MHR 749-CH. 12-THE ROLES OF GOVERNMENTS AND UNIONS IN COMPENSATION

Role of Unions in Wage and Salary Policy and Practices

basis of pay; occupation wage differentials; experience and merit differentials; other differentials; vacations and holidays; wage adjustment provisions; (The union threat effect-results in better and more formalized work practices and policies in non-unionized organizations)

unions affect compensation management directly through

collective agreements, facing the need to adjust compensation due to international competition

Worksharing: Impact on Government

in theory, the government is pay out the SAME level of EI benefits under either option

Gender Wage Gap

is the amount by which the average pay for female workers is LESS THAN the average pay for male workers; approximately 30%

Governments' interests include

procedures for the unemployed and disadvantaged are sufficient (minimum wage, employment insurance), employees are protected from exploitation (human rights, pay equity)

WORKSHARING can be more expensive for management because

program administration, increased employee benefits costs that are a fixed amount per employee (dental plan); (NO increased costs for benefits that are a % of earnings-ex. pension); increased payroll taxes that are a fixed amount per employee due to ceiling (CPP, EI)

RESPONSIBILITY

the degree of accountability required in the job performance

How do we determine equal value for the compensable factors?

By using job evaluation plan-to determine the number of points to see how important a particular job is to an organization; The plan has to be as gender neutral as possible for equal pay for both genders

NECESSARY CONDITIONS FOR WORKSHARING

INCOME LEVELS, SKILLS/LOCATION MATCH, OTHERS

Worksharing

a redistribution of given amounts of work, EI benefits and leisure aimed at avoiding temporary layoffs; used in several European countries; introduced in Canada (1982) as a special feature of employment insurance (EI)

UNIONS impact on HIGHER Productivity

better employee quality as the wage levels attract more candidates; improver morale and greater motivation; Exit-Voice tradeoff lead to lower turnover; union improves lines of communication with management; SHOCK employers into more professional management (fewer arbitrary decisions), more cooperative behaviour among employees

Reasons for Gender Wage Gap

differences in occupation, qualifications, experiences; differences in the number of hours worked; differences in industries and firms; differences in union membership; presence of discrimination

Worksharing: Impact on Government: MORE COSTLY

double dipping provision, waiting period for EI benefits are waived, an estimated 30% of employees whose layoffs were prevented by STC would not have applied for EI benefits if they had been laid off???????

Worksharing: Impact on Management: LESS COSTLY

elimination of seniority wage effects, save on costs of layoffs and recalls, help retain skilled and valued employees, save on costs of recruitment and training replacement, improved productivity by avoiding bumping, improved employees' morale by reducing the negative impact of layoffs; (worksharing had mixed impact on labour costs, on average, resulted in a small net reduction of 0.5 % in measured labour costs)

IMPACT ON MANAGEMENT

employers receive the same level of labour and pay for the same number of hours under either option but 3 reasons worksharing can be MORE COSTLY: program administration costs, increased employee benefits costs that are a FIXED amount per employee; increased payroll taxes that are a FIXED amount per employee due to ceilings (CPP, EI)

THE SPILLOVER EFFECT

employers seek to avoid unionization by OFFERING WORKERS the wages, benefits, working conditions WON IN RIVAL UNIONIZED FIRMS; non-union management continues to enjoy the freedom from union "interference" in decision-making; non-union workers receive the SPILLOVER rewards obtained by unionized counterparts; gross union-nonunion differential-UNDERSTATED

SKILL

experience, training, education, and ability as measured by job performance requirements

Government as part of the employment relationship

government is KEY stakeholder in compensation decision-making; compliance is a critical compensation objective

effects of government on demand for workers

government is a big employer (federal, municipal, provincial); indirectly affects labour demand through ITS PURCHASES & POLICY decisions and legislations (Ex.: increasing the minimum wage then some companies cannot manage to hire as many individuals earning minimum wages-their costs would go up); (Ex. increase in interest rates on companies)

summary of government involvement

includes assessing fairness and legislation employment standards, human rights, pay equity that affect compensation management;

UNIONS impact on LOWER Productivity

less incentive to be productive due to higher job security; more difficult to fire unionized employees; resistance towards technology; restriction of OUTPUT through inflexible work rules (featherbedding); resources directed at strike, contract negotiations, etc

the goal of the government is to

protect its citizens and to make sure they are not discriminated and provide them at least some income under the legislation; they can affect the demand and supply;

FOUR universal Compensable Factors

skills, efforts, responsibilities, working conditions

some benefits are FIXED dollar amount per employee

such as dental, CPP, EI, etc

Pay Equity at the Federal Level

the legislation takes a proaction approach to pay equity, focused on helping employers comply with the law rather than forcing employees to lodge complaints about discrimination wages; labour minister says forcing workers to file complaints and even going to court to get equal pay is BURDENSOME, costly, and unfair to workers

THE DISPLACEMENT EFFECT

union decreases non-union WAGES; higher wages in union sector reduces employment levels in union sector; displaced workers enter non-unionized labour market; increase supply of labour depresses non-union wages; GROSS UNION-NONUNION DIFFERENTIAL-OVERSTATED

Union Impact on Wage Levels

union workers earn about 10% MORE THAN non-union workers; size of gap varies year to year (UNION IMPACT IS higher during periods of high unemployment and slow economy); (union impact smaller during strong economy)

Reverse Causation

(also called reverse causality) refers either to a direction of cause-and-effect contrary to a common presumption or to a two-way causal relationship in, as it were, a loop; do unions cause high wages or are high-wage earners more likely to be unionized? employees in high wage firms may have a strong incentive to unionize to protect themselves from arbitrary dismissal from these jobs; GROSS UNION-NONUNION WAGE DIFFERENTIAL=OVERSTATED

Pay Equity: 4 distinct phases in pay equity legislation

1: equal pay for equal work 2: equal pay for similar or substantially similar work 3: equal pay for work of equal value (complaint-based) 4: pay equity (proaction)

Human Rights Laws

based on Charter of Human Rights and Freedoms in Canadian Constitution; equal treatment in employment and opportunity for employment regardless of race, colour, religion, sex, etc.; prohibits harassment in the workplace;

Worksharing: Impact on Society

cost savings due to reduction in the social costs of unemployment (decrease in stress related diseases, crime)-is difficult to quantify but NOT zero-may wash out for society as a whole: increased employers' expenditures on benefits go to benefit the employees; increased government EI costs go to benefit the employees; increased equity being the MOST IMPORTANT BENEFIT which cannot be quantified

Criteria for Worksharing

firm must be in business in Canada for at least 2 years and have a minimum of 2 employees; magnitude of work reduction must be at least 10%; work reduction must not be seasonal; expected duration of work reduction 6-26 weeks (potential extension of 12 weeks); employees must be considered CORE STAFF qualified under usual EI criteria and agree to worksharing; usual waiting period (1 week) for EI benefits waived; employees can draw conventional EI if laid off at end of worksharing program; program participation requires joint application by employer and the union (in unionized workplaces) or a substantially majority of employees in non-unionized workplaces;

effect of government on supply for workers

have minimum age for you to work-therefore limiting the amount of supply available; there are no longer a mandatory retirement age; affect through legislation; licensing requirements restricts labour supply; immigration policy (set by the federal government)- approx. 300,000 immigrants allowed per year-because jobs are now being filled up-make sure we have people to fill up the necessary jobs

UNIONS impact on Structure of Wages

higher but flatter-union wages starts higher but rises less steeply; two-tier wage plans-lower wages for lower seniority workers;

NECESSARY CONDITIONS FOR WORKSHARING-continued

income level is a time-money tradeoff, may not quite work for low-income earners who are ALREADY struggling to make ends meet; Skills/Location Match: workers may not be interchangeable; increasing level of skills work in industrialized countries; Others: marketing of program, minimize additional costs;

Pay Equity Legislation

intended to redress the portion of the wage gap assumed to be due to discrimination, through comparison of male and female dominated jobs; using the 4 evaluation factors/compensable factors; compare male and female job classes-to achieve pay equity (JOB TO JOB MATCH, PROPORTIONAL VALUE AND WAGE LINE METHOD, PROXY COMPARISON METHOD)

Pay Equity

issue relating to the gender wage gap

EFFORT

mental or physical, the degree of effort actually performed on the job

Employment Standards Acts (ESA)

minimum wage, paid vacation and holidays, standard hours of work and overtime pay, pay (or notice) on termination of employment, minimum age of employment, equal pay for equal work by men and women, leaves (maternity, bereavement and compassionate care leave); ESA is a complaint-based model used by individual employees to complain (use the ESA to indicate all their RIGHTS as an employee)

Unions and Alternative Reward Systems

some collective agreements include alternative rewards such as: lump sum awards, piece rates, skill-based pay, gain-sharing, and profit sharing

some benefits are % of base pay

such as pension, vacation, etc

UNION imapacts on

supply and demand, on productivity, on wages and benefits levels, on wage structure, on policies and practices

Evidence of Employee (EE) Reaction

surveys of employees showed that over 90% supported the program and would participate again; for employees who would have been laid off, there are additional important psychological and social benefits-avoid stress and loss of self-esteem that are often associated with layoffs;

WORKING CONDITIONS

the physical surroundings and hazards of a job; inside/outside, heat/cold, and poor ventilation

Unions and Alternative Reward Systems

unions are receptive to alternative reward systems linking PAY to PERFORMANCE-as employers face extreme competitive pressures (ex. competitor's lower labour costs) unionized firms that experiment with alternative reward systems, the union usually insists on safeguards that protect the union and its workers: group-based performance measures with equal payouts to members, use of objective performance measures, use of measures based on past performance?

UNIONS impact on benefits

unions have even greater effect on non-wage compensation benefits than on wages; union benefits 20-30% HIGHER than non-union because an average union member values benefits-more likely to be older and have dependents

the government in itself is a big employer

with over 2,000 employees