TON DUC THANG UNIVERSITY FACULTY OF LABOUR RELATIONS & TRADE UNIONS

Chapter 4: The role of the economic, technological, and demographic environments Lecturer: Hoang Thi Tuong Vinh, MA.

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 The importance of bargaining power  The economic context  The Technological context and the demographic

environment

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What are the three types of “Bargaining power”

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 Total power – total profits (financial resources) available to labor and management

 Relative power – the “relative” strength of labor & management in dividing up profits

 Political Power – ability to influence

government action (either through policies or as an employer)

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 Total bargaining power

◦ degree of competition of firm (monopoly, oligopoly) ◦ Overall state of economy

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 Unions

◦ Ability to shut down production (organize & sustain strike, “blue

flu,” “work to rule,” occupation) ◦ Organize and sustain strike/action ◦ Worker solidarity (the public and

other unions)

 Employers

◦ Ability to withstand union action ◦ Effect on sales, profits, customers & public

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Calculating Relative Bargaining Power

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Prof. John T. Dunlop Industrial Relations Systems

3 main influences shape LR environment: (Environment shapes us & we seek to shape it) Economic context

◦Size, quality & skill of workforce (education) ◦Population trends (Urbanization & migration trends, child labor, aging) ◦Global markets and globalization

Technological context

◦Tools, materials, energy forms (level of development) ◦Organization & control of work (production systems, deskilling)

Locus of power in society

◦Distribution of power – where and how important decisions are made (regions, national, international)

Authors also added demographic context

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Unions sometimes moderate their wage demands (employer ability to pay, fear of cuts in employment)

NeoClassical Economists Alfred Marshall

Unions are most powerful when…. 1. Labor cannot be easily replaced in production (neither machines or

other workers)

2. Demand for final product is not sensitive to price increases 3. Cost of non-labor factors prohibits easy substitution for workers 4. Ratio of labor cost to total cost is small

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 1. Employer requires 100 workers, no matter what, in

order to get the job done.

 2. The public will buy the same amount. They don’t seem

to care how much it costs.

 3. The workers have special skills that are hard to learn.

These workers are hard to replace.

 4. The technology and materials cost a lot compared to

the labor so the company has invested a lot in the factory.

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 The workload can be spread around fewer

workers;

 The public won’t pay more; they will stop buying or go next door if the price of the product goes up;

 Untrained workers can do the job OK;

 The equipment is not a huge investment, but labor costs are a major share of the cost of production.

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 Why would Vietnam want to develop more highly

trained workers?

 What effect would that have on the ability of

workers to bargain?

 Why would Viet Nam want more investment in

high-tech equipment that costs a lot?

 What effect would that have on bargaining?

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