominally only in­ creases of 5.5 percent were allowed-it provided special induce­ ment to bargain over the way in which work is performed. Ob­ viously, this would include negotiation about the efficiency with which labor is combined with capital to produce the output of the organization-put more succinctly, bargaining over work rules. In isolation, the organizational difficulties in moving to pro­ ductivity bargaining are significant. As is shown in Figure I, each party recognizes the potential rewards and dangers in the process, and must adapt to them before true productivity bargaining can occur. In a sense, we are speaking of a threshold situation in which each party must make a go-no go decision on the basis of evaluating the relative potential benefits and costs of entering into a productivity bargain. That decision-contrary to traditional negotiating procedures-will be made in the affirmative only when the parties believe that the objectives outweigh the reservations. The existence of an economic stabilization program complicates the picture still further. In a period of economic controls, perhaps more than at other times, the union negotiator realizes the potential of greater rewards for the membership, but also worries about compromising labor's long-term interests. The management negotiator is aware of the potential for greater output, but also recognizes that elements of

Objectives Reservations

Management Improved Utilization Excessive Unit of Workers Labor Costs

Workers Increased Loss of Job Security Rewards and Status

FIGURE I puterized tracking originated for the Pay Board went through several modifica­ tions to improve efficiency. These improvements, designed to facilitate . case processing, liad the shortcoming of occasionally changing case classifications. This may mean that certain submissions were omitted because of the failure of the computer retrieval system to identify them. However, conversations with those responsible for the ajudication of these cases lead the authors to be­ lieve that the number is very small. The count of cases is also biased because, in several situations the same plan was submitted for more than one unit. However, the number of union plans reported here is not affected because each union plan was filedfor a single unit. · 126 COLLECTIVE BARGAINING AND PRODUCTIVITY managerial discretion may have to be sacrificed in order to obtain higher efficiency levels. Moreover, both parties fear that the eco­ nomic controllers may lock them into something which might prove to be undesirable in the long run. This setting establishes the threshold situation described earlier. Both parties are desirous of negotiating a contract which is mu­ tually acceptable. However, the existence of the controls program restricts their ability to accomplish this objective. Their choices are limited to (1) settling for an adjustment within the standard, (2) initiating an appeal process with the expectation of an almost indefinitely delayed decision, or (3) negotiating a productivity agreement which will allow them to bypass normal channels and hopefully accelerate approval. The evidence to be examined here indicates that for fifteen collective bargaining units, the limiting of choices caused by the stabilization program was sufficient to induce efforts to bargain over productivity. In our discussion, we will first analyze the content of the fif­ teen productivity incentive plans during the Economic Stabilization Program, and then relate the analysis to more general consider­ ations of productivity bargaining. The fifteen plans are summa­ rized in terms of industry detail and output measure in Table I. It is readily apparent from Table I that the firms which nego­ tiated productivity incentive plans during the controls program were primarily in "light" industries. With the exception of one,

TABLE I Distribution of Union-Management Productivity Incentive Plans Negotiated During the Economic Stabilization Program, by Industry Represented Number of Plans Industry Output Measure

4 Fabricated metal products Spray Guns, Castings, Misc. Metal Products 2 Warehouse operations Tonnage, Pieces 2 Furniture manufacturers Cabinets, Desks Heavy equipment manufacturer Ratio: Sales/payroll Food processor Animals processed I Glassware producer Dozens of pieces produced I Mobile home manufacturer Units produced I Automobile parts distributor Miles driven 2 Industry not stated Not Available SOURCE: Case filings submitted to the Pay Board and Cost of Living Council under Section 201.61 of Pay Board Regulations. · PRODUCTIVITY AND ORGANIZATION BEHAVIOR 127

a heavy equipment manufacturer, these industries' output can be easily measured. Their units of production include such items as desks built, miles driven, and spray guns assembled, units which are relatively unchanging in form over reasonable time periods and are easily quantified; in short, there is not much room for dis­ agreement as to what work was performed. Obviously, this form of output was important in facilitating bargaining over specific changes in how the work is performed. Table II, which lists the primary reason stated for the negoti­ ation of the productivity agreement in the fifteen cases considered, reveals that in the majority of cases the parties to these agreements responded to the provisions of the economic controls program. In nine, or sixty percent, of the cases, the parties indicated that the bargain was negotiated because of the controls program. Their reasons are of two types-to provide for pay adjustments in excess of the 5.5 percent standard, and because of a desire to be in com­ pliance with the stabilization regulations. Only two, or thirteen percent, stated that the basic purpose of the plan was to increase productivity.10 These proportions indicate the importance of the control efforts as a factor in stimulating attempts at productivity bargaining. While it is not possible to provide a complete survey of the productivity plans which were negotiated during the Economic Stabilization Program, some significant features are summarized in Tables III and IV. Table III details the payment systems which were negotiated into the plans. Most commonly employed was a

10 By way of contrast, thirteen percent of the non-union plans indicated they were established because of the controls program, and forty-five percent declared increased productivity as the reason for implementation.

TABLE II Number and Percent Distribution of Union-Management Productivity Incentive Plans Negotiated During the Economic Stabilization Program, by Reason for Establishment Reason Established To Revise Because of an Unsatis­ To Increase Economic factory Productivity Controls Plan Unclear Total Number 2 9 I 3 15 Percent 13.3% 60.0% 6.7% 20.0% 100.0%

SOURCE: Case filings submitted to the Pay Board and Cost of Living Council under Section 201.61 of Pay Board Regulations. - Nl 00

n 0

TABLE III i Number and Percent Distribution of Union-Management Productivity Incentive Plans Negotiated During the Economic Stabilization Program, by Payment System Employed

Payment System Per Unit � Single (or Per- Payment Fixed cent) Standard Standard z if Output Percent Split Payment Hour Cost Hour Q Target of Per- With Above a Savings Saving Output Reached formance Reserve Minimum Cap Pool Pool Bonus O ther � Number 1 2 3 5 3 1 1 1 1 '1:1 Percent 6.7% 13.3% 20.0% 33.3% 20.0% 6.7% 6.7% 6.7% 6.7% g NOTE: Totals add to more than 15 and 100% because individ ual plans had multiple provisions to their payment systems. c:: SOURCE: Case filings submitted to the Pay Board and Cost of Living Council under Section 201.61 of Pay Board Regulations. � � PRODUCTIVITY AND ORGANIZATION BEHAVIOR 129

TABLE IV Number and Percent Distribution of Union-Management Productivity Incentive Plans Negotiated During the Economic Stabilization Program, by Revision Process Provided Revision Process Union Company Partici- None Only pation Unclear Provided Total Number 2 3 2 8 15 Percent 1 3.3% 20.0% 13.3% 53.3% 100.0% SOURCE: Case filings submitted to the Pay Board and Cost of Living Council under Section 201.61 of Pay Board Regulations. system of providing a per unit or percent payment after a worker or group of workers achieved a certain minimum level of output. Fully one-third of the plans used this method of payment, a tech­ nique which allows relatively easy determination of bonuses. Other payment systems were the fixed percent of performance, where payment is related to all levels of performance; the split with reserve, where bonus earnings are divided between the workers and the company; and the standard hours output bonus, where payment is tied to the relationship between the standard hours "required" to produce a unit of outputll and the actual hours required for production. Of considerable interest is the fact that three, or twenty per­ cent, of the plans had a "cap,"12 or ceiling; that is, the payment system had a built-in maximum earnings potential, above which point additional output did not provide increased earnings. While it is impossible to know the precise reasons for the inclusion of these limits, they are probably due to lack of experience with pro­ ductivity bargains by the parties involved and a reluctance on the part of employers to agree to open-ended plans because of the pos­ sibility of excessive labor costs. This uncertainty and reluctance about unforseen results of the plans may have led the parties to include limitations on the maximum potential. In general, one would not expect unions to cooperate with any restrictions on earnings potential of their members. However, in the case of those unions new to productivity bargaining, there may

21 Such standard hours are normally determined by time study and similar measurements techniques. 1ll Only ten percent of the non-union plans had "caps." 130 COLLECTIVE BARGAINING AND PRODUCTIVITY have been fear of excessive production efforts (rate-busting) or concern that the workers may begin to feel their earnings are more dependent upon management than upon the union. Moreover, the unions may have felt that if the cap proved to be too rigid they would be able to raise it through further bargaining. Table IV does not indicate that the unions made a significant effort to control the revision of the productivity plans negotiated under economic controls. In over half of the cases (eight of fif­ teen) , there was no provision for changes or revisions. In another two plans, the revision process was left entirely to management. In only three, or twenty percent, of the cases was the union's role in the revision process established. The remaining plans were characterized by rather vague statements indicating that they would be revised from time to time or as needed. It is difficult to understand why the unions would accept such a passive role in modifications of the plans. Perhaps they felt they could make the necessary changes when general negotiations are taking place. Or they may have thought of filing grievances if there were parts of the plans which did not work out satisfacto­ rily.13 More likely, however, the lack of concern about revision was the result of the union's expectations that wage controls were short-term phenomena, and once they were terminated the parties could return to the previous style of bargaining. Another view of the unions' perspective on productivity bar­ gaining under economic controls can be gained from considering the usage of penalty provisions in the plans negotiated. A penalty provision reduces the amount of the bonus to be received if pro­ duction falls below a specified standard.14 These provisions, which occurred in two of the plans negotiated (13 percent) , would also appear to be contrary to union policies and objectives. Possible reasons for their incorporation include union inexperience with these plans, the expected short-term duration of the program, and the rapid expansion of the economy at that time which held the promise of increased production with little likelihood of the slack operation levels that might activate the penalty provisions.

18 Only one plan explicitly provided for filing grievances involving operating characteristics, while another stated that the plan was not a grievable issue. "These provisions do not reduce earnings below the basic hourly wage. Rather, they reduce bonus earnings, either through offsetting future bonuses or by reducing pooled earnings from previous bonuses when the plan provides for a partial reserve for payment at the end of the plan year. PRODUCTIVITY AND ORGANIZATION BEHAVIOR 131

To the student of industrial relations, of perhaps greater im­ portance than the details of the plans agreed upon is the extent to which the agreements constituted true productivity bargaining, where management and the unions surrendered certain rights (such as certain staffing decisions and work rules) in an effort to generate greater output. It appears that in only one of the fifteen plans did such trade-offs occur. In all other cases, the parties maintained their respective prerogatives and simply agreed to provide increased earnings in response to greater output. The productivity incentive plan which gave rise to trade-offs was negotiated by a food warehousing operation in the eastern United States. The warehouse is a central distribution point for a large supermarket chain with several outlets. The unit was re­ sponsible for the receipt of bulk orders of grocery, dairy, and pro­ duce items and their allocation among the individual retail out­ lets. The productivity scheme was based on the number of units processed into and out of the warehouse. Each type of product was converted into a set number of units (e.g., a case of cigarettes equalled 12 units) , and the number of units shipped each week was totaled and divided by man-hours worked. These figures were then aggregated on a four-week basis. The number of units shipped per man-hour during the period was then fitted to a performance scale to determine the incentive earnings. The scale provided for different rates of bonus earnings per hour, depending upon how many pieces were shipped over the preceeding four-week period.15 Bonuses were paid on a per-hour basis (i.e., added to the base hourly rate) for the four weeks succeeding the measurement period. In exchange for this program, the union surrendered two rights under the collective bargaining agreement: one was the right of certain individuals in the bargaining unit to a guarantee of four hours of overtime, and the other was a guarantee of eight hours work on Saturday. This latter provision was reduced to four hours. Each party had the right to discontinue the plan upon written notice to the other and, if discontinued, the guarantees would re­ vert to their original status. Unfortunately, for reasons of confidentiality, it is not possible to learn the final outcome of this plan. Important for the process

'"The four-week period was used to smooth out the calculation in the event weekly aberrations in output occurred. 1!12 COLLECTIVE BARGAINING AND PRODUCTIVITY of productivity bargaining-particularly under a system of eco­ nomic controls--is the fact that it is the only plan among the fifteen in which the real meaning of productivity bargaining was approached. It is evidence of the relative lack of success of legis­ lative and regulatory efforts to induce true productivity bargaining, bargaining where labor and management surrender prerogatives gained and maintained through previous negotiations.16 A definitive judgment on the plans discussed here would be premature. The plan which comes closest to a true productivity plan was negotiated late in the program, in early 1973. The par­ ties, therefore, had the chance to negotiate for some time within an environment of wage-price controls; they had adequate oppor­ tunity to examine possible trade-offs and to make those which were appropriate to the situation; they had the ability to tailor the provisions of their agreement to the functional activities of the workplace and not simply to avoid wage controls. Uncertainty, such as that surrounding the negotiation of pro­ ductivity bargains during Phases II, III, and IV of the Economic Stabilization Program, tends to have certain predictable effects. Many of these effects were observed in the plans discussed. For example, the plans tended to be simple. This is understandable. Neither party would want a complex arrangement requiring ex­ tensive interpretation, in an environment which it cannot control. The union, in particular, would want to be certain the program was simple and direct enough to be accepted by the membership without extensive delay because of possible suspicions over the motivations for entering into a productivity arrangement. Sim­ plicity also is important in having rewards calculated and paid out quickly. And, lastly, simplicity is significant in case of any disagreements about the plan. The issue of simplicity affects productivity bargaining during economic controls in another way: industries negotiating produc­ tivity bargains tend to be those which produce output that is easily measured or quantified. An industry with a complex form of output, with rapidly changing technology, or with an irregular pattern of production is not a likely candidate for a productivity

1" The fact that the vast majority of the plans were simply efforts on the part of the parties to increase earnings more than the "standard" allowed raises serious questions about the propriety of including such provisions in an eco­ nomic stabilization program. PRODUCTIVI'IY AND ORGANIZATION BEHAVIOR 1!1!! bargain in the rush to minimize-or avoid-the impact of eco­ nomic controls. One would also expect the negotiated plans to be short-term in nature. Because they are undertaken in response to a presumably short controls program and because the parties fear being locked into a productivity agreement which subsequently may prove im­ practical, short-term plans would seem to be a mutual goal. And, in fact, several of the plans were designed with apparent one-year time horizons. Finally, because of the uncertainty surrounding the Economic Stabilization Program, neither party to a productivity bargain wishes to surrender as much as it might in a bargain negotiated without the coercion of economic controls. Productivity bargaining, which can be expected to involve the surrender of management prerogatives and union concessions on work rules or other restric­ tive practices, is not likely to be entered into enthusiastically by either party under the threat of government action. The prerog­ atives relinquished are likely to be few, given haltingly, and the conditions for regaining them clearly understood.

DYNAMIC ELEMENTS IN PRODUCTIVITY BARGAINING

The American experience with productivity bargains during the recent Economic Stabilization Program does not indicate an eager acceptance of this form of bargaining. While government pressures and inducements can stimulate unions and employers to respond, they do not guarantee that the parties will do more than make the minimum effort in taking advantage of the proffered opportunity. Although it would be unwise to generalize exten­ sively from the cases studied, it can be concluded that the bar­ gaining did not lead to a basic restructuring of the union-manage­ ment relationship.17 There are no quick and easy steps for unions and employers to

11 In some sense, this experience parallels the situation in Great Britain. The British experiments with productivity bargaining in the early 1960s, while initially successful, have not been repeated extensively since. The productivity gains of the earlier agreements have been hard to repeat, and the parties find negotiating over additional savings a difficult process. This inability to main­ tain a continuing dialogue over productivity issues has pushed bargainers back toward previous styles of negotiatmg. For a more complete examination of the declining incidence of productivity bargaining in Britain, see MeKersie and Hunter, op. cit., pp. !151-355. 134 COLLECTIVE BARGAINING AND PRODUCTIVITY follow in negotiating over established interests and prerogatives which involve transforming their existing patterns of relations, even though both parties might see the promise of mutual benefit. If past experience is any guide, a crisis of some kind is required. However, the real issue is what forces are needed to induce labor and management voluntarily to alter their existing bargaining prac­ tices and negotiate over productivity in the absence of a pressure situation. The movement of established union-management practice from a conventional collective bargaining relationship to the cooperation necessary for continuing and systematic bargaining over work rules, in the expectation that increased productivity will result, makes organizational and attitudinal demands to which most unions and managers are unaccustomed. Below we discuss several interrelated examples of such demands. Obviously, their relevance to specific union-management relationships will vary. Similarily, the force or event that can move the parties over the threshold from conven­ tional to productivity bargaining may take different forms. While major changes in attitude must occur on the part of all parties to the collective bargaining process, productivity bar­ gaining does not have to await the initiative of management or occur in the context of an organizational crisis.1B Unions have a stake in increasing productivity, provided there is a payoff to the union and its members and that the union is involved in making the decisions affecting changes that lead to higher productivity. Yves Delamotte stresses the concept of "efficiency agreements," a broader and perhaps more descriptive term than "productivity agreements."1D The attitudinal and behavioral changes required of unions and employers to engage in productivity bargaining are similar, if not identical, to the changes required to bargain over the improvement of the quality of working life. There is little reason to expect rapid development of the cooperation needed to move in a comprehensive manner in bargaining over productivity or the quality of working

18 In fact, the presence of an organizational crisis or external pressure may be detrimental to the development of productivity bargaining in the long run. Certainly, the recently termmated Economic Stabilization ProgTam appears to have done little to produce significant bargaining over productivity. 11 Yves Delamotte, The Social Partners Face the Problems of Productivity and Employment (Paris: The Organization for Economic Co·operation and De­ velopment, 1971), p. 153. PRODUCTIVITY AND ORGANIZATION BEHAVIOR 1!15

life. The fact remains that unions have objectives directly at odds with those of management. Joint consultation over productivity is not impossible or undesirable, and in some instances has been quite successful. But it alone is not adequate. The inherent lim­ itation of joint consultation relates to the fact that in the final analysis, collective bargaining is a power relationship. The problem has been stated with clarity by Robert Dubin:

Union-management co-operation on production problems and the other forms of joint consultation tend to smooth out labor relations in the intercontract negotiation periods. The more for-reaching conflicts in the economic goals of union and company will continue to underlie their rela­ tionship in spite of any degree of co-operation through joint consultation. Collective bargaining as a power pro­ cess is not replaced by union-management co-operation at a consultative leve1.2o It can be argued that the legitimacy of union involvement in conventional collective bargaining also serves to give unions legit­ imacy to engage in productivity bargaining and, more broadly, to improve the quality of working life. In this perspective workers, and unions on their behalf, have a right that derives from their being part of the work situation to participate in the design of any new work system. Where experience with productivity bargaining exists, it is clear that worker participation is both a necessary pre­ requisite as well as a resulting condition of productivity bargaining. Although both unions and management have a responsibility to create the necessary conditions for increased participation, manage­ ment has a special obligation to create the mutual trust in the relationship which will enable the union to withdraw from a strictly protective posture with respect to work practices, or from pursuing demands in bargaining that can be viewed as restrictive rather than protective.21 Most students of productivity bargaining seem to be in agree­ ment that it is more difficult to change the attitudes of management than it is to change those of the employees. For many managers, any admission that things can be done better is tantamount to

"'Robert Dubin, "Union-Management Co-operation and Productivity," In­ dustrial and Labor Relations Review, 2 (January, 1949), p. 209. "'For a discussion of these points, see D.C. Alexander (ed.) , A Productivity Bargaining Symposium (London: Engineering Employers' Federation, 1969). 136 COLLECTIVE BARGAINING AND PRODUCTIVITY acknowledging that they were not doing their jobs properly before. Yet without such recognition it is unlikely that any lasting changes in how work is done will be brought about. The union engaged in bargaining over productivity places itself in a new and different role vis-a-vis its members. The task before the union is to ensure that the membership obtains an equitable share of the gains which are derived from negotiated changes in work rules. To this end, the attention of the union must be focused on the basic structure of the production process and the design of strategies to obtain from it the appropriate rewards. The union has to move from being a defender of work restrictions to a pro­ tector of worker's rights in the distribution of the returns to pro­ duction. It is easy to understand why workers may be reluctant to have their union engaged in productivity bargaining. As D.C. Alexander observed: "In most cases the greatest fear of employees when asked to give up restrictive practices, protective practices, as they prefer with some justification to call them, is unemployment."22 Allevi­ ation of this fear is mandatory, and very likely without it produc­ tivity bargaining is not possible. The classic Fawley case provides the answer: "Changes were accepted in exchange for an assurance that there would be no dismissals, that basic wages would be in­ creased (providing greater security of income) , and that time spent at the refinery would be reduced."23 Productivity bargaining may result in greater attachment and identification of workers with the employer. But this need not mean a decrease in their attachment to and identification with the union. Indeed, there is some evidence that rank-and-file workers are more willing to accept changes in their work environment than is true of the union leadership. Some union leaders will oppose new approaches for political and organizational reasons. As is true of management, productivity bargaining will require of union leaders greater professionalism, cooperation among local unions, and the use of specially designated persons who serve as expert coordinators and advisors to representatives involved in plant negotiations. Development of cooperative relationships is enhanced when

12 D.C. Alexander, op. cit., p. 49. 13Delamotte, op. cit., p. 21. PRODUCTIVITY AND ORGANIZATION :BEHAVIOR l37 both the union and management view work rules as functional rather than solely as manifestations of the relative power of each party. This means in effect that work rules are taken as state­ ments about how the work gets done, who does it, and when it is done, rather than as expressions of power and authority. In the typical union-management relationship of today, an underlying barrier to a functional approach to work rules is the conflict be­ tween the management reserved rights doctrine, which tends to be part of the value structure of managers and the tradition-laden view of unions concerning their protective role.24 Many unionists believe it is not the duty of unions to cooperate with or participate in management. In this perspective, the unions' duty is to protect and advance the interests of their members. Frequently, this will necessitate tl1e utmost cooperation with management. At other times it will require an unequivocal statement that a certain course of action is not in the interest of their members. Many work rules that eventually have come to be seen as restrictive (by the union as well as management) and as barriers to productivity were ini­ tially placed in the contract to deal with pressing worker insecu­ rities and problems which existed at the time. Naturally, unions are extremely sensitive to obtain appropriate assurances that no losses will result from any changes made in the work rules already protected by contract. Most managers in the private sector (and, to a considerable extent, in the public sector as well) procede from the premise that, except as limited by law, certain historical practices, and the collectively negotiated agreement, all authority in the employment relationship is vested in the employer. This attitude affects the potential for cooperative relationships with the union. Manage­ ment, to the extent that it views its relationship with the union primarily in power and legal terms rather than as a partnership in managing the enterprise, will have great difficulty in dealing with the underlying reasons for the persistence of outmoded work rules. It may be legally accurate, but not helpful if managerial actions are based on the proposition that contractually protected work rules amount to nothing more than penetration into the

"'For a discussion of the theory of management reserved rights, see Paul Prasow and Edward Peters, Arbitration and Collective Bargaining (New York: McGraw-Hill, 1970), chapter 3. l!IS COLLECTIVE BARGAINING AND PRODUCTIVITY reserved rights of management achieved through power bargaining. For these managers, there exist few alternatives to power bargain­ ing as the mechanism to remove inefficient practices. It is not realistic to assume that unions and management are going to transform their existing relationships to focus on produc­ tivity considerations at the expense of firmly entrenched interests and prerogatives. However, it is possible for the parties to restruc­ ture their relationship to achieve accomodation on a new set of cooperative goals within the traditional power context. Attitudinal changes will be needed which make it possible for negotiations over work rules to take place within the existing power relationship.

CoNCLUSION

Productivity bargaining is most likely to occur in a cns1s or pressure situation, although this is neither the best nor a necessary condition for bargaining over work rules. Productivity bargaining is most successful when it is self-generated-when the parties bargain because they feel there are mutual advantages in such negotiations. What is at issue is the climate which must exist for self­ generated productivity bargaining to take place. In general, col­ lective bargaining reflects basic characteristics of the industry in which it occurs. This implies that those factors which affect the industry will also affect the bargaining process. And these same factors can be expected to induce unions and management to negotiate over the way in which work is performed. The need and potential for productivity bargaining are perhaps greater today than ever before because of the rapidly changing world in which we live. Competition from abroad, rapidly rising prices, the energy crisis, and demands for improvements in the quality of working life are all putting new strains on the indus­ trial system. Unions as well as management need to recognize that the frame of reference is much larger than it has been in the past. This means that the "scope" of bargaining must be larger, too. 'The fact that a shortage of petroleum or other form of energy can cause a plant to shut down; the fact that a new competitor, either foreign or domestic, can cut or eliminate the sales of a particular product; the fact that inflationary pressures can induce changes in the mix of labor and capital used; the fact that new PRODUCTIVITY AND ORGANIZATION BEHAVIOR 139 production techniques are being developed continuously; and the fact that social pressures are demanding changes in the basic nature of work mean that there is a wider range of problems which can and should be brought to the bargaining table. The prospects for true productivity bargaining hinge in large part on the development by unions and employers of an increased appreciation of their interdependence. Labor and management have one objective and one right in common-to obtain a greater return which can be shared by both. Productivity bargaining is one of many tools which can facilitate this sharing process. How­ ever, when the results of such bargaining are shared, the standards of measure become different. It is not only the size of the agreement which is important, but also its structure. Contracts can be eval­ uated on the basis of their contribution to improving the rewards to both labor and management as well as the amount of dollars they represent.

CHAPTER 8 Productivity, Collective Bargaining and Wage Control

WAYNE L. HORVITZ and PETER TCHIRKOW Joint Labor-Management Committee of the Retail Food Industry

Once again national interest in improved productivity is on the rise as a solution to our high rate of inflation, our declining com­ petitive position, and our inability to resist import penetration. We worry about output per manhour and rising unit labor costs and we are seeking answers. One of the most complex aspects of any discussion of productivity is its relationship to the collective bargaining process. Productivity bargaining as a concept has seized the imagination, and not much else, of many practitioners for some time. That subject is dealt with elsewhere in this volume. This paper will also cover some aspects of the relationship between pro­ ductivity and collective bargaining, including productivity bar­ gaining, but in a limited context-The U.S. experience with pro­ ductivity and incomes policy. There have been three major occasions in this century when the U.S. has instituted formal incomes policies which included con­ trol of wages. Two of these have been in wartime and one in peacetime. In each of these instances the nation has accepted con­ trols and in each of these periods the designers of stabilization policy had to deal with that active institution, free sollective bar­ gaining. Collective bargaining as a major force in wage determi­ nation affected all the policy decisions during those periods and the impact of collective bargaining was felt going into, during, and coming out of each controls period. In addition the goal of im­ proving and sustaining productivity growth was much on the minds of controllers during all these periods although their treatment of productivity as a concept, and particularly its relation to private collective bargaining decisions, ranged from non-existent through evasive to erratic. Despite the sparse history, it is important to look at that history

141 142 COLLECTIVE BARGAINING AND PRODUCTIVITY

to see what impact productivity issues have had on stabilization policy for there will undoubtedly continue to be increasing em­ phasis on productivity as one yardstick of wage bargaining in an inflationary economy. There is, in addition, the possibility that this country has not permanently abandoned the idea of wage and price controls as a counter to inflation, even in peacetime. If so, future controllers will have to deal with productivity issues and productivity bargaining will take on a new importance. The three periods when the U.S. embraced formal wage con­ trols were World War II; the Korean Emergency; and the period of the Economic Stabilization Act that was in effect from August 15, 1971, to April 30, 1974, Phases I-IV. These three pe­ riods have been and will continue to be a subject of much debate and discussion with respect to their effectiveness in achieving the goals set forth by the Congress and the President in each instance. I do not propose to enter that debate except to the extent that productivity andfor productivity bargaining has impacted basic policy decisions or the administration of wage controls.

The War Labor Board

Two major considerations went into the wage stabilization pro­ gram that was developed and administered by the National War Labor Board in World War II. The first of these was that wage stabilization should not mean wage "freezing." The basic aim of wage stabilization was to prevent substantial increases in the gen­ eral level o£ wage rates. As in any stabilization program, basic principles pose problems when other important and perhaps unre­ lated goals require exceptions to those principles. For example, adjustments would be necessary to correct gross inequities; ineq­ uities should not be frozen. This kind of objective could only be accomplished by a flexible program. The Board also stabilized wage and salary rates rather than total earnings. The distinction is of course important. A wage rate is the price paid for a type of work for a fixed period of time or for a given unit of output. Earn­ ings, on the other hand, represent the total amount of money re­ ceived by a worker for a pay period. One factor that affected total earnings, common in WW II, was the multiplicity of incentive pay plans that covered thousands of workers. Limiting earnings for those groups meant limiting production. PRODUCTIVITY AND WAGE CONTROL 14!1

The general wage principle of the Board was set forth in the little steel formula of July 1942 and was designed to provide non­ inflationary increases to selected groups of employees who had fallen behind the general movement of wages which had occurred since January 1941. These increases were applied to tl1e average rates of all employees within an industry, a plant, or a collective bargaining unit.

In the stabilization Act of October 2, 1942, Congress authorized the President to stabilize prices and wages at September 15, 1942 levels but provided that he might make "adjustments with respect to prices, wages, and salaries to the extent that he finds necessary to aid in the effective prosecution of the war or to correct gross inequities." Ex­ ecutive Order 9250 dated October 3, 1942 forbade the Board from approving any increases in the wage rates pre­ vailing on September 15, 1942, "unless such increase is necessary to correct maladjustments, or inequities, to elim­ inate substandards of living, to correct gross inequities, or to aid in the effective prosecution of the war."1

In the War Labor Board period even the phrase "effective pros­ ecution of the war" was not utilized to consider productivity as a discreet issue in considering exceptions to general stabilization pol­ icy. Indirectly, of course, all policy decisions that granted excep­ tions to general standards and affected the allocation and utilization of manpower or allowed the free play of wage incentive systems stemmed from an overall commitment to increase vital war pro­ duction. There is little evidence, however, that there was any pub­ lic or private discussions of a productivity factor in setting wage standards or exceptions or any practice of recognizing exceptions for productivity increases stemming from negotiated work rule changes. The emphasis was on dispute settlement mechanisms critical to maintaining the balance between labor's no-strike pledge and tl1e demand for uninterrupted war production. The wage policies that flowed from those critical considerations placed more emphasis on general formulas to be applied with limited exceptions. This rather terse summary appears to ignore the substantial achievements of the War Labor Board in developing a multitude

1 Act of October 2, 1942, and executive order no. 9250. 144 COLLECTIVE BARGAINING AND PRODUCTIVITY

of innovative approaches to a host of sensitive Labor-Management problems. The WLB contributed enormously to the effective prosecution of the war and to the development of private and public collective bargaining in the post-war period and to the present day. But within the narrow confines of the subject of this paper, the history is sparse.

Korean Wage Stabilization Board 1950-53

During the Korean emergency the establishment of the Wage Stabilization Board attempted to follow the pattern of tripartite administration that characterized the War Labor Board. Unlike its predecessor, however, it set about early to establish some form of wage stabilization policy that could operate effectively in a country that was only partially mobilized. Moreover collective bargaining had expanded greatly in size and sophistication since WW II. This added to the dimensions of the task, particularly when all of the players were not in the same game. The Board first considered the productivity issue in the spring of 1951. A significant number of collective bargaining agreements had been negotiated prior to the freeze date and provided for specific adjustments to be paid at a future date.2 The majority were covered by the "General Motors" type of agreement. These contracts called for quarterly cost-of-living ad­ justments, plus a series of annual 4¢ increases designated as im­ provement factors. The improvement factor was designed to pro­ tect and improve the real wages of employees; a concept based on the principle that there is an historic steady annual rise in pro­ ductivity in the U.S. It was not unusual for these contracts to spell out the need for increased productivity as the corollary of higher standards of living. The GM-UAW contract stated:

. . . The annual improvement factor provided herein rec­ ognizes that a continuing improvement in the standard of living of employees depends upon technological progress, better tools, methods, processes and equipment, and a co-

1 The BLS reported to the Board in May 1951 that over 1,650,000 employees were to receive wage increa� that year under agreements negotiated prior to January 26, 1951. Those "deferred type" agreements covered workers in auto, farm, machinery, metalworking, printing, chemical and transportation. PRODUCTIVITY AND WAGE CONTROL 145

operative attitude on the part of all parties in such progress."3

However, no contracts specifically provided that such increases were contingent upon any actual demonstration or proof of in­ creased productivity. A second type of deferred contract provided for flat cents-per­ hour adjustments to be made at some future time during the life of the agreement. These contracts did not contain escalator clauses or provide for annual improvement factors, and were not based on any general consideration or specific reference to productivity or improvement factors. Rather, they were designed to eliminate wage-reopeners and to avoid strikes. In order to mitigate the un­ certainty of long-term commitments, and anticipate future rises in the cost of living these contracts provided for fixed future increases. Early in 1951 the Board felt that a consensus had to be reached on the annual improvement factor issue, insomuch as adjustments in the GM agreements were scheduled for May 29, 1951. There was some sentiment at that time for separating the productivity issue from the yet to be developed comprehensive general wage policy. The Council of Economic Advisors offered this advice in early 1951:

"The problem of wage increases to reflect increased effort, whether by productivity allowances or other methods ar­ rived at by collective bargaining, is different from the cost of living adjustment problem ... one approach to help keep total wages available for spending as nearly as pos­ sible in line with the available supply of consumer goods, would be to restrain increases in wage rates. A second ap­ proach to this same objective would be to permit some increases in these wage rates, in return for increased pro­ ductivity results, but to prevent these increases from find­ ing their way into the spending stream, by means of higher taxes, or larger social security deductions."4

A letter from Mr. Johnson to Mr. Ching, dated February 27, 1951, made the following references to the productivity issue:

1 Korean Wage Stabilization Board, A History, 1950-1953, three volumes, pp. 156-157. • Annual Economic Review, January, 1951, p. 118. 146 COLLECTIVE BARGAINING AND PRODUCTIVI'IY

"Some collective bargaining contracts in existence on Jan­ uary 25 also contain provisions for annual wage increases in recognition of increased productivity. Such incentives are desirable at a time when the country is straining to step up production for defense. Such provisions in exist­ ing contracts should be allowed to operate until June 30, 1951, if the increase in wages does not result in any price rise. These incentive payments do not require price in­ creases if they are matched by corresponding increases in productivity.... I request the Board to prepare suitable regulations to authorize productivity incentive payments through June 30, 1951, where are provided for in contracts in existence on last January 25.''11 In an attempt to reach an agreement on this issue the recon­ stituted Board (after the Labor walk-out) held a public hearing on May 24, 1951. Those who urged approval of these contracts argued that: agreements settled prior to the freeze were consumated in good faith; pre-freeze agreements should not be disturbed. These agreements must be considered as "one ball of wax"; the improve­ ment factor, the escalator clause, the length of the whole agree­ ment including its non-economic provisions should not be dis­ turbed. All are intertwined. If the annual improvement factor were nullified, the entire agreement would have to be renegotiated. Long-term agreements which recognize annual productivity growth would guarantee stable collective bargaining relationships in such industries as automobile, aircraft engines, farm equipment, textiles, and the clothing industries for a period of three to five year; an important consideration for the uncertain duration of the Korean emergency. Wage adjustments reflecting productivity gains would not increase the cost of production. Representatives of GM, the AFL and the CIO all urged the Board to recognize the need to preserve collective bargaining relationships during the controls period; particularly a period of partial mobilization. Only one person, representing the National Association of Man­ ufacturers, took a position opposing the approval of the improve­ ment factor, on the grounds that such provisions were not analogous to true incentive payments since there was no requirement to dem­ onstrate actual increased productivity as a quid pro quo for the 4¢ annual payment.

• Korean Wage Stabilization Board, pp. 162-163. PRODUCTIVITY AND WAGE CONTROL 147

After the May hearing, the productivity issue came to the Board for further debate. The labor, industry, and public members agreed to limit approvals to the GM type agreement. They decided that parties to those agreements had negotiated long-term contracts that should guarantee stability in labor relations, that efforts had been made to maximize pmduction, and that GM was willing to agree not to use the four cent adjustment as a basis for increasing prices. On June 6, 1951, Resolution 22 was issued. Six days later the Board passed Resolution 23, which set forth the price warranty in productivity increase cases.

June 6, 1951

Wage Stabilization Board RESOLUTION #22, ANNUAL IMPROVEMENT FACTOR

The Board has been discussing general policy, includ­ ing possible revision of General Wage Regulations 6 and 8, and the letter of the Economic Stabilization Adminis­ trator to the Chairman of the ·wage Stabilization Board, dated 2/27/51. The Board feels that substantial progress has been made towards the development of a general pol­ icy and expects to be able to complete this task shortly. Among tl1e problems being considered are those con­ tracts executed prior to January 26, 1951, commonly re­ ferred to as involving "productivity increases," or "an improvement factor," or "deferred increases." It is clear that whatever form tl1e general policy finally takes, it will include provisions which will make possible the approval, under certain conditions and within certain limitations, certain of tl1ese cases, at least where no price increase is required as a result of the wage increase involved. The pending General Motors-UA W, CIO contract illustrates one type of case the Board has in mind. RESOLVED THEREFORE: That the staff be authorized to process pursuant to this statement the General Motors­ UA W agreement and similar cases involving agreements executed prior to January 26, 1951, now pending before the Board, where tl1e employer warrants tl1at the wage in­ crease will not be used as the basis of a request for a price increase. Passed unanimously.o

• Ibid, Appendix to Chapter 8-"The Productivity Issue." 148 COLLECTIVE BARGAINING AND PRODUCTIVITY

June 12, 1951

Wage Stabilization Board

REsOLUTION 23 PRICE wARRANTY IN PRODUCTIVITY INCREASES CASES

It is resolved that: No increase in wages, salaries and other compensation shall be approved pursuant to the Board Resolution of June 6, 1951, dealing with productivity increases, unless the employer shall have executed the following warranty: "The undersigned employer warrants that he will not use any increase in wages, salaries and other compensation, approved by the Wage Stabiliza- tion Board in Case No...... pursuant to the Board Resolution of June 6, 1951 as a basis for request­ ing an adjustment or resisting a reduction in any price ceiling."7

The council of Economic Advisors, stated at that time: ... Restraints need to be put on wage increases of ex­ cessive magnitude, because if such large wage increases be­ come a general pattern, they would build up excessive in­ flationary pressure on the consumer side. In addition, while they might not require price increases in some strongly situated industries, they would when generalized require price increases in many other industries. Thus, in allowing productivity gains, certain safeguards merit con­ sideration. In the first place, some limits should be made to relate to realistic appraisal of the amount of lowered unit labor costs. In the second place, more leadership and effort should be directed, not only towards providing just reward for increased productivity, but also toward doing everything possible to achieve increased productivity .... In the third place, so long as there cannot be a general expansion of consumer goods, a policy of allowing pro­ ductivity gains should be combined with efforts to stimu­ late voluntary plans for translating at least a portion of these increments of income into saving rather than into immediate spending."8

'Ibid. • Ibid, pp. 168-169. PRODUCTIVITY AND WAGE CONTROL 149

By early 1952 it appeared that the Board would not issue "for­ mal" productivity regulations. Productivity was a mixed bag. There was general agreement that in some industries to allow a modest increase above and beyond the cost of living, in recognition of productivity improvement was valid. Other industries were some­ what depressed in the 1951-52 period. To promulgate a general Regulation permitting increases above the cost of living based on a theory of generally rising productivity, could be counter produc­ tive in those industries. Others were concerned that enactment of a formal productivity regulation would set a new "floor" for wage increases, by violating a general standard and create a ripple effect in the unorganized segment of the economy as well as in smaller business establishments that were organized. Nevertheless, the Board was well aware that hundreds of ap­ plications for wage increases were pending that did not meet the GM criteria. The largest number of those cases involved "post­ freeze" contracts stipulating annual improvement adjustments. To accommodate those petitions, the Board issued Resolution 90, which stated that annual improvement agreements negotiated subsequent to the freeze should be approved, to the extent that the parties could demonstrate a tandem relationship to a unit whose annual improvement factor had been agreed to in a pre-freeze agreement. The Board also required the price warranty in these cases. In the spring of 1952 the Board appointed a Tripartite Com­ mittee to examine the issue of whether wage adjustments beyond those approvable under existing regulations should be permitted based on increased efficiency or productivity and to make recom­ mendations to the Board with respect to this issue. The Com­ mittee held conferences with numerous representatives of labor, business, government, and the public to solicit a wide variety of views. The labor representatives favored a more liberalized treatment of productivity cases for the following reasons: To maintain the existing share of the national income, workers should share in the benefits of rising productivity. The Board had distorted historical relationships by denying an­ nual improvement factors in certain industries (historically re­ lated) to other industries, where increases had been approved. Delay in enacting a specific productivity policy had created 150 COLLECTIVE BARGAINING AND PRODUCTIVI'IY

havoc in long-term agreements due to be renegotiated. Parties in collective bargaining were unsure as to what could be negotiated in good faith in a period of vague and uncertain guidelines. "Wage increases based on rising productivity were not infla­ tionary."& Annual improvement increases would stimulate further in­ creases in productivity because employers would be induced to cut man-power to offset or in anticipation of increases. The AF of L proposed an eleven percent self-administered cap in recognition of productivity gains that had occurred over the previous three years. The CIO urged that the Board permit a four percent annual improvement in real wages also on a self-admin­ istered basis. It was no surprise that the industry and management repre­ sentatives invited to testify at the conferences opposed any relax­ ation of the treatment of productivity increases. Their arguments were: If the Board placed a separate emphasis on productivity in­ creases, as a basis for exceptions to general standards other impor­ tant factors would be ignored or distorted; wage comparability, cost of living changes, special local circumstances, and ability to pay. There was no certainty that productivity would increase in the future as it had in the past. To agree to a standardized wage in­ crease for the future based on past productivity trends would be perilous. Any liberalization of present incomes policy would become the floor for new wage demands and would impose undesirable con­ formity on a complex economy. Under free collective bargaining, employers would have a chance to obtain something in return for a productivity wage in­ crease. If such increases were to become official policy, there was no chance that employers would be able to negotiate anything substantial as a "quid pro quo.''lO Real wage rates had increased more rapidly than productivity in recent years even without a generally agreed productivity factor. There never had been any positive correlation between real wage increase and productivity.

• Ibid, p. 176. 10 Ibid, pp. 177-178. PRODUCTIVITY AND WAGE CONTROL 151

The Public member of the Committee summarized the evidence, and suggested that, assuming the Board wished to expand its pro­ ductivity policy, it should not limit its approvals solely to the GM type of agreement or any other specific type thereby creating a single standard. The public member sympathized with those who urged that the complexities and diversities of the economy war­ ranted something more flexible than a single approach to the pro­ ductivity issue. Finally, it was suggested that the Board avoid the use of the specific term productivity on the basis that many em­ ployers could accept the concept but not the label. The Board received the recommendations of the Productivity Committee, and considered the alternatives. The first was to adopt the position preferred by the Industry members; to continue to process cases through existing precedents, policy, and regulation. The second favored by the Public member, was to issue a regula­ tion that the "Board was prepared to consider petitions seeking approval of wage increases beyond the amount permissible under existing regulations, on the grounds that the parties were adopting specific ways and means of improving efficiency and productivity, so that wage adjustments would not be infiationary."ll The Gen­ eral Motors agreement qualified as one such type of agreement although not necessarily the only one. Neither Labor nor Industry favored this approach. The third proposal, favored by Labor, would have added a certain additional percentage increase as an exception to the standard. Two percent or four cents an hour would have been consistent with the existing Board practice in considering exceptions to the general standards. The last alterna­ tive was to contain the productivity issue by treating it on an "in­ equity" basis; requiring the parties to demonstrate an intra-plant or intra-industry inequity. The industry members, although op­ posed to this course, felt they could live with it. Unfortunately, various inquiries of the Board of Congressional subcommittees, a huge caseload and strong reaction against a pro­ ductivity policy slowed further consideration of the alternatives . Then in June, 1952 Congress declared that the existing Wage Sta­ bilization Board would be terminated effective July 29, 1952, and that the Board was prohibited from issuing any further Regulations. However, for the disposition of "in-house" cases a resolution

11 Ibid, p. 179. 152 COLLECTIVE BARGAINING AND PRODUCTIVITY was passed, labor members dissenting, that the remaining cases be heard by the P1·oductivity Committee. Virtually all of the petitions were approved using various standards of equity, industry com­ parisons, extension of existing standards to new plants, inter-plant rate structures, etc.

Economic Stabilization Act Aug. 14, 1971-April 30, 197 4 Phase II Productivity Policy The two significant parts of Phase II Wage Stabilization policy between the period November 14, 1971, to the end of Phase II on January 10, 1973, were the establishment of the 5.5% general and salary standard (in recognition of a 3.0% historical annual rate of growth in the economy and 2.5% to compensate for the anticipated annual rate of inflation) , and a case-by-case exceptions procedure to consider the appropriateness of wage increases in excess of the guidelines. In the development of wage policy, the Pay Board was cognizant of the fact that there would be specific claims based on the results of productivity bargaining that might legitimately war­ rant consideration for wage increases in excess of the 5.5% stan­ dard. Nevertheless, specific regulations with respect to productivity claims were rejected by the Pay Board in favor of the case-by-case, equity approach. Furthermore, the Pay Board considered the pro­ ductivity issue "only in cases in which there was a request for com­ pensation above the general wage and salary standard, since the wage standard already included the 3.0%. The case.by-case ap­ proach, in regulatory terms, was grounded in the general "catch all" regulation 201-11 (d) later recodified as 201-30 (b) . (b) Criteria. When the Board reviews new contract and pay practices in individual cases with respect to payment for services rendered in any control year and in its devel­ opment of additional criteria for exceptions, it shall con­ sider such factors as changes in productivity and the cost of living, ongoing collective bargaining and pay practices, the equitable position of the employees involved, and such other factors as are necessary to foster economic growth, to promote improvement in the quality of governmental services, and to prevent gross inequities, hardships, serious market disruptions, domestic shortages of raw materials, localized shortages of labor and windfall profits.12

12 6CRF 201.30, Revised as of Feb 1, 1974. PRODUCTIVITY AND WAGE CONTROL 153

As early as January 1972, a claim that substantial work rule changes had been barg ained as a tr ade-off for wage increases in excess of the 5.5% standard came to the Board. The case involved a pre-Phase II contract between the United Transportation Union and the National Railway Conference. In addition to permitting a 10% retroactive increase for 1971 the Board approved the 1972 wage increase, which was substantially in excess of the standard, on the basis of substantial negotiated work rule changes. It was the consensus of the Board that these changes would greatly in­ crease the level of productivity of the railroad employees, and thus, justify the wage increase. The Board also recognized that the De­ cember 22, 1971, Amendments to the Economic Stabilization Act stated that the " ... Pay Board could not limit deferred increases set forth in a contract negotiated prior to August 15, 1971, where prices have been advanced, productivity increased� taxes have been raised, appropri ations have been made, or funds have otherwise been raised to cover such increases."l3 Another rel ated case involved the Long Island Railro ad and the Brotherhood of Locomotive Engineers. On December 13, 1971, the Long Island Railroad and the Brotherhood of Locomotive Engi­ neers signed an agreement which provided, among other things, for a lump sum payment based on work performed during calendar year 1971 to be paid to the appropriate employees, in lieu of a wage increase, and in exchange for the elimination of 23 major work rules then in effect. Quite apart from the technical problems the Board encountered due to its regulations reg arding control years, a rigid wage and benefit standard, and the legislative inhibi­ tions noted above, the question of a money trade-off for the elim­ ination of specific work rules that exceeded the standard went to the heart of one kind of productivity problem. The regulations made no provision for either a specific or a general exception to the standard for this kind of case. Naturally the Board wished to encourage collective agreements that would improve productivity and the general work rules problem on the railroads had been widely publicized. The claims were clear enough. The 23 work rules were quite specific and savings, at least based on historical experience, were

"'Economic Stabilization Act of 1970, Amended Dec. 22, 1971 (Public Law, 92-210) . 154 COLLECTIVE BARGAINING AND PRODUCTIVITY

measurable. A staff analysis of the contentions of the parties with respect to the work rules, the cost of the lump sum payments, and the potential savings which although viewed as "one shot" were indeed permanent showed that reductions in costs would result.14 In June of 1972 the Board issued a Decision and Order. Sec­ tions 7, 8, and 9 are pertinent to this discussion. 7. That the payments proposed to be made in ex­ change for work rules changes on the basis of work per­ formed during calendar year 1971 are in the form of lump­ sum payments rather than an increase in wages and salaries as defined by Pay Board regulations. 8. That, upon the evidence contained in the parties' submissions, by virtue of the contract provisions permit­ ting a change in production techniques through work rule changes, the employer will achieve a higher level of oper­ ating efficiency which will be in effect from the time of implementation of such work rules changes; further, that unit labor costs will be lowered significantly. In consider­ ation of these facts, it is held that the need to prevent gross inequities and windfall profits within the meaning of Sec­ tion 20l.ll (d) is sufficient to permit payment of the lump­ sum amount according to the terms of the agreement of the parties, based on work performed in the employee unit during calendar year 1971. 9. That, upon the evidence contained in the parties' submissions, the employer will during the second control year realize considerable productivity increases as a result of the contract provisions permitting the reassignment of present firemen personnel and the elimination of certain employee functions. It is further found that these produc­ tivity improvements are permanent and will result in sub­ stantial continued savings to the employer during the en­ tire period for which the agreement is effective even after implementation of the proposed increases in wages and salaries for the second control year. In consideration of these facts, and the fact that under the terms of the agree­ ment, less than the maximum agreed upon lump-sum pay­ ment for calendar year could be paid, it is held that the need to prevent gross inequities and windfall profits within the meaning of Section 20l.ll (d) and the equitable posi-

" Pay Board Staff Analysis and Case Presentation-Long Island Railroad Case, PB #7202050018. PRODUCTIVITY AND WAGE CONTROL 155

tion of the employees involved with respect to other em­ ployees in the railroad industry are sufficient to permit payment of the proposed increases in wages and salaries during the second control year ....''15

A second key case involving work rule changes led to the first Pay Board reduction of wages negotiated in a pre-Phase II con­ tract. On March 20, 1972, the Pay Board challenged a second-year wage increase pursuant to a two-year contract signed on March l, 1971, by the Philadelphia Fo od Employees Council and the Meat Cutters, Locals 56, 195, 198, 199. The wage increases, effective March 4, 1972, amounted to approximately 11%· The basis for the union's claim was the negotiation of a new contract clause which permitted the employers the option of intro­ ducing "Block Ready" meat into retail stores from central cutting plants. This reduced some of the need for labor at the retail level. The union also argued that there would be a significant reduction in labor costs if the employers exercised the Block Ready option. In considering the merits of the case, the Board ruled specifically that the productivity data, largely supplied by the employees was deficient, and only provided gross indicators of productivity movement. Since the Board was not satisfied that the work rule changes in the future would result in increased productivity; and in view of the relatively high level wages in the units and the job guarantee provisions in the contract the Board rolled back the negotiated increase to 7%. Because of the difficulty of measuring such a thing as the shif t of meat processing to areas outside the retail store; changes in product mix, packaging and other problems associated with mea­ suring productivity in service industries, the Pay Board never ap­ proved a food case on a "productivity exception." The Phase II wage board decided one other major case where the productivity issue was paramount that attracted wide interest and attention because of its implications for wage stabilization policy. Tha t case involved the strike settlement agreement reached between the International Longshoremen and Warehousemen Union and the Pacific Maritime Association. The issues raised in this case are worth reviewing. On June 30, 1971 the labor agreement between the Pacific

"'Pay Board Decision and Order, dated June 2, 1972, PB #7202050018. 156 COLLECTIVE BARGAINING AND PRODUCTIVITY

Maritime Association (PMA) and the Warehousemens Union (ILWU) expired and on July I the ILWU struck 24 West Coast Ports. A Taft Hartley injunction went into effect on October 6, 1971 and after the expiration of the 80 day cooling off period fol­ lowed by an extension of the strike deadline by the union the strike resumed on January 17, 1972. It was settled on February 10. On February 25th submissions were made to the Pay Board for full approval of the terms of the settlement. The staff met with the parties, the Pay Board held public hearing on March 14 and on March 16 decided the case. The PMA-ILWU case raised some important questions for the board with respect to productivity and productivity bargaining. Except for the so called catch up increase provisions on wages and fringes neither of which was claimed by the parties and not allow­ ing for cost of living provisions which were not included in the agreement the claims of the parties exceeded even the most liberal allowable interpretations of the guidelines by more than 16%. But the case would not rest there. The basic ILWU Agreement had a long and interesting history dating back to 1957. At the base of it was an on-going concept that the union traded years of nego­ tiated work rules and practices and agreed to permit technology and continuing productivity improvement on the West Coast Waterfront in exchange for continuing economic benefits. Under­ lying the change tl1at occurred in I 960 and was perpetuated in two long-term five-year agreements was a trade-off between a variety of wage and fringe benefits for the registered work force and the ongoing right of the PMA members to introduce new technology work methods and improved efficiencies in their operations. The parties had not conceived the agreement to be "one shot" or that the mechanization provisions had a specific terminal point. There was no direct quid pro quo between specific economic provisions and specified changes. The basic terms of the original agreement and the success of the parties efforts in accommodating to change was in fact ongoing and continuous even when temporarily inter­ rupted. This agreement did not fit into any prescribed niche of regulation or narrow rule for exceptions. A number of conceptual questions arose. Where does a produc­ tivity agreement of long standing fit into any temporary wage con­ trol formula? When does such an agreement begin (the control PRODUCTIVITY AND WAGE CONTROL 157 year?) and when does it end (at the contract termination date?) . Does the "pay-off" come at a specified time and for specified terms or is it on-going? Can the total savings be calculated within a certain time frame? Can savings be measured in terms of units of production for hours of work or priced for individual work rule changes that can be measured in terms of manhour savings or num­ bers of employees on the job? All attempts to measure the myriad changes contemplated and completed failed and only gross measurements of annual changes in productivity were accetpable to either side. Basically the parties argued that the long history of productivity bargaining and its agreed upon benefits for both sides dictated that their present settlement was justified because productivity on the west coast waterfront as a whole had improved dramatically over the entire life of the agreement. Wage control regulations promulgated eleven year after the original Mechanization Modernization agreement had been concluded should not frustrate the reward to employees of a $900 million productivity improvement in 10 years. A knotty problem but one that was never really faced. The staff report took cognizance of the position of the parties. The staff report said in part:lB "Section 201.11 (d) allows the Pay Board to consider addi­ tional criteria that may provide a basis for an increase above the general wage and salary standard and the seven percent limitation on the other exceptions in Section 201.11. In developing these additional criteria, the Board: "shall consider such factors as ongoing collective bargaining and pay practices, tl1e equitable posi­ tion of the employees involved, and such other factors as are necessary to foster economic growth and to prevent gross inequities, hardships, serious market disruptions, domestic shortages or raw materials, localized shortages of labor, and wind­ fall profits."

"ON-GOING COLLECTIVE BARGAINING AND PAY PRACTICES" The ILWU and PMA have apparently maintained an on-going collective bargaining situation involving both their Mechanization

11 This portion of the Longshore analysis (pp. 18-22) is excerpted directly from the Pay Board Staff Analysis, dated Mardi 14, 1972, pp. 17-24. The staff paper wu presented to the Pay Board in its consideration of the PMA-ILWU case. 158 COLLECTIVE BARGAINING AND PRODUCTIVITY

and Modernization Agreement and their guaranteed income pro­ visions since 1958. These were both embodied in their 1960 agree­ ment. The guarantee was dropped in the 1966 agreement and re­ instated in the 1971 contract. These two contract provision directly reflect the decasualization and modernization of the longshore in­ dustry that has occurred during the last decade. In the words of the parties: "The 1960 Mechanization and Modernization Agreement which terminated on June 30, 1966, was extended for five years to run from July 1, 1966, to June 30, 1971. It was apparent at the negotiations that the Plan had proved of great benefit to both parties. The Pacific Maritime As­ sociation reported sharply-increased productivity, and the union was pleased with the early retirement and vesting provisions. Under the new Agreement, as under the original Agree­ ment, the shipowners and stevedoring contractors are freed of restrictions on the introduction of labor-saving devices, relieved of the use of unnecessary men and as­ sured of the elimination of work practices which impede the free flow of cargo or ship turnaround. These guarantees to industry are in exchange for a series of benefits for the workers, designed to protect them against the impact of the machine on their daily work or on their job security."* Thus, the parties can claim that the pay guarantee and M&M provisions are, and have been, items of "on-going collective bar­ gaining" within the meaning of 20l.l1 (d) . Further, because the parties do not intend final implementation of their February 10, 1972 Memorandum of Understanding until the Pay Board has passed upon it, the parties can claim to be in an on-going collective bargaining situation. Therefore, it appears that the contract is not effective until the Pay Board has passed on the proposed in­ creases. Hence, the parties can be considered to still be in an on-going collective bargaining situation within the meaning of 201.11 (d) . 2. The ILWU gave the PMA an almost completely free hand in changing work rules between 1961 and 1966. Productivity in­ creases far exceeded those in American industry. To foster the growth of productivity on the West Coast docks, the PMA re- PRODUCTIVITY AND WAGE CONTROL 159 newed the M&M agreement in the 1966 contract. Again, productiv­ ity increased and unit labor costs dropped. In the 1971 agreement, the ILWU members are only following the principles agreed to in 1958 that:

... "The longshoremen were entitled to a "share" of the machine . . . . There would be no layoffs of registered longshoremen. . . . The Mechanization and Modernization Agreement would provide a guarantee of work or earnings . . . . If the unhindered introduction of new machinery and new methods of work resulted in tl1e curtailment of work opportunity so that the size of the work force to be reduced, this would be done by shrinking the work force from the top"• Hence in the 1971 agreement, an exception to the applicable wage and salary standard might be granted under 201.11 (d) , be­ cause when considering the equitable position of the parties, the ILWU members might now be considered entitled to share the productivity increases that have demonstratably resulted from the earlier M&M agreements. Now that the productivity changes are documented, the ILWU members might be entitled to a "catch-up on productivity." This is the main thrust of tl1e brief submitted by the ILWU, and is not inconsistent with Section 203 of the Economic Stabilization Act as amended.

" ...... SucH OTHER FACTORS ••••••" The last part of 201.11 (d) is a broad section clearly indicating that the Pay Board has, in its discretion, and consistent with 203 of the Economic Stabilization Act as amended, tlle authority to consider " ... such other factors ..." as it considers necessary to grant an exception to the applicable wage and salary standard. While the legislative history on tl1is section is sparse, the clear thrust is to empower the Board to identify and focus on the unique aspects of a particular case and to frame its exception criteria accordingly. Section 201.11 (d) of the Regulations confirm the Board's intention to construe tllese provisions broadly. While the parties, as of this writing, have not argued this

• Men and Machines, PMA·ILWU, 1963. 160 COLLECTIVE BARGAINING AND PRODUCTIVITY section directly and framed their submissions precisely, in the language of the act. Most of their arguments do allude to the provisions of Section 201.11 (d) . The staff would articulate these arguments to be as follows: (1) The collective bargining and prior contracts of the parties have established an ongoing practice of allo­ cating the cost savings and productivity increases oc­ casioned by the M&M Agreement between the parties. The parties' experience under the plan has been a major factor in this allocation. This was specifically noted in Appendix li-B of the July 1, 1966 Agree­ ment, paragraph II of this states: "The objects set forth in the joint state­ ment agreed to by PMA and ILWU in November, 1957 will continue to be the objectives of the parties during the term of the New Agreement and will be the basis for future contract negotiations at the expira­ tion of the New Agreement. The statement of objectives is hereby reaffirmed, but with­ out commitment by either party as to the manner in which such objectives are to be implemented in future bargaining." (2) Because of the favorable results in cost savings and increased productivity under the plan during the last two contracts covering a decade, it would create a gross inequity for the Economic Stabilization Pro­ gram to prevent the parties from implementing their agreed upon allocation of these ongoing economic benefits which have as their direct antecedents the original M&M Agreement in 1961. In support of this contention, the ILWU has cited the fact that the only major difference between the PMA final offer of September 30, 1971 and the Memorandum of Understanding of February 10, 1972, was in the skill differential rates. (3) The ILWU alludes to the profits that the M&M Agreement has produced for the PMA Members be­ tween 1961 and 1971. In the absence of any showing by the PMA that productivity increase resulted in PRODUCTIVITY AND WAGE CONTROL 161

reduced stevedoring rates or direct capital expendi­ tures, it appears reasonable to assume that the in­ creases in productivity from 1961-1971 largely pro­ duced increased profits. Since the parties did not "cost" the savings that would be realized under the M&M agreement were substantially larger than either party anticipated. Whether they were windfall profits to be recouped by the ILWU in a subsequent con­ tract is a question of fact for the Board to consider. In summary, the staff concludes that there are suf­ ficient grounds to consider an exception to the ap­ plicable general wage and salary standard under 201.11 (d) . Since the staff submits that the parties are clearly entitled to a catch-up under Section 201.11 (a) (3) , the request for exception under 201.11 (d) is necessary only to exceed that seven per­ cent guideline. While no one argument submitted by the parties appears determinative to the staff, it does appear that the parties may be able to meet a test of uniqueness implied by 201.11 (d) and be entitled to special exception above seven percent. The staff was obviously more impressed with the history than the public members whose proposal to resolve the issue was eventually adopted by a majority vote. With respect to the wage issue in general and the productivity issue in particular, the Board said: 2. The employee unit does, in fact, meet the require­ ments set forth in Section 201.11 (a) (3) (i) and (iii) of the Pay Board regulations and qualifies for an annual aggregate wage and salary increase of 7% under the catch-up exception. 3. Under the excludable fringe benefits policy adopted by the Pay Board at its February 23, 1972 meeting, the employee unit is entitled to a 1.9% increase in exclud­ able fringe benefits. 4. The employee unit involved should be granted a further exception allowing an additional 3% in wages and includable fringe benefits, and approving the remainder of the excludable fringe benefits as negotiated by the parties and proposed in the PB-1 submission. This addi­ tional exception is granted under Section 201.11 (d) of 162 COLLECTIVE BARGAINING AND PRODUCTIVITY

the regulations because of the demonstrated and unique facts set forth in the record, including those relating to prior Mechanization and Modernization Plan payments, involving on-going collective bargaining and pay prac­ tices, the equitable position of the employees involved, arrangements between the parties specifically designed to foster economic growth, and other factors, including pro­ ductivity considerations, as set forth in Section 203 (b)

of the Act; and ...... The labor statement in support of approving the full agree­ ment is illuminating in light of the decision.

Mr. Weiss' Statement Supporting ILWU-PMA Agreement (1) Productivity-gains are tremendous-nearly 150% over 1960-70 decade. 41 men now handle tonnage requiring I 00 men in 1960. (a) Output per man-hour for 1960-70 period sub­ stantially outstrips all of 37 specific industries whose productivity was measured by BLS. Long­ shore output per production worker man-hour tops highest productivity industry by about 20 percentage points. (Source: BLS Bull. No. 1692-Indexes of Output Per Man-Hour­ Selected Industries; 1939 and 1947-70.) (2) Public Members' statement, rationalizing their deci­ sion, refers to on-going collective bargaining at the time ILWU agreement expired-and the magnitude of settlements being made at that time which were significantly and substantially in excess of the figure the Board proposes to approve. Yet these industries cited by the Public Members don't begin to approach the productivity rates of longshoring on the West Coast. Moreover, the rollup offset required by the Board further reduces the cash-in-pocket increase which longshoremen will receive and pinpoints and aggra­ vates the disparity with other contemporary industry settlements in which no rollup was charged. (3) The Board's own staff conclusively demonstrates that West Coast longshore productivity increased well above 100% points in the decade over output for PRODUCTIVITY AND WAGE CONTROL 163

man-hour in the private economy; 144% vs. 33%. (4) Unit Labor costs on West Coast docks declined by 30% in the 10-year period and by contrast, until labor costs in the economy as a whole rose 30%. (5) In the last 10 years, longshore employers achieved a savings as against an outlay of about -- in ex­ change for work rules modifications and · increased per man-hour output. This is a 17 to I payout-good in any league. The Board cutback of the negotiated increases will further magnify the savings to the industry-and create a situation of windfall profits. (6) The Board, by its action, has significantly modified the concept inherent in the M&M agreement-and denied the longshore workers productivity gains and cost savings, increased its M&M contributions sub­ stantially. These increased contributions, related to the man-hours worked in the most recent 5-year period, equaled to a 3.6% boost, as contrasted to 3% for the 10-year period. If the Board found it neces­ sary to devise a rationale for its reduction of the proposed settlement, then equity would dictate that 3.6% (or even a higher figure) rather than 3% be granted. The decision, largely political in concept, reveals only that the Board had no conceptual framework within which it could entertain a claim based on a broad ongoing history of productivity bargaining.

Phases Ill & IV Conceptually Phases III and IV (considered here as one from a policy making point of view) differed in some major respects from Phase II. Whereas during Phase II the Pay Board employed a general and rigid wage and salary standard, did not have a regular and on-going dispute settlement function and emphasized control over large units the administrators of Phase III did not see the task the same way. In contrast the administration of Phase II and IV followed an in depth case by case approach on wages, en­ couraged active dispute intervention in key negotiations by tri­ partite boards and recognized that in certain industries or parts of industries small units could be inflationary leaders and pattern 164 COLLECTIVE BARGAINING AND PRODUCTIVITY setters. Although the 5.5% standard was retained it was used in combination with the more flexible case approach. The three major industry sectors that were still under mandatory controls during this period, food, health services and construction employed tri­ partite committees in the administration of the program and be­ cause of that structure gave meaning to the case by case approach and to the disputes settlement role of the committees. Despite the difference of approach to wage stabilization in Phase III which was considerable and significant to the program the approach to productivity claims in cases and to productivity bargaining was not substantially different. The historical working papers on the economic stabilization program contain the follow­ ing excerpt: "An additional topic that a stabilization agency must resolve is how to evaluate improvements in productivity and work rules in terms of the degree of restraint on compensation. Changes that result in increased productivity are usually com­ plex and difficult to evaluate, but because there is often a dollar trade-off for them in collective bargaining agreements, a stabiliza­ tion agency must determine its approach regarding these factors. A policy that ignores work rules may contribute toward dis· couraging needed long-term changes. However, the most serious stabilization problem is that higher wage and benefit increases paid in recognition of productivity or work rule changes may spread to other related employees who have not made similar work or productivity adjustments. "The Pay Board considered the productivity issue only in cases in which there was a request for compensation above the general wage and salary standard; the 5.5 percent standard included an allowance of three percent for normal productivity increases. In contrast, the Phases III-IV approach considered the impact of pro­ ductivity or work rule changes, if any, along with all other relevant factors before deciding an individual case. Proof that the changes had already had some effect on productivity rather than the ex­ pectation that they would have an effect was required by the Council in evaluating such changes."17

17 HistoriCal Working Papers on the Economic Stabilization Program, August 15, 1971 to April 30, 1974, Part I, p. 415. PRODUCTIVITY AND WAGE CONTROL 165

Within this framework and under these admonitions only a handful of cases came before the two tripartite committees on food and health that included claims for exceptions based on pro­ ductivity changes.1s

Conclusion Productivity increases as exceptions to firm wage stabilization standards during periods of wage controls has received only gen­ eral and often erratic recognition, usually limited to specific cases where wage incentive systems qualified as exceptions to a general standard or there was a "buy out" of specific work rules. Admin­ istrators have treated the subject gingerly and with suspicion and have hestitated to set forth specific rules for considering productiv­ ity factors in writing regulations during stabilization periods. Even in specific cases using guidelines for exceptions to general standards when the parties have pressed a case for recognizing the impact of productivity in agreements, controversy over facts as well as philosophy has discouraged administrators from accepting such claims per se as a basis for decision. The lack of reliable data particularly has compounded the problem and left admin­ istrators on unstable and unreliable ground usually bulldozed into place by the parties. This has led to intuitive andfor political decision making even in those cases where productivity change was demonstrable. Perhaps the War Labor Board experience is not a good ex­ ample. Productivity as a concept in collective bargaining including even the limited area of work rule trade offs had not received wide­ spread attention as a part of the collective bargaining process at that time. But this was not true at least conceptually during the Korean emergency and during the period of the Economic Stabilization Act Phases I-IV. And in theoretical terms at least the liberalization of the rigid guideline concept when Phase III went into effect should have produced more claims for approving productivity increases as exceptions to the general standard par­ ticularly in the three industries that remained under mandatory controls. If the experience of administering the Wage and Salary Com-

18 The authors are not familiar with the experience of the Construction Industry Stabilization Committee in its administration of similar claims during the same period. 166 COLLECTIVE BARGAINING AND PRODUCTIVITY mittee of the food industry is any guide it may be possible to clarify the apparent anomaly. When the planners or administrators of any controls program address the problem of productivity they must grapple first with the problem of establishing a general productivity formula or considering productivity claims on a case by case basis. The general problem is the kind the Wage Stabilization Board faced in 1951 in considering the prefreeze agreements a Ia G.M. that built in annual automatic wage increase factor based on historical data and which presumed that the historic average annual productivity growth would continue. Controllers however are left with residual problems. For example; To what extent will the application of such an across the board principle distort re­ lated wage relationships in contracts not calling for such an im­ provement factor? To what extent will it assess new costs on an industry or company that may be in a period of stagnation or decline, or set a new floor for bargaining in industry generally so that in effect the general guideline is breached in advance. One way of avoiding the "general" dilemna is to handle all such claims on a case by case basis but if regulations permit only limited exceptions to a tight general standard then administrators have little to fly by but the seat of the pants. A variation of the rigid cases approach is the one that was theoretically adopted in Phases III and IV of the Economic Stabilization program, in work­ · ing with a more flexible general standard. The controllers em­ phasized for example the need to mitigate distortions in labor markets and to maintain historic structural relationships estab­ lished prior to controls through collective bargaining. But even in that more liberal and perhaps more rational framework claims for exceptions based on productivity changes or the results of productivity bargaining were not widespread nor seriously treated. The controllers found life much easier using general standards and adding to them a pinch of exception accompanied by enough regulation language to justify agreements which the parties would tolerate. In cases where the parties sought to add productivity as a basis for further exceptions to general standards and workable exception procedures they were viewed as unnecessary burdens on structures already strained by the very existence of controls. But these observations do not go to the roots of the problems that controllers face. PRODUCTIVITY AND WAGE CONTROL 167

We are as a nation extremely unsophisticated even untutored in understanding let alone measuring productivity changes. In the food industry which accounted for over 11,000 cases in Phases III and IV there were only a few claims for exceptions based . on productivity changes. In the few cases that did come before the committee there was a notable absence of reliable data. The unions usually argued that they · could not present reliable data to substantiate their claims because management would riot make it available to them. Management argued that except on a very superficial and general level (retail store operators pointed out that they only had sales versus man hours for given periods of time) firms did not measure productivity with any precision or sophistication. Both sides were right. But if serious considera� tion is to be given to specific claims that productivity has indeed improved during a period of time and that that improvement should be reflected in increased earnings for workers it is ncit possible to entertain that claim seriously in the . absence of the neccessary data to substantiate it. Gut feeling is not enough. Ex� cept in instances where the parties bargained out the removal of specific work rules or practices no such measurement information was introduced. Part of the explanation of this phenomena of course lies in the· fact that even sophisticated economists and statisticians who have work!'!d this problem for years cannot agree on one measurement formula to measure changes in productivity. The struggle to develop satisfactory measurement criteria, however, leaves the con­ trollers worse off than they would be without the statisticians. In addition since productivity claims are by definition exceptions one has to recognize that exceptions are always troublesome even if the standard has some administrative flexibility built into it. For exceptions inevitably distort the status quo no matter how distorted that status quo may appear to be. Theoretically it should be the controllers objective to minimize distortion in the labor market regardless of how that market may look . to an out­ sider. The market decisions and the relationships created by that market decision should not be disturbed more than is absolutely necessary. On the assumption that all controls end some day, the controllers should return the parties to private bargaining as un­ changed vis a vis each other as possible. Yet the West Coast long­ shore case was as a practical matter a market decision. Subse- 168 COLLECTIVE BARGAINING AND PRODUCTIVITY quently a set of foreign regulations was imposed on that decision. Herein lies the crux of the dilemma of wage regulation. In the absence of regulation, it is highly unlikely that other bargains in the economy would have been struck based on the unique in­ gredients of the West Coast longshore contract. In the context of the regulation however the possibility of a broad scale breaching of fuzzy guidelines that would set the stage for hundreds of un­ substantiated claims that could not consistently be dismissed was a threat to the standard. The majority of the board took refuge in regulation and resisted the breach. The lesson of our experience to date is that we have not found a way to encourage productivity bargaining during controls periods. The data is poor and controversial, controllers fear labor market distortion, are unable to establish satisfactory general guidelines, and loath to embark on the rough sea of exceptions. Yet we should be encouraging innovation in productivity bar­ gaining whether we are in a period of controls or not if we are to encourage productivity improvement and productivity bargain­ ing by the parties, particularly during times of national emergencies. During a controls period certain conditions must be accepted by the authors of regulations and the administrators of those regula­ tions. I think a good beginning would be the following. General Wage and Salary standards should be flexible not rigid. There should not be any general productivity formula or standard. Representatives of each industry that chooses to bargain on productivity change should recognize that it is part of their bar­ gaining responsibility to develop agreed upon criteria that become the yardstick for measuring their own performance under the contract. No matter how gross the measurement it will be better than throwing to the controllers the problem of finding a formula. Controllers it seems will not take that responsibility and probably they are right not to do so. Productivity changes and productivity bargaining will not take place unless both parties desire to make them work. Let them establish the criteria in the bargain and prove that the facts fit the case. CHAPTER 9

Productivity Bargaining Abroad: An Evaluation

LAURENCE c. HUNTER. University of Glasgow

The main purpose of this paper is to assess the significance of productivity bargaining outside the United States. As we shall see, however, the foreign experience is limited, with Britain standing out as the only important exception. This raises the subsidiary question why productivity bargaining has flourished in some coun­ tries and not in others. Are there vital environmental or structural factors which determine the relevance or pay-off from productivity agreements? If so, what are these factors: do they include, for example, the industrial relations framework at large, trade union and employer objectives, collective bargaining structure, and the economic situation of the country? Again, have the objectives sought through productivity bargaining in some countries been pursued along alternative routes elsewhere? If these questions are too broad to be encompassed satisfactorily in a single paper-as they are-it may still be worth while to pose them, and to see how far the hypotheses which underlie them stand up to prelim­ inary investigation. Before we can reasonably commence an exploration of such questions, a more secure basis of knowledge of the foreign exper­ ience is required. Section I provides a short history and evaluation of the British experience. Section II discusses the available infor­ mation on productivity bargaining elsewhere. In Section III, some possible explanations for the observed incidence of productivity bargaining are advanced. Finally, in Section IV, the main conclu­ sions of this review are summarised and related to possible future developments.

• I am indebted to Phil Beaumont, Oliver Clarke, Steve Engleman and Andrew Thomson for valuable comments on a earlier draft.

169 170 COLLECTIVE BARGAINING AND PRODUCTIVITY

I. Productivity Bargaining in Britain (a) History The British experience of productivity bargaining was confined mainly to the 1960's, beginning with the Esso agreements at the Fawley Refinery in 1960 and 1962, so admirably described and analysed by the late Allan Flanders.1 The Fawley agreements es­ tablished the main characteristics of the many successors that were to appear during the rest of the decade: the joint involvement of the parties to the collective bargaining process; the identification o� potential improvements in productivity achievable through changes in methods or patterns of work organisation; and the . negotiation· of a package of sp ecified changes in return for defined improvements in pay andfor conditions of employment. The significance of the Fawley experience is to be seen at two levels. First, it illustrated a method of tackling a set of problems that were endemic in much of British industry, including over­ manning, rigid adherence to craft or job demarcation boundaries, resistance to technical and organisational change, and consequential persistent overtime working. Secondly, the Fawley agreements were foc.used . on the workplace, and indicated the scope that existed for dtension of collective bargaining at plant level. To understand the importance of this, one has to recognise the general context of collective bargaining in the U.K. at this time, which was dom­ inated · by the dual system analysed by the Donovan Commision.2 This system was based on industry-wide bargaining supplemented by informal shop floor negotiation, frequently sectionalised and f;ragmented and thereby encouraging intra plant application of caercive comparisons. The consequence was frequently a chaotic pay structure at plant level. Although Esso's collective bargaining for refinery employees was not subject to the constraints of in­ dustry-wide negotiations, the plant-based agreements showed how

a · more comprehensive, less fragmented pay structure could be developed. These lessons were underlined by broader environmental fac-

1 Allan Flanders, The Fawley Productivity A.greements, Faber and Faber, 1964 . . · s.Royal Commission. on Trade Unions and Employers' Associations, Report,

Cmnd. 3623: HMSO, London, 1968. . . . . PRODUCTIVITY BARGAINING · ABROAD l'l l tors. The growth performance of the economy was consistently disappointing, and the opportunity to achieve even a once-for-all improvement in productivity was attractive. Concern was also being shown for wage and price stabilisation, and the prospect of increases in the national wage bill being offset, even in part, by productivity gains was readily seized upon by the policy-makers. Each successive stage of incomes policy from 1965-69 made explicit provision for productivity agreements to be exempted from the normal constraints on wage increases. This was undoubtedly the main stimulus to productivity bargaining and accounts in large measure for the increase in its volume in the mid-1960's. It has been estimated that between 1963 and 1968, just over 70 agree­ ments were concluded. By comparison, the period 1967-69 wit� nessed over 4000 agreements. Of these, 76 (covering potentially 4.5 million workers) may be regarded as 'framework' agreements on an industry-wide basis, enabling constituent companies to pursue productivity bargaining within the industrial collective bargaining structure: the remaining 4000 or so covered about 3.7· million workers. a Even more quickly than it had sprung up in the 1960's, pro­ ductivity bargaining began to disappear from the scene in 1970. As the concept fell into disrepute (for reasons discussed below) even those who still persevered with a productivity approach played it down: it is thus very difficult to know its current extent. However, with the problems of accelerating inflation diverting attention to cost of living compensation and comparison-based criteria, it seems certain that its incidence is extremely limited. Three main factors seem to explain this rapid turnaround. First, increasing antagonism was developing in 1968-69, especially from certain trade unions and left-wing spokesmen. The basis of this attack was the threat posed to the principle of mutuality­ the notion that no change should be made without joint agree­ ment, and implying in its strongest form that all aspects of con­ ditions and pay should be permanently negotiable. The threat was seen most strongly where the agreement involved a change from incentive payments to measured daywork, but more generally

8 For further discussion of the source of these figures, and the difficulties in estimating the total coverage of productivity bargaining, see Robert B. McKersie and Laurence C. Hunter, Pay, Productivity and Collective Bargaining, St. · · · · Martin's Press, 1973: pp. 63-68. 172 COLLECTIVE BARGAINING AND PRODUCTIVITY agreements which resulted in greater managerial control over job content, speeds and conditions of work were regarded as under­ mining the source of shop steward power in the workplace. Even if U.S. experience suggests that measured daywork systems do not unduly restrict the engagement of shop floor representatives in effort bargaining, the validity of the criticism matters less than its role as a rallying point against the productivity bargain, in which it proved an influential factor.4 A second factor can be briefly treated: unemployment had been rising steadily since 1966 and union negotiators became in­ creasingly concerned about the effect of further productivity bar­ gaining. Although guarantees were usually provided against en­ forced redundancy of existing employees as a result of agreements, the use of incentives to encourage workers to leave was by no means unknown, and elsewhere job opportunities were being cur­ tailed. Thus the higher unemployment rose, the greater the re­ action against further agreements. Still more important was the removal of the prime incentive, the ability to obtain wage increases above the incomes policy norm or ceiling. A statutory incomes policy was in force without a break between mid-1966 and end-1969, but by mid-1969 it was clear that further extension into 1970 was politically impracticable. Although the Labour Government, which was to lose the General Election in mid-1970, tried to introduce a voluntary prices and incomes policy for 1970, the strains of a sustained period of control together with dissension in the Labour Party over industrial relations legis­ lation rendered the attempt ineffective. With the return to essen­ tially free collective bargaining, the absence of norms removed the incentive to productivity bargaining. Together with the left wing attack and the rise in unemployment this was enough to bring about a rapid decline in the popularity of the practice. How then are we to evaluate this relatively brief experience of productivity bargaining? Some would argue it was simply a convenient fashion, serving a purpose during a period of pay restraint: that the movement contained the seeds of its own de­ struction and could be no more than a short run phenomenon, since at any time there was only a limited stock of practices which could be 'bought out': that the opportunities for real progress

• See McKersie and Hunter, op. cit., pp. 285-91, for more detailed discussion of this point. PRODUCTIVITY BARGAINING ABROAD 173 were illusory, as witness the many agreements that were cynically concluded with no genuine quid pro quo in terms of productivity gain; and that the whole process was contributory to the quick­ ening pace of inflation which emerged in the late 1960's. While admitting some validity in these criticisms, we may argue con­ versely that opportunities for real progress were available, but were often missed: that the innovation, properly developed, could have provided a means of modernising an obsolescent collective bargain­ ing system; and that its association wi th incomes policy was a distorting factor which proved fatal to its long term prospects. If this latter view is accepted, it seems reasonable to seek to dis­ sociate productivity bargaining from incomes policy. The following three questions then become critical (and will in fact provide a basis for considering the reasons for the limited experience of the practice in other countries) : (i) What was the significance of the content of productivity bargaining? By 'content' in this context we mean the subject matter of the agreements. On the workforce and union side of the bargain, the results were to be seen almost entirely in increased pay. There were exceptions, including transition from manual to staff status, and increased security of employment, together with some orga­ nisational gains for the unions. But on the whole the substantive 'reward' elements were heavily biased in favour of straight pay rises. The more important development, then, was on the employer side, where cost savings were sought through reductions in crew size, removal of skill demarcations and other job restrictions, cut­ backs in systematic overtime, more flexible hours of working, and cooperation in changes in wage payment methods. These are all subjects which in many British industries had been moved out of the area of managerial prerogative. Yet they were by no means issues which were always open to conventional collective bargain­ ing. In some cases (e.g. craft demarcation lines) they were vir­ tually matters of unilateral regulation by unions. In others, the reliance on industry-wide bargaining meant that there was no con­ venient machinery by which discussions about pay could be linked with matters of job organisation at plant level. Formal joint con­ sultation through works committees could certainly deal with some of the topics mentioned but its role was equivocal, especially because of the normal practice of keeping wage questions out of the con- 174 COLLECTIVE BARGAINING AND PRODUCTIVITY sultative machinery. It was the contribution of productivity bar­ gaining that it provided a route to introduce these matters directly into negotiations over pay changes and other worker rewards. This relates to the second question. (ii) What was involved in productivity bargaining for the reform of bargaining structure? Productivity bargaining was primarily a workplace phenomenon which marked a step in tl1e direction of bringing collective bar­ gaining into greater harmony with the reality of shop floor power relationships. The formal dominance of the normal industry-wide agreements sat uneasily with the informal system of bargaining on wage supplements at sectional and departmental level, and the logic of filling the intervening vacuum at plant or company level was widely recognised-as for example, in the analysis and recom­ mendations of the Donovan Commission.11 By introducing new subject matter into plant negotiations, productivity bargaining created a pressing need to develop new machinery which involved not only a devolution of authority from the industry level, but also the possibility of reducing the sectionalisation of shop floor bargaining, by integrating the several union groupings of the typical plant within the terms of a single agreement. The ideal of the single 'comprehensive' agreement was identified early by Allan Flanders in his analysis of the Fawley experiments.6 In fact it was seldom achieved in pure form, even at Fawley, but even a series of partial agreements could contribute to a much needed &implication and rationalisation of plant payment structures. (iii) What was involved in the process of productivity bar­ gaining? The theme of decentralisation of negotiations had another off­ shoot, this time in the process of negotiation itself. By making it possible for plant level representatives and even work group members themselves to be involved in discussion about changes in the content and organisation of jobs, as part of a negotiation about pay and conditions, the remoteness of centralised negotia­ tions was removed, and the scope for the shop floor participation was enhanced. This change undoubtedly presented problems as well as opportunity for the parties, requiring of them alterations in attitude, preparedness for bargaining, and organisation. For al-

5 Royal Commission Report (op. cit.), Chapters III and IV. 8 Flanders, op. cit. PRODUCTIVITY BARGAINING ABROAD 175 though the informal shop floor bargaining process had been an essential ingredient in the structure to fill the vacuum left by cen­ tralisation, it was constrained by the very existence of the industry­ wide settlement and tended to take place on a narrow front, re-em­ phasising the sectionalisation of bargaining and the difficulties of tackling problems of work content and organisation. It was in essence straightforward distributive bargaining, as opposed to the potential in productivity bargaining for a problem solving or inte­ grative approach. This in turn set up the opportunities to effect significant changes in attitudes, produced as much by the involve­ ment of management and work groups as by the planned outcomes of the negotiations. In a few of the more ambitious and sustained efforts to continue productivity bargaining through time, this kind of cultural change objective showed signs of emerging as the pri­ mary goal-for management at least-in the form of an acceptance of continuous change by workers without a specific quid pro · quo for each identifiable element in the change experience. These three implications of productivity bargaining, then, stand as the really significant elements in the British productivity bargaining experience. Together they illustrate the bearing of productivity bargaining on the key elements of any system of col­ lective bargaining: extension of content, adaptation of structure and extent of participation. Of these, the one that has tended to figure most prominently is the first, simply because of the striking characteristics of individual agreements. But on a longer term, broader perspective, one senses that the two latter elements are likely to prove the more significant. That may well stand as the last word for the moment on the U.K. experience, for although the more eye-catching agreements, involving (what were then) un­ usually large increases in pay in exchange for major changes in working arrangements, have now virtually disappeared, the reper­ cussions of structural changes set in motion by productivity bar­ gaining, and of workplace involvement in negotiations, are still at work in the system today.

II. Other Foreign Experience Apart from the U.K. experience-and leaving aside the U.S. experience-what evidence is there of productivity bargaining in other countries? Only two countries seem to emerge with any sig- 176 COLLECTIVE BARGAINING AND PRODUCTIVITY nificant record of productivity bargaining: Australia and Italy. Even there, the experience is very limited, but brief reports on the situation in these countries may be helpful. (i) Australia. The Australian industrial relations system is radically different from that of most other countries and is at first sight a rather surprising environment in which to find productivity bargaining.7 The system is characterised by the direct participation of the State, providing for compulsory arbitration through a net­ work of tribunals established by federal and state legislation. The ready availability of arbitration has resulted in widespread reliance on this form of settlement rather than the pursuit of negotiations through to a freely reached collective agreement. It is estimated that at least half the labour force are still covered by tribunal awards following notification of a dispute.8 The arbitration system is used to determine basic pay and conditions for large agglomer­ ations of unions and employers: supplementary 'over-award' wages or special conditions may be negotiated separately at plant level where, however, the content of bargaining is confined to a narrow front. These plant negotiations have become increasingly impor­ tant under the pressures of sustained full employment. Side-by-side with this structure exists an expanding 'free' collective bargaining system which often sets the pattern for arbitration awards, and in which the unions have sought to achieve favourable terms where they have strong bargaining power, then using these as a basis for pressing claims elsewhere through the arbitral system. Within this dual framework, the arbitration process has tended to uphold the validity of 'management rights', making it generally unnecessary to include in contracts provision for the exercise of managerial prerogatives. This inevitably reflects a situation in which matters of work content and job organisation are seldom the subject of joint regulation, and indeed it is difficult to see how the arbitration system could be expected to become involved in such plant-based questions. Further, the historical domination of

•It has been suggested to me by Oliver Clarke that this may be explained in part by the historical origins of Australian unionism (e.g. the Australian Engineering Union was formed by British emigrants who lost a strike over managerial prerogatives in 1851-52) . In this way British union concepts of job control may have been absorbed at an early stage by Australian trade unions. 8 Diane Yerbury and J.E. Isaac, Recent Trends in Collective Bargaining in Australia, p. 198 (in International Labour Office, Cotlective Bargaining in Industrialized Market Economies; I.L.O., Geneva: 1974) . PRODUCTIVITY BARGAINING ABROAD 177

the arbitration method, which has been maintained by the evident desire of the tribunals to retain their power, has meant that unions and employers' organisations have geared their structures to the requirements of the system, resulting in an essentially centralised orientation (at State rather than national level) which again pro­ vides an unpromising environment for the emergence of produc­ tivity bargaining. However, in practice unions have managed to secure de facto rules affecting work content and organisation, so that whatever the legal rights of employers "they lack the power to institute ...... changes unilaterally, even given any sanctions which might be available under the Arbitration system ...... they must, if they are to achieve the productivity increment, be prepared to provide compensation in return for the concessions sought."D This, of course, sets the scene for the introduction of productivity bargaining. The main source of information on productivity bargaining experience is the study by Riach and Howard10 which includes discussion of three cases (one of them unsuccessful) . All three reflect points of strong similarity with British experience. One case arose with the changing technology of the shipping industry, specifically the impact of containerisation which required modifi­ cations in crew size and allocation of duties. Traditional demar­ cation lines were not only inefficient per se but also gave rise to frequent disputes which could not be afforded on the new, more capital intensive ships equipped for handling container cargoes. The solution was to seek a simplification of the existing complex pay structure through a single monthly salary, related to improved manning practices, including a shift to integrated crews in which job flexibility was accepted and the use of systematic overtime was eliminated. The agreement, reached in 1969, was regarded in retro­ spect as a success by both sides, and since then similar arrangements have been extended to other ships. Subsequent negotiations have introduced slight modifications to the actual manning arrangements in the light of experience, but the main principles are well established. Another case concerned a New South Wales coal mining group,

• P.A. Riach and W.A. Howard, Productivity Agreements and Australian Wage Determination, p. 99; John Wiley & Sons Australasia, Sydney, 1973. 10 op. cit. For fuller discussion of the cases outlined below, see Riach and Howard, Appendix Case Studies, pp. 139-171. 178 COLLECTIVE BARGAINING AND PRODUCTIVITY

and again involved questions of crew size and deployment. One effect of the existence of the arbitral system in the background is that unions were prepared informally to accept the principle of flexibility, but were unwilling to have this written into the agree­ ments. According to Riach and Howard, this may not be un­ reasonable given "the distinct possibility that an industrial tribunal in some future hearing may take any explicit concession in working practices and award such changes elsewhere; without ensuring the incorporation of the close consul­ tation, negotiation and mutual agreement which we have stressed throughout as necessary elements of productivity bargaining-and perhaps without awarding a satisfactory or perhaps even any, quid pro quo to labour."11 The case in which productivity bargaining failed to reach a con­ clusion arose in petroleum refining, and again changing technology was the factor which generated the need for change. In one old­ established refinery, job organisation had changed much more slowly than technology itself, and (as in Britain) the plant was characterised by multiple unionism including strong craft-based groupings. The aim then was to achieve increased flexibility both within and between the operative and maintenance sections of the workforce. Management's strategy appears, however, to have been deficient, and an attempt to win over the workers through an intensive communications programme ran counter to the vested interests of the union organisation and its leadership, which was ideologically biased and unwilling to see its authority diminished. No agreement was reached. Elsewhere, there are indications of agreements which bear the stamp of productivity bargaining techniques: in agricultural im­ plement manufacture, in the airlines and (in the public sector) in naval ship-building.12 The future of productivity bargaining in Austrailia is uncertain. Riach and Howard have linked what is at times a trenchant attack on the 'mainline' system of arbitration to a strong advocacy of the need to extend free collective bargaining embracing productivity bargaining principles. Yerbury and Isaac are less sanguine, arguing

n Riach and Howard, op. cit., p. 152. "'See Yerbury and Isaac, op. c1t., pp. 183-4. PRODUCTIVI'IY BARGAINING ABROAD 179 that the major barriers are 'lack of awareness of its nature and potential' and the constraints imposed by the arbitration system. This reinforces management conservatism and inhibits development of the negotiating experience and skills which, as is evident from other experiences, is clearly an essential element in the successful conclusion of productivity bargaining. At the same time, there is evidence that the lower levels of trade union organisation are similarly underdeveloped. What is clear is that the dual system is coming under increased pressure as the balance of power grav­ itates to plant level, and it remains to be seen precisely what direc­ tion reform will take. (ii) Italy. The Italian system of industrial relations, like that in many other countries, has been undergoing considerable change during the 1960's. The strongly centralised (national and industry­ wide) system of collective bargaining that had been dominant in the postwar years came under pressure at plant and company level, and supplementary plant-level negotiations on such matters as piece rates, bonuses and job classification became widespread. This was only a partial solution, however, for this supplementary bargaining was conducted not by plant-level union representives but by pro­ vincial officials, and the failure to develop a recognised system of plant level participation led to pressures for still further change. After several false starts,l3 the process of change was advanced by the crisis of 1969, when an outbreak of wildcat strikes reflected a loss of control by official union authorities, and the separation of responsibilities in the recently-introduced two-tier (or 'articulated') bargaining system became hopelessly blurred. During this crisis, a new form of plant-level representation sprang up to fill the void left by ineffective union organisation, with 'delegates' being di­ rectly elected from the shop floor, outside the formal union or­ ganisation. This group was to become the cutting edge of the movement towards further decentralisation. The events of 1969 included a series of major strikes, partic­ ularly in the metal-working industries, which were typically the pace setters for collective bargaining developments; and the an­ nouncement by government of a Worker's Charter (which subse-

18 For an admirable discussion of this period, see Gino Giugni, Recent Trends in Collective Bargaining in Italy in International Labour Office, Collective Bargaining in Industrialised Market Economies, (op. cit.) , pp. 273-294. 180 COLLECTIVE BARGAINING AND PRODUCTIVITY quently became law in May 1970) . The strikes triggered in the 'hot autumn' of 1969 by the metal-working sector led to substantial pay rises and improvement in conditions, while demands for formal union representation and appropriate facilities-in reality a key to the legitimization of plant bargaining-were met (but only for the large national unions) in the 1970 Charter. With this victory, plant bargaining gathered momentum, and the spontaneous 'del­ egate' movement could begin to be re-absorbed into the formal union organisation. By 1971 an estimated 1.5 million workers were covered by 4400 plant agreements,14 notably in the metal-working industry, but also in textiles, clothing and rubber where the del­ egates' movement has emerged most strongly, resulting in frag­ mentation of the bargaining within the plant. This background to the evolution of the Italian collective bar­ gaining system is essential to an understanding of the potential for productivity bargaining. To use Allan Flanders' phrase, the 'challenge from below'15 has gradually produced a decentralisation of bargaining, as a result of which detailed plant and department level negotiation is possible. But this development has apparently gone ahead faster than the changes in union organisation: and the system is still characterised by a great deal of uncertainty,16 which is not helped by the background of political instability, and by a dualism which reflects important differences in conditions between north and south, and between large and small firms. With the emergence of explicit plant-level bargaining around 1970, the new-found freedom for shop floor representation began to express itself in a questioning of management prerogative and broader questions of work organization. According to Giugni, "The symbol of this campaign is the assembly line, which is singled out as the source of the workers' alienation and degradation. In this drive for a new type of organization, particular importance is attached to such matters as the working environment, the pace of work and job classifica­ tion. . . . The complete elimination of the lower grades, the introduction of job enlargement or job enrichment and

"Giugni, op. cit., p. 289. '" Allan Flanders, Industrial Relations: What is Wrong with the System'!, Faber and Faber, London, 1965. 18 For an elaboration of this view, see Guido Zangari, National Report on Italy (in OECD, Recent Trends in Collective Bargaining, International Man­ agement Seminar, Supplement to Final Report) , Paris, 1972: pp. 45-65. PRODUCTIVITY BARGAINING ABROAD 181

the end of the practice of breaking down the work into simple operations have become common claims."17 It is important to stress that this kind of claim is being pressed in the process of negotiation at shop floor level, and while the num­ ber of agreements actually reached appears to be limitedlB the spread of interest in this approach has been significant. No information on specific cases is available at present, and it is not possible, therefore, to determine how far the actual process of negotiation and the nature of the trade-off between changes in working practice and improvements in pay and conditions con­ form to other experiences of productivity bargaining. In partic­ ular, it must be noted that initiative comes from the side of labour rather than as an expression of employer desires to increase control or productivity. To what extent, therefore, there exists a real quid pro quo for management is uncertain, however real the opening up of bargaining areas typical of productivity bargaining elsewhere. It remains to consider what further development is likely. Re­ cent commentaries on the Italian system vividly suggest that the process of change is by no means at an end.19 Among the problems still to be resolved are the ability of the unions to acquire control over the delegate movement at plant level (which threatens in places to substitute for factory level union organisation) ;2° and the interplay between the various levels of bargaining which now range all the way from national (industry-wide) negotiations down to fractional bargaining at departmental level. This latter set of relationships shows signs of developing into a framework of 'con­ tinuous' bargaining in which agreements have no validity except as temporary and open-ended working documents, susceptible to continuous renegotiation and leverage among the various levels. The basis in Italy for the development of productivity bargain­ ing is therefore precarious, and is the outcome of a major change in the system which has not yet stabilised. Whatever the advan-

17 Giugni, op. cit., p. 290. 18 ibid., p. 290. 19 Cf. Giugni, op. cit.: Zangari, op cit.: also K. J. Allen and A. A. Stevenson, Introduction to the Italian Economy, Ch. 4, Martin Robertson, London, 1974. ""Allen and Stevenson (op. cit., p. 139) suggest that the recession of 1972 and the emergence of a more rightist government may have helped the unions to re-establish their authority, but the final outcome is not yet certain, especially as Italian unions may be less concerned with organisational authority in a hierarchical sense than their counterparts elsewhere. 182 COLLECTIVE BARGAINING AND PRODUCTIVITY

tages of productivity bargaining in the ideal situation, there must be doubts whether useful progress can be made in such a setting as Italy now provides. Among the important conditions for suc­ cessful agreements must be included inter alia, the existence of mutual trust as a basis for this kind of extension of bargaining activity.21 It is difficult to see how such trust can be developed in a context of unstable union-employer relationships. If that con­ clusion is correct, the contribution of productivity bargaining may simply be to add still further confusion to what is already a conflict-ridden and dangerously unbalanced situation. Reflection on the foregoing discussion of British, Australian and Italian experience indicates that the path towards productivity bargaining has been very different. But if there is no general pat­ tern overall, there are some elements in common. First, and most strikingly, all three countries were moving towards decentralisation of negotiations. In each case the primary level of wage determina­ tion had been well above plant level but pressures from the shop floor produced a need to recognise the increased power at the lower levels and (in the cases of the U.K. and Italy at least) the desire by workers for more extended involvement of plant repre­ sentatives in the regulation of plant affairs. Secondly, vexed ques­ tions of managerial prerogatives featured in all three cases, giv­ ing rise to a prime facie condition for productivity bargaining. Thirdly, in Britain and Australia, craft-based unions were present, creating the potential for a particular form of inflexibility in man­ power utilisation that is seldom found under industrial unionism. The next section will include consideration of the extent to which such factors are important in determining the diffusion of produc­ tivity bargaining.

Ill. Some Explanations for Limited Development Abroad In this section we turn to a discussion of reasons why produc­ tivity bargaining has not been more widespread. It is perhaps as well to begin with some corroboration of the conclusion that for­ eign experience is limited. In a study covering Sweden, France and West Germany, Yves Delamotte observes that problems of achieving higher productivity are as common among European

21 Cf. McKersie and Hunter, op. cit., pp. 172-6. PRODUCTIVITY BARGAINING ABROAD 183 managers as in Britain and might be expected to lead in the direc­ tion of the productivity agreement. He concludes: "This has not, however, been the case. In the countries visited for the purpose of this survey . • . there are no productivity agreements in the British sense of the term."22 Delamotte goes on to offer an explanation. First, this kind of agreement is held to be unnecessary, because the problems of rigidity in work organisation, stemming largely from the presence of craft unions, do not exist in most continental countries where the unions are organized along industrial lines. But even the ab­ sence of craft unionism. does not mean that there are no problems in the reorganisation of work. No matter, argues Delamotte, the French manager who seeks union approval in negotiation "would be acknowledging that he no longer had exclusive authority to de­ cide on the necessary changes, thereby creating a dangerous prec­ edent for the future. . . ."23 We are, then, back to a situation where management prerog­ ative still holds firm. Productivity may enter into negotiations, but management decides on the changes to take place, and there is no attempt to relate specific changes to improvements in the pay, which is the hallmark of the typical productivity agreement. Swe­ den and Federal Germany occupy a middle position, where man­ agerial prerogatives remain intact within the terms of the contract, but consultation with the unions on technical and structural change plays an important role-in France and Federal Germany through works councils as a legal requirement, in Sweden by a binding national agreement.2• Delamotte goes on to argue, secondly, that even if managements in these countries were to be converted to the cause of productivity bargaining, it is by no means certain that the trade unions would cooperate. To the extent that productivity bargaining implies differential improvements in pay among different plants in the

,.. Yves Delamotte, The Social Partners Face the Problems of Productivity and Employment, O.E.C.D., Paris, 1971, p. 45. 08 Delamotte, op. cit., p. 46. " It is worth noting however that since Delamotte was writing, both the Swedish and German situations have changed. In Sweden, a new law on trade union rights in the workplace has weakened management's freedom, while in Germany the recent developments in Works Council legislation may have had a similar effect: see p. 189. 184 COLLECTIVE BARGAINING AND PRODUCTIVITY same industry, the solidarity principle that underlies trade union wage policy would be threatened. And indeed this differential outcome was surely one of the factors which gave rise to felt in­ equities in the British experience of the late 1960's, and added to the disenchantment.2s Acknowledging that the problems tackled through productivity bargaining in Britain are important elsewhere (for example, staff status for manual workers, reduction of hours, increasing produc­ tivity through rationalisation and technical change) , Delamotte concludes that the three European countries have gone about it in different ways. In Sweden, the route has been by way of strongly centralised collective bargaining, competitive pressures on low pro­ ductivity firms and an active employment policy to mop up the resulting unemployment and secure rapid transfer to high produc­ tivity employment.26 In France and Germany, the solution has been through the emergence of a code of practice determining pro­ cedures for consultation and compensation for enforced change of employment, to be applied in any situation of change, but without restrictions on management's rights to pursue efficient production techniques. Thus within this framework, the process of change can take place on a continuous basis, the results being reflected in ne­ gotiations at each wage round but without specifically being tied to pay increases or other worker or union benefits. The principle is widely accepted that there should be continuous adaptation and change, such as was sought in a few of the later U.K. productivity agreements, and advocated by the National Board for Prices and Incomes in its concept of efficiency agreements.27 Of the three significant aspects of U.K. experience identified earlier-content, change in bargaining structure and shop floor participation in problem-solving-it is the first (content) which is

25 Cf. McKersie and Hunter, op. cit., pp. 277-282. ""For a useful discussion of this approach, see Erik Lundberg, Incomes Policy Issues in Sweden, in W. Galenson (ed.) , Incomes Policy: What can we learn from Europe?. Corneii, Ithaca, 1972: pp. 47-51. Note also Ulman's observation that active labour market policies outside the U.K. have been regarded as independent of policies of institutional reform: Lloyd Ulman, Collective Bargaining and Industrial Efficiency, in Britain's Economic Prospects, by Richard Caves and Associates, George AIIen & Unwin, London, 1968: p. 370. "" National Board for Prices and Incomes, Productivity Agreements, Report No. 123, Cmnd. 4136; HMSO, London, 1969. The efficiency agreement concept included productivity agreements but extended coverage to include agreements where changes in work practice were not specified in advance: this principle was thought particularly appropriate for white collar workers. PRODUCTIVITY BARGAINING ABROAD 185 central in Delamotte's analysis. That is, the contribution of pro­ ductivity bargaining is seen as introducing issues of managerial control over work organisation and effort utilization, and the focus of the process is on the rate of exchange between payment and this control. Clearly, where management already has this kind of con­ trol, there is no need to bring it explicitly into the bargaining process. While there is no reason to quarrel with this explanation for the limited diffusion of productivity bargaining, it is evident that it does not carry over into the other areas of significance, namely, bargaining structure and participation. Particularly in view of our findings in the Australian and Italian cases, where changes in bar­ gaining structures and the desire for more plant-level involvement were evident, we must go on to see whether similar forces were operative in other countries, and if they were, how they were tackled in the absence of a productivity bargaining approach.

(a) BARGAINING STRUCTURE In most countries it is possible to identify one predominant level of bargaining, but at the same time almost all are character­ ised by a complex system of interrelationships reflecting bargaining activity at a variety of levels from the truly national down to the section or department of the individual plant. In very general terms, it may be said that the North American pattern is decen­ tralised, based either on the plant or the company: that the Jap­ anese pattern is enterprise-based; and that the West European tra­ dition is one of centralisation. Within this broad categorisation, however, there is considerable variation according to industrial and sometimes regional practice. In Western Europe, the generally centralised structure includes two main types of organisation: the economy-wide level of nego­ tiation based on highly centralised union and employer organ­ isations which is common to the Scandinavian countries and Aus­ tralia; and the industry-wide system which holds in most others. The economic pressures of full employment which have perhaps been mainly responsible for the increased bargaining power at plant level in the U.K. and Italy have undoubtedly been present throughout Europe in the post-war period. Taking Sweden as an example of the highly centralised Scandinavian group of countries, 186 COLLECTIVE BARGAINING. AND PRODUCTIVITY we recall that the economy-wide negotiations28 determine the pat­ tern of major changes in wages and conditions for all industries, but that this is developed in greater detail through subsequent in­ dustry-wide and plant bargaining-the latter dealing particularly with setting group and individual incentive rates, which affect about 60 per cent of the workforce. This process of supplementary bargaining inevitably gives rise to a high degree of wage drift, but the system has not degenerated into one of fragmentation and dis­ order in pay structures, as was true in the U.K. for example, largely due to the strong control exercised by the central trade union and employer authorities. In particular, the Swedish union wage policy with its emphasis on solidarity helps to keep the earnings differen­ tials narrowly prescribed and this, together with a highly progres­ sive income taxation and the existence of an active labour market policy which provides employment security, helps to preserve the stability of the system. In countries such as France and West Germany, the dominant pattern is one of industry-wide bargaining, but elements of econ­ omy-wide negotiation have em�rged, as has a growing pressure for decentralisation. To the extent that economy-wide bargaining has taken place, however, it has been of a quite different form from that of the Scandinavian countries, with the emphasis being more on procedural matters (Germany) and employment security, pen­ sions and insurance (France) . More importantly for our present purpose, the role of bargaining at plant level has expanded con­ siderably in recent years, again doubtless because of the economic pressures making themselves felt there. In both cases, however, the legislative framework of industrial relations has provided a controlling influence which has not proved possible in the case of the U.K. with its reliance on the 'voluntary' tradition.2D And in contrast to Italy (where a legislative framework also exists) France and Germany have contrived to prevent plant level pressures from getting out of control. Whereas in Italy the plant level union organisation was ill-developed, and the statutory works council machinery inadequate, giving rise to the spontaneous eruption of the 'delegates' movement, the existing trade union (and works council) organisation appears to have been strong enough to con-

""Separate for manual and white-collar workers . .. For a recent discussion, see Allan Flanders, The Tradition of Voluntarism, British journal of Industrial Relations, Nov. 1974. PRODUCTIVITY BARGAINING ABROAD 187 tain the pressures until legislative changes gave recognition to the new requirements. Thus an Act of December 1968 gave French trade union delegates legal rights to operate at the level of the plant, while in Germany, although the works council machinery has assumed responsibility for the fixing of piece rates, the estab­ lishment of principles of remuneration and job evaluatiqn,30 there has been growing evidence of involvement by union representatives at plant level in the bargaining process, and of employers' accep­ tance of this development, especially in the metal working industry� It is clear even from this abbreviated account that the kinds of change in the distribution of bargaining power that we have observed in the U.K., Italy and Australia, have also been common in other European countries. More generally, we may note the conclusion of a recent I.L.O. study: "In most countries the dominant trends at present are to­ wards decentralisation, especially in the countries of West­ ern Europe where industry-wide bargaining has been the general rule. With few exceptions, the trend is towards more local decision making, more plant-level bargaining, more company agreements, and more participation in col­ lective bargaining by unions and by the management of individual enterprises."31 If the experience of France, Federal Germany and Sweden is typical of other countries, it seems likely that the trend to plant bargaining has been able to develop within a well controlled in­ dustrial relations framework-whether that control comes from law (as in Germany and France) or the central organisations (as in Sweden) . Thus whereas in the U.K. productivity bargaining could be interpreted as a means of developing a mechanism for plant-level negotiation, bridging the gap between plant consultative committees and industry bargaining in a way no other institution was able to achieve, the channelling of plant level pressures else­ where has been taken in hand by the existing institutions. In that light, the Italian path to productivity bargaining has been due

80 Cf. Hans Reichel, Recent Trends in Collective Bargaining in the Federal Republic of Germany, in I.L.O., Collective Bargaining in Industrialised Market Economies, op. cit., p. 262. Reichel also observes that stewards may be membei:s of the union negotiating committee for the finn, and can also play an informal advisory role (p. 262-3) • 81 I.L.O., Collective Bargaining in Industrialised Market Economies, op. cit., p. 126. 188 COLLECTIVE BARGAINING AND PRODUCTIVITY to the failure of existing machinery, and the Australian extension of a relatively few isolated examples will depend on the resilience of the arbitral system in face of the challenge from 'free' collective bargaining. 32

(b) PARTICIPATION The third significant aspect of productivity bargaining expe­ rience in the U.K. was identified above as participation, in the sense that it involved a joint search for alternative solutions to the identified problems and joint selection of solutions, thus estab­ lishing a basis for integrative bargaining and worker involvement in problem solving activity. 'Participation' has a wide variety of applications in the industrial relations field, ranging from co-deter­ mination at board level, through the various forms of works council machinery, down to the involvement of the individual on the work group in the microsystems of the shop floor organisation. The needs satisfied by these forms of participative activity are rather different but we need not be concerned here with board (or com­ pany council) levels of representation, which are concerned more with plant-wide issues and the relationship of the plant to the wider company or community environment. Both the works coun­ cil mechanisms, and the work group's participation in determining its organisational form and task arrangement, however, are rel­ evant to the participative activity capable of being generated by productivity bargaining. In one sense, the very process of decentralisation of collective bargaining, and the creation of machinery to cope with the new issues it raises at the lower levels, carry the implication that the remoteness of industry-level bargaining is reduced, and the rel­ evance of the bargaining process to the individual worker or group is seen more clearly. But plant level bargaining per se need not bring about a real sense of participation. In particular, it is still perfectly possible for plant bargaining to be characterized by union officials using straightforward distributive bargaining tactics, as op-

.. No comment has been made here on the North American or Japanese systems, which are essentially decentralised, and are not therefore subject to the same kinds of pressure as European systems. Indeed, the current trend in the U.S. (and perhaps in Japan through the unifying efforts of the annual spring wage offensive) seems to have been towards greater centralisation. To the extent that this movement succeeds, it may serve to create something of the plant level remoteness which has been a stimulant to the changing structure. PRODUCTIVITY BARGAINING ABROAD 189 posed to the problem-solving approach sponsored by some of the best examples of productivity bargaining. Indeed, while one would not necessarily require pure integrative bargaining as a condition of productivity bargaining, the presence of some integrative ac­ tivity does appear essential. It is, then, upon this problem-solving activity below plant level that we focus as the primary character­ istic of the participative process. In the British situation, the scope for such involvement was extremely limited until the advent of productivity bargaining. The only obvious route was through the joint consultative system, which was more apparent than real due to the weakness (or absence) of such machinery in many plants and the mutual avoidance by unions and employers of the more difficult and controversial issues. This criticism is much less applicable to the well developed system of works councils established statutorily, or by national agreement, in a majority of West European countries. Practice varies from country to country, and the stage of development actually reached differs, so that generalisation is risky. On the whole, however, the works council systems have been able to deal not only with plant­ wide issues of manpower and personnel policy, but also wi th de­ tails of the process of adaptation to technical and organisational change, including the transfer and deployment of labour. These are not, however, explicitly introduced into the bargaining process. Rather the situation is that management formulates its plans, which are then considered by the works council before active steps are taken to implement the change. The extent to which manage­ ment can ignore adverse reactions from the council will vary ac­ cording to the country and according to the issue: for example, under the 1972 German legislation, dismissals, transfers and re­ deployment of personnel may in defined circumstances be referred to the Labour Courts if council approval is withheld:aa Rights to joint decision-making through works council machinery, quite gen­ erally, cover many of the issues which would elsewhere be appro­ priate to a productivity bargain approach.34 A significant difference

83 For a useful account of the post-1972 situation in Federal Germany, see Ivor L. Roberts, the Works Constitution Acts and Industrial Relations in West Germany, British journal of Industrial Relations, November 1973, pp. 338-367. "'These might include, for example, the time pattern of work, methods of wage .payment, work measurement systems and the application of methods for determining wage structures. 190 COLLECTIVE BARGAINING AND PRODUCTI\ilTY exists in the fact that whereas in Britain the union must almost of necessity be involved in such issues (in the absence of alterna­ tive machinery) , in Europe the works council and union organisa­ tions have been conceptually quite separate-the degree of overlap in membership varying among countries. The significance of the statutory works council system, there­ fore, is that by legal authority it includes within its scope a right to be involved in a wide spectrum of plant level policy-making activites, and in that sense can be seen to be participating in the solution of problems within the plant, though not necessarily by means of bargaining behaviour.35 It is true that this kind of machinery existed in Italy, yet as we have seen it was ineffective in its approach to the problem areas of employment security and as a result of the pressures generated, a more direct approach has emerged, akin to productivity bargaining. In addition to this avenue to participation, there is a second approach which has been carried furthest in the Scandinavian countries, but which can be found in at least a few companies in many parts of Europe. This is the form of industrial democracy which lays stress on the democratisation of the work place, not by representation on boards or councils but by individual workers being involved in the restructuring of the workplace and their roles within it. The key to this form of participation is the at­ tempt to increase the autonomy of the individual or the work­ group with respect to their tasks--which may be radically redefined during the process, and may carry repercussions for organisation, technology and work-roles well beyond the group itself. This approach has been carried furthest in Norway and Sweden. In Norway, it has been the subject of an experimental programme under a joint management-labour committee at national level, backed up by intensive research and development activity.ae In Sweden, the Volvo experiments in the redesign of assembly line

85 With the gradual extension of works council rights, the former limitations on its true bargaining role within the plant are being eroded and in future the line between bargaining (including plant wage matters) and responses to man­ agement plans may be increasingly difficult to draw. 88 A recent OECD report noted that thirty-five leading employers in Norway were now engaged in the programme. It is noteworthy that this pro­ gramme resulted from an investigation of the effectiveness of works council forms of participation which revealed grounds for dissatisfaction and the need to set up other approaches. See OECD Prospect for Labour Management Co­ operation within the Enterprise, Final Report, Paris, 1974: p. 21. PRODUCTIVITY BARGAINING ABROAD 191

work to develop improved quality in working life are well known, The Phillips (Holland) programme of job enrichment, through the development of individual and group responsibilities for their own work organisation, belongs to the same category. It is impossible to go into this emerging trend in any detail, but it is clear that this kind of participation is very close to that which occurs in cases of productivity bargaining, seeking to extend the individual's direct involvement (rather than just representa­ tion) in regulating the conditions and quality of his working life.37 This involvement is, in both instances, essentially a problem solving activity, reconciling the needs of the individual for more discretion and fulfilment in his work with the organisation's needs for effi­ cient production and effective organisation. . It would be pointless to push the analogy too far, for there are evidently important differences. The autonomous work group/job enlargement concept of industrial democracy often goes well be­ yond what was envisaged even in the more ambitious U.K. pro­ ductivity agreements; and whereas the latter were essentially an outcome of a bargaining process, however integrative, the indus­ trial democracy movement is divorced (directly at least) from the process of wage negotiation. This, however, serves to emphasise the main point of this discussion, that despite the common need for development of improved participation in all industrialised countries, it has been met in different ways. Thus where productivity bargaining introduced both greater general involvement of work groups and shop stewards and greater individual participation by workers in determining the performance of their work, both these forms of participative activity seem to have been developing throughout the main industrial countries of Western Europe. The works council system has provided a mech­ anism for participation of more general kind, its limits within the plant being defined by the legislative framework of each· country. It may be, therefore, that where such machinery exists and is ca­ pable of responding to the developing needs of the labour move­ ment, it provides a direct fulfilment of the participative desires

"'This need not be inconsistent with the requirement that fragmentation of bargaining activity should be reduced (cf. above, pp. 5 & 6) . What is en­ visaged is an orderly plant-level system of negotiation within which scope will exist for detailed involvement by work groups in their own specific job territory. 192 COLLECTIVE BARGAINING AND PRODUCTIVriY met elsewhere by productivity bargaining. But there has also been increasing experimentation with radically new methods of work organisation, evolving in complementary fashion alongside more formal approaches to industrial democracy. This again may be interpreted as a parallel development to that of productivity bar­ gaining, arising out of joint labour-management concern for the quality of working life. Here too, the lesson may be that where conditions are suitable for such initiatives to flourish, the need to resort to a bargaining approach may be reduced.

IV. Conclusions The main argument is now completed and can be summarized as follows. Outside North America, the only really significant ex­ perience of productivity bargaining has been in the U.K. but Italy and Australia in different ways have also witnessed developments in this direction. Analysis of the U.K. situation suggested three important contributions from productivity bargaining, relating to the content and structure of collective bargaining, and the extent of participative activity. The relevance of these issues in Western Europe was then examined, and Delamotte's conclusion was noted that the special content of productivity agreements was unnecessary in France, West Germany and Sweden, due to the clearer definition of management rights and the importance of the solidarity prin­ ciple. Going beyond Delamotte, we have observed broadly similar trends towards decentralisation of collective bargaining in the pre­ viously centralised European systems, and towards greater participa­ tion by workers and their representatives in plant-level affairs. It has been argued that factors such as the legislative framework of industrial relations (including the provisions for Works Councils) and elsewhere, the strength of the central organisations, have been important in channelling and controlling the grass-roots pressure for plant bargaining; while in the case of participation, works coun­ cils and job-restructuring approaches to industrial democracy have developed to provide a problem-solving approach to issues affect­ ing individuals and work groups in the workplace. Thus the prob­ lems approached through productivity bargaining in Britain clearly exist elsewhere, and there is enough evidence to suggest that differ­ ent traditions of unions and management, and different institu- PRODUCTIVITY BARGAINING ABROAD 19!1 tiona! and legislative environments, play some part in determining the route to their solution. It remains briefly to consider the future. On the European front, the present trend appears to be one of gradual circumscrip­ tion of managerial rights, not by de facto trade union power but through the development of the legal framework of industrial re­ lations (and this is true even of Scandinavia where there are sounds of complaint-from both unions and employers-that mat­ ters are being covered by legislation which could well be handled by collective bargaining) . The eventual pattern is not yet clear, but to judge from the combination of developments both at plant and at national level, it seems likely that there will emerge a com­ plex, interrelated network of bargaining processes ranging from tripartite discussions between employers, unions and government at national level down to detailed negotiation on sectional matters within the plant. At all levels, but particularly at the lower reaches, questions of productivity are likely to remain quite cen­ tral. Their treatment will depend on developments in union or­ ganisation at plant level. On past evidence one would expect that productivity questions would be treated with a broad brush in negotiations, with works councils being involved in joint planning and unions taking productivity improvements into account in bar­ gaining. This of course would be in contrast to the specific treat­ ment of such matters in productivity bargaining. But with the tendency for works councils to take on more bargaining functions at local level, and with the possibility that union organisation at plant level will strengthen, it is just possible that there will be a greater fusion of problem solving and bargaining functions, which could lead to behaviour not far different from productivity bargaining. In Britain there are still many uncertainties to be resolved, including continued membership of the European Economic Com­ munity which is likely to bring movement in the direction of statutory works councils and co-determination. Already draft legislation exists for an extension of employee rights and further movement towards industrial democracy and union involvement in company planning is in prospect. Such legislation will even­ tually have the same effect as elsewhere in Europe-a continuing redefinition of residual managerial rights and increased employee 194 COLLECTIVE BARGAINING AND PRODUCTIVITY participation in all areas of plant and company activity. · There is, however, an unknown factor, namely how the introduction of works council machinery will interact with the strong plant-based union organisation characteristic of many industries. But if a satisfactory blend can be achieved, it is probable that the main features of productivity bargaining activity will be absorbed by more developed forms of industrial relations institutions. If that is so, the likely outcome will be a convergence between British and European systems. OFFICERS OF IRRA FOR 1975

PRESIDENT:

Gerald G. Somers. U n iversi 1y of \\' isconsi n

PRESIDENT-ELECT:

Irvi ng Bernst e i n. Universily of California, Los Angel es

SECRETARY-TREASUHER :

Richard U . 1\l i ller, Uni,·ersi ty of Wisconsin

CO-EDITORS :

James L. Stern, Uni versi ty of \\'i sconsin Barbara D . Dennis, University of \\'isconsin

EXECUTIVE BOARD MEMBERS :

Eileen Ahern , Conti nenta l Can Company Arvi d A nderson , Onice of Collect i ve Bargaining, NYC Henrietta L. Dabney, Amalgamated Clothing \\' orke rs of America ·wal ter A . Fogel, Uni ,·ersi ty o f California. Los Angel es Thomas \V. Cavett, B11reau of Labor Statistics, USDL Joseph P. Goldberg, Bureau o f Labor Statistics, USDL Nathaniel Goldfinger, AFL-CIO Juanita 1\f. Kreps, Duke Universi ty Graeme H . 1\lcKech nie. York U ni v e rs ity Robert B. M c K ersie, Cornell U ni,·ersity Herber t S. Parnes, Ohio State Uni versi ty Jerome 1\f. Rosow, .Exxon Corporation Da v i d \V. Salmon. \\'estern Conference of Teamste rs G eo t·ge Strauss, University of California, Berkeley Paul Yager, Federal J\lediation and Conciliation Sen· ice

PAST PRESIDENTS OF IRRA

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