EMPLOYMENT MATTERS

A lunchtime seminar series aboutemployment relations and

the world of work

http://www.dti.gov.uk/er/emar/events.htm 

 

Professor John W. BuddIndustrial Relations CenterCarlson School of ManagementUNIVERSITY OF MINNESOTA

Why Efficiency is Not Enough: Employment

Relations with a Human Face

Employment Relations Seminar

Dept. of Trade & IndustryLondon

Tuesday, June 29, 20042

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Adapted From

John W. Budd

Employment with a Human Face: Balancing Efficiency, Equity, and Voice

ILR Press Imprint of Cornell University Press, 2004

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Overview

Employment should be productive, but it is not simply an economic transaction. Employees deserve fair treatment (equity) and input into decision-making (voice). Efficiency, equity, and voice are therefore the key analytical dimensions of the employment relationship. Achievement of economic prosperity, respect for human dignity, and equal appreciation for the competing human rights of property rights and labor rights further require that efficiency, equity, and voice be balanced. Public policies, business practices, and union strategies need to promote this balance and create employment relations with a human face.

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Ask Yourself

What do you want to get out of working?

How do you want to be treated?

How do you want your job conditions determined?

What does your employer want from you?

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Common Responses

What do you want to get out of working?

£ (or € or $), benefits, self-worth, accomplishment, friendship

How do you want to be treated?

fairly, with respect How do you want your job conditions determined?

talk with supervisor What do employers want?

high-quality work, productivity, loyalty

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But…

Contrast your answers with academic, policymaking, and corporate perspectives on work: Economics: Work is purely an economic transaction

endured to earn income Human Resource Management: Designing policies to

create productive employees Balance Sheets (and Government Budgets):

Employees are costly factors of production Debates over family leave, minimum wages, trade

unions, and global labor standards reduce to analyses of labor costs and competitiveness

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Efficiency, Efficiency, Efficiency

Contemporary discourse is dominated by Efficiency Standard economic theory is the basis of the

Liberal Market Economy:

Competition is assumed to prevent bad jobs (Milton Friedman) Marginal Productivity Justice—whatever the market produces must

be fair

Well-Defined Property Rights

Free Market

Transactions

AggregateWelfare

Maximization(Efficiency!)

+ =

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Beyond Efficiency

But what about a concern for how workers are treated? Decent Work (International Labor Organization,

1999) A Fair Globalization: Creating Opportunities For

All (World Commission on the Social Dimension of Globalization, 2004)

Rerum Novarum / On the Condition of Workers (Pope Leo XIII, 1891)

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My Premise

Work is a fully human activity in a democratic society Employees seek income, and intrinsic rewards Employees want and are entitled to fair treatment Employees want and are entitled to participate in

decision-making Efficiency is not enough

Efficiency is important, but it should not be the only goal

Rather, employment relations with a human face

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Employment Relationship Objectives

Voice Meaningful input into decisions (discretion, free speech, industrial

democracy)

Equity Fair employment standards for outcomes and

treatment (justice and nondiscrimination)

Efficiency Economic performance—the effective use of scarce resources

(competitiveness, productivity, quality, economic prosperity)

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Analytical Framework

Employment research should be rooted in the objectives of the employment relationship.

EFFICIENCY EQUITY

VOICE

Analyze how policies, practices, laws, behaviors, etc. contribute to efficiency, equity, and voice.

??

?

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Workplace Governance

Efficiency Equity

Voice

LawsFree Markets

Union andNonunion

Representationand

Participation

HRM

Worker Control

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Globalization

Efficiency Equity

Voice

International Labor Standards

Free Trade

International Representation and Solidarity (e.g., European

Works Councils)

Corporate Codes of Conduct

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Comparative IR Systems

Efficiency Equity

Voice

Co-determination

StrongVoluntarism

EnterpriseUnionism

New Deal System

Award System

SocialPartnership

WeakVoluntarism

Sectoral Bargaining

FreeSpeech

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The Balancing Imperative

Equity and voice can enhance efficiency, but… Global competitiveness (efficiency) can reduce

wages and benefits (equity) and weaken unions and works councils (voice)

Legislated minimum standards and unions (equity and voice) might reduce efficiency

Should efficiency (property rights) trump equity and voice (labor rights) ? Property rights and labor rights are conflicting

human rightsEfficiency, equity, and voice should be balanced

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The Importance of Balancing Competing

Interests

Balance of Power Between Employers and

Employees

Optimal Outcomes

Healthy Competition / Individual Freedom

Neoclassical Economics

PluralistIndustrial Relations

Healthy Competition /

Individual Freedom

Balance of Power Between Employers and

Employees

Optimal Outcomes

John W. Budd, Rafael Gomez, and Noah M. Meltz (forthcoming) “Why a Balance is Best: The Pluralist Industrial Relations Paradigm of Balancing Competing Interests,” in Bruce E. Kaufman, ed., Theoretical Perspectives on Work and the Employment Relationship (Champaign, IL: Industrial Relations Research Association).

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Achieving a Balance

Pluralist Industrial Relations School of Thought Labor is more than a commodity or factor of production Inequality of bargaining power between employers and

employees in imperfect labor markets Mixed motive employment relationship conflict: Inherent

conflict of interest between employers and employees on at least some issues (mutual gains are possible on other issues)

Employee voice is important in a democratic society

Thus, non-market institutions are needed to help balance efficiency, equity, and voice For both positive and normative reasons

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Harper’s Weekly (July 14, 1894, front cover)

The Liberal Market or Neoclassical Economics Distortionary Vision of Labor Policies and Institutions

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Forbes (December 1, 1928, p. 29)

The Human Resource Management Unnecessary Vision of Labor Policies and Institutions

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The Pluralist Industrial Relations Balancing Vision of Labor Policies and Institutions

Survey (February 7, 1914, front cover)

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Policy Framework

EFFICIENCY EQUITY

VOICECreate social norms and design policies, practices, laws, institutions, etc. to balance efficiency, equity, and voice and create employment relations with a human face.

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Globalization

Efficiency Equity

Voice

International Labor Standards

Free Trade

International Representation and Solidarity (e.g., European

Works Councils)

Corporate Codes of Conduct

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Employment Relationswith a Human Face

Employment scholarship and policymaking needs a renewed focus on the objectives of the employment relationship

Efficiency is important…but it is not enough Employment research should analyze efficiency,

equity, and voice Laws and institutions should fulfill the economic and

human needs of a democratic society and foster broadly-shared prosperityPolicymakers need to create employment relations

with a human face

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Contact Info

Professor John W. BuddIndustrial Relations CenterUniversity of Minnesota3-300 Carlson School of Management321 19th Avenue SouthMinneapolis, MN 55455-0438 USA

e-mail: jbudd@umn.eduPhone: (612) 624-0357Fax: (612) 624-8360

 

DISCUSSION