An analysis of imbalance of bargaining power

The relationship between employers and employees has experienced a process from confrontation to concession and cooperation, from imbalance to relative balance during the past hundred years. In the early stage of industrial relations, owners of capital employed large numbers of wage labours to produce standardized goods in larger quantities for markets and employers and had absolute ascendancy over labour. However, economic transition and political democracy engaged in the late nineteenth and early twentieth century which promoted the unions’ growth to a great extent. After World War II, more regulations and legislations were created to standardize the actions of both parties. Consequently, large scale conflicts declined relatively and replaced by regularly organizational behaviours, such as collective bargaining and tripartite organization. Whereas union membership decreased and individuals were emphasize around 1970s. Although unitarists claimed that with a single source of authority (management) and all participants sharing the same goal, harmony and co-operation are the predicted outcomes, it is still necessary to take the pluralist assumptions into account in the labour market of the 21st century. There are four main assumptions in Pluralist, which are diverging interests within the employment relationship; an imbalance of bargaining power exists; labour should not be treated as a commodity; principles of equity and fairness are important. However, bargaining power constitutes the most essential feature of the management-union relationship.

This paper presents a tactical approach to the analysis of imbalance bargaining power in respect of union and individual level. In general terms, the classic definition of bargain power is “the capacity to exert influence, and to overcome resistance in achieving a desired objective”(Rojot,Jacques.,1991). In the management-union relationship, each party has power over the other: management has the power to deduct wages and terminate employment contracts; employee has the power to withdraw work, effort or goodwill. Nevertheless, Adam Smith pointed out in 1776:” It is not difficult to foresee which of the two parties must, upon all ordinary occasions have the advantage in the dispute, and force the other into compliance with their terms. Many workmen could not subsist a week, few could subsist a month, and scarce any a year without employment. In the long run the workman may be necessary to his master as his master is to him, but the necessity is not so immediate”. The statement clearly indicated the existence of imbalance of power between the employer and employed.

Generally speaking, the union and collective bargaining are recognized as a counterpart of the employers instead of individuals. And unions significantly influence the bargaining process and the decisions made by employers by means of negotiation and strike. Concerning on the power in bargaining , the analysis of the environment is of primary importance, because it is from the environment that bargaining power issues. External environment and internal environment are two principal forces influencing the decisions and actions of the two parties heavily. Several factors associated with external environment are the economy, the socio-political system, media and public opinion, and the wider industrial relations system. The union party is able to get an advantage in a certain history period, like in war; in a prosperous economy; in a supportive public opinion; in a backing from a strong and cohesive organization. Management can find an advantage in signed contracts or agreement; in a union that not united on an issue and on the use of industrial action. Also, if government favours one side, it will definitively get the edge on the other party. Management and unions are not the only interested parties and, therefore, not the only ones that can influence the outcome of negotiations. According to a report published in Business Week in August 9th 2004, the union of Chandler gave up 2.8% salary raises and consented to lengthen working hours from 35 hours to 39 hours per week in order to keep the 6000 employment opportunities in Germany in the following 8 years. The example illustrates that global economy brings impacts to negotiations between management and unions as well. Also, internal context could be divided into two parts,one part relates to the management side and the other part relates to the union side.Those on the management side include business/market conditions, business strategy and organization, and leadership goals and attitudes. Those on the union side include membership demographics and expectations, union organization, and leadership goals and attitudes to management.

These crucial forces heavily influence how the parties participate in the process of negotiating and even decide the power of the engaged parties. As a result, it is implicit to conclude the bargaining power between employment and union is balanced or not in such a changeable situation .

Comparing with bargaining power between management and union discussed above things may changed significantly relating to individuals. Generally speaking, after the World War II the industrial relations stepped into a new era along with the declining of large scale conflicts replaced by regulatory and organizational behaviours and rules; the declining density of unions which mainly in traditional industry sectors, such as coal, transportation and manufacturing on account of the economy restructuring; and decentralization trend of collective bargaining. Meanwhile, the importance of people themselves, its initiative and creativity for the efficiency of the organization is recognized gradually. People are the lifeblood of organizations, which could present one of its most valuable resources. Managing people is one of the most difficult aspects of organizational management as it is concerned with people related problems and interests.

This difficulty largely results from the fact that people are inherently different physically and psychologically. And diverging interests do exist in the two parties: the objectives of employees are various, such as income, security, satisfaction and career development, while the goals of the employers are high margin and low cost. The employment relations can be described as profit and wages, authority and compliance, which creates a persistent tension between employer and employed, management and workforce. However, employment is the side possessing capital and buying the working ability of employees by signing the contracts. Only when the goals of the employment are satisfied, will the requirements of the employees be realized. In other words, by conducting and supervising the production process and building a relationship of authority and compliance, the company will be well operated and then employees will obtain more welfare and promotion opportunities.

Concerning the reality of the employment market, the unemployment rate increased from 6.1% in 1999 to 15.1% (CSO 2009) in Ireland. It reveals a situation of employers displaying large amounts of bargaining power over the other. Suppose Erin, a graduated student, is applying for a job at a xx Company, only one position is available, and there are 100 different people applying for that same position. The company will have a lot of choice, and will be in a position to offer Fri a standard form contract for employment, complete with minimum wage pay, nothing but workers compensation and unemployment as benefits. Obviously, it makes it more likely that the employer will gain more favorable terms. Therefore, the bargaining power of an average employee is weaker than employer undoubtedly.

In contrast, for a highly skilled and knowledgeable employee, the stake in bargaining may very enormously. Under the influence of Knowledge Economy, the knowledge capital and human capital act more significant role nowadays. The Human Resource Development Report in 1996 from United Nations Development Program claimed that, three quarters GDP of one country relied on its human resources, while one quarter on its capital resources. As Backer notes, more than 75% capital in developed country is human resources rather than physical capital. Intelligent persons present values both in economy and investment entitling them greater bargaining power with employer. It is this that lead to a relative balance power between employers and employees.

The main overall conclusion concerning the bargaining power is a present division that between management-union relationship and employer-individual employee relationship. In the management-union negotiation, many other forces, such as economy situation, the socio-political system, media and public opinion, the industrial relations system, and the internal organizations and goals, may heavily affect the attitudes, tactics, and bargaining power of the parties. Although it is claimed that an imbalance exists in management-unions relationship, it is implicit to conclude the strength of both parties’ bargaining power in such a changeable situation. On the other hand, an average employee is normally reduced to relative inferiority, while a highly skilled employee particularly will get more chance and capital to negotiate with employers reaching to a relative balanced bargaining power.