LABOR AND EMPLOYMENT RELATIONS ...

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LABOR AND EMPLOYMENT RELATIONS ASSOCIATION SERIES

Proceedings of the 58th Annual Meeting

January 6–8, 2006 Boston, Massachusetts

Adrienne E. Eaton, Editor


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PROCEEDINGS OF THE 58th ANNUAL MEETING Copyright © 2006 by Labor and Employment Relations Association. (Formerly the Industrial Relations Research Association.) Printed in the United States of America. No part of the book may be used without written permission, except in the case of brief quotations embodied in critical articles and reviews.

First Edition ISBN 0-913447-91-9 ISSN 0277-7347 Price: $29.95

LABOR AND EMPLOYMENT RELATIONS ASSOCIATION SERIES (Formerly the Industrial Relations Research Association) Proceedings of the Annual Meeting Annual Research Volume Membership Directory (published every four years, forthcoming in 2006) LERA News (quarterly newsletter) Perspectives on Work (published biannually)

Inquiries and other communications regarding membership, meetings, publications, and general affairs of the Association, as well as notice of address changes, should be addressed to the LERA national office. LABOR AND EMPLOYMENT RELATIONS ASSOCIATION University of Illinois at Urbana-Champaign 121 Labor & Industrial Relations Bldg. 504 East Armory Ave. Champaign, IL 61820 Telephone: 217/333-0072 Fax: 217/265-5130 Internet: www.lera.uiuc.edu E-mail: [email protected]

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CONTENTS Officers of the LERA

Cover 2

Alphabetical List of Authors

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LERA Membership Information

Cover 3 I.

PRESIDENTIAL ADDRESS Role of Unions in Creating Wealth in the Twenty-First Century Stephen R. Sleigh

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II. WHY ARE OLDER AMERICANS WORKING MORE? Teresa Ghilarducci, Presiding What Role Do Financial and Health Constraints Play in Partial Retirement? Sharon Hermes

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The Distribution of Retirement Leisure Kevin D. Neuman and Daniel M. C. Lawson

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Discussion

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John Turner III.

LERA REFEREED PAPERS: LABOR MARKETS AND ECONOMICS AND WORK AND EMPLOYMENT RELATIONS Diane Bailey, Presiding The Labor Market Risks of Individual Accounts for Retirement Christian E. Weller and Jeffrey B. Wenger

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The Diffusion and Decline of Employee Involvement Policies in U.S. Manufacturing Plants Wei Chi, Richard Freeman, and Morris Kleiner

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IV. SAM WALTON GOES TO CHINA: WHAT MNCS WILL FIND WHEN THEY INVEST THEIR FOREIGN CAPITAL IN CHINA’S HUMAN CAPITAL Morris Kleiner, Presiding The China Daily News Organizing Election Loss

Eric Geist

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MNCs in China: Regulation and Reality Trevor Bain, Chyi-herng Chang, and Zhi Tang

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Discussion

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Chi-herng Chang V.

AIRLINE INDUSTRY COUNCIL: LEAN PRODUCTION IN THE AIR: LOW-COST COMPETITION TAKING OFF IN THE GLOBAL AIRLINE INDUSTRY AND IMPLICATIONS FOR EMPLOYMENT RELATIONS Jody Hoffer Gittell and Thomas Kochan, Presiding Low-Cost Competition in the United States Nancy Brown Johnson

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Low-Cost Airlines’ Product and Labor Market Strategic Choices: Australian Perspectives Gregory J. Bamber, Russell D. Lansbury, Kate Rainthorpe, and Clare Yazbeck 77 Lean Production in the Air: Low-Cost Competition Taking Off in the Global Airline Industry and the Implications for Employment Relations: European Experiences Philip B. Beaumont, Geraint Harvey, Laurence C. Hunter, Judy M. Pate, Joseph Wallace, and Peter Turnbull

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Discussion

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Jody Hoffer Gittell and Thomas J. Kochan VI.

AUTOMOBILE INDUSTRY COUNCIL: WORK SYSTEMS, WORKER REPRESENTATIONS, AND MANUFACTURING PERFORMANCE IN THE WORLD AUTO INDUSTRY Joel Cutcher-Gershenfeld, Presiding Work Systems and Employment Relations in the Australian Automotive Manufacturing Industry Greg J. Bamber, Russell O. Lansbury, Christopher F. Wright, and Marian Baird 97 iv


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European Unions and American Automobile Firms: From European Works Councils to World Councils? Isabel da Costa and Udo Rehfeldt

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VII. LABOR AND CAPITAL SEEKING AGREEMENT FOR MUTUAL BENEFIT: LEGAL AND FINANCIAL ISSUES Wilma Liebman, Presiding Bargaining Before Recognition in a Global Market: How Much Will It Cost? Marshall B. Babson

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Employers’ Stake in Union Neutrality

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Thomas A. Kochan

VIII. THE NATIONAL LABOR RELATIONS ACT AFTER SEVENTY YEARS: AN ASSESSMENT JOINT SESSION WITH AEA Michael Reich, Presiding Will Labor Fare Better Under State Labor Relations Law? Richard B. Freeman

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The NLRA After Seventy Years: What Next? Barry T. Hirsch and Jeffrey M. Hirsch

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Expanding Voice for Professional and Managerial Employees Paula Voos

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Discussion

William B. Gould IV

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Discussion

Jon Hiatt

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Discussion

Daniel J.B. Mitchell

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IX. LINKING SOCIAL CAPITAL TO OUTCOMES FOR CUSTOMERS, WORKERS AND FIRMS Casey Ichniowski, Presiding What Is It About Relationships? A Behavioral Theory of Social Capital and Performance Timothy J. Vogus

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X. THE SHARED CAPITALISM ROUTE TO THE OWNERSHIP SOCIETY Lisa Lynch, Presiding Show Me the Money: Does Shared Capitalism Share the Wealth? Robert Buchele

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XI. THE LIMITS OF NLRB CERTIFICATION AND ITS ALTERNATIVES Julie Martinez Ortega, Presiding The Employee Free Choice Act: A Reality Check Discussion

Roy J. Adams

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Sheldon Friedman

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XII. LERA REFEREED PAPERS: DISPUTE RESOLUTION, INTERNATIONAL AND COMPARATIVE INDUSTRIAL RELATIONS, AND LABOR UNIONS AND STUDIES Howard Stanger, Presiding Union Cities and Voter Turnouts

Roland Zullo

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Institutionalism and Bargaining Power in Comparative IR Heiko Massa-Wirth

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Waiving Goodbye to Gilmer? Early Signs of Repatriating Employment Disputes to Courts Michael LeRoy and Peter Feuille 223 XIII. LERA POSTER SESSION Robert Hoell, Presiding Discretion and Performance: A Cross-National Comparison of Public Governance Matthew M. Bodah and Martin Schneider

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Courts of Appeals and NLRB Orders: A Longitudinal Analysis Clyde J. Scott and Edwin W. Arnold

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Portfolio Decisions of Older American Workers: The Role of Private Pensions

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Huan Ni


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From Command to Involvement: The Transformation of Authority at Continental Airlines Andrew von Nordenflycht

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International Evidence on the Convergence of Female and Male Unemployment Rates Hervé Queneau and Amit Sen

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XIV. 2005 BEST DISSERTATION COMPETITION Differences Matter: The Impact of Social Policy on the Working Poor in Canada and the United States Daniyal Zuberi, Co-winner 243 XV. LERA ANNUAL REPORTS Executive Board Meeting in Washington DC, June 2005

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Executive Board Meeting in Boston, MA, January 5, 2006

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General Membership Meeting in Boston, January 7, 2006

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Annual Report for 2005

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I. Presidential Address

The Role of Unions in Creating Wealth in the Early Twenty-First Century Stephen R. Sleigh International Association of Machinists and Aerospace Workers Introduction Thank you, David Lipsky, for the introduction, and good luck in the year ahead as LERA president. Your work on the Development Committee is a great contribution to this organization, and I look forward to assisting you in any way to push this initiative along. This past year as LERA president has been a busy one for me. My day job at the Machinists Union has been filled with mergers, negotiations, strikes, bankruptcies, and the breakup of the AFL-CIO. For LERA I feel a little like I’ve been living the Johnny Cash song, “I’ve been everywhere.” Over the past year I have spoke at LERA chapters in St. Louis, Atlanta, Chicago, Seattle, Detroit, Portland, Oregon, Alabama, Tennessee, Florida, New Jersey, the Carolinas, central New York, and my home chapter in Washington, D.C. My speeches have generally focused on the common interests of labor and management in addressing the crisis in health care access, affordability, and quality. My theme today is a little more one-sided: how can organized labor in the United States survive and thrive in the coming years? The system of labor and employment relations in the United States that arose from the ashes of World War II was an important element in the establishment of democracy throughout the world. In turning back fascism and containing communism, the United States laid the groundwork for one of the greatest periods of economic growth and the expansion of freedom for

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LERA 58TH ANNUAL PROCEEDINGS

peoples of all nations. At the dawn of that era one of the great statesmen from the United States who had helped shape labor relations policy prior to, during, and after World War II said “Labor and management can pay an installment on the price of freedom by striving to understand each other’s point of view, by making collective bargaining work, and by learning to live together and conducting their relations in the best interests of the country” (Ching 1953, 204). Today, sixty years after the end of World War II, making collective bargaining work in the United States is at a critical juncture. As a union activist and participant in a wide variety of negotiations, I can tell you that the idea of making collective bargaining work for the good of the country is far from my field of experience. Our challenge today in the labor movement is to remain viable as a force for social good. Since our relationship is a multilateral one—that is to say, our success or failure in the labor movement impacts business and public policy—the viability of the labor movement in the United States is important for everyone who works for a living or who worked and is now either retired or out of the workforce. In my view unions provide the best mechanism for representing employee interests at the workplace. This should not be a controversial view in an era where Republicans are championing the democratic rights of peoples a world away. An employee’s right to have a union here in the United States is a cornerstone to our democratic society, but it has been severely eroded over the past thirty years. The slow but steady decline of union density, particularly the precipitous decline of union density in the private sector, threatens the ability of unions to adequately address employees’ concerns about fairness and equity in the workplace. The split within the labor movement, which occurred this past summer, between the unions that have remained in the AFL-CIO and those that left to form the Change to Win coalition has exacerbated the challenge we face in stopping the decline and developing strategies and implementing actions that address the fundamental problem of providing workers a voice independent of management. To be clear, I belong to one of the unions that has remained in the AFL-CIO and that believes that addition is not accomplished through subtraction or multiplication by division. Still, the issues raised by the Change to Win coalition are critical and deserve respectful analysis. In my view, the split within the house of labor is over personalities, timing, and tactics, not fundamental differences between the unions or the leaders who make up the two camps. Agreement exists on the need to do more organizing, to find new ways to represent workers, and to mobilize public support for issues of concern to working people.

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PRESIDENTIAL ADDRESS

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My focus today, consistent with the theme of our conference, is how labor can more fully utilize all aspects of capital to further our members’ interests, the interests of working people generally, and the country as a whole. Challenging Times for Unions Another way to look at the problems that organized labor faces in the United States in the early twenty-first century is to ask the question, What do unions do to create wealth? I think that answering that question is central to rejuvenating organized labor’s role in society. The collective bargaining system that emerged from World War II created a framework for unions and employers, first in the private sector and then later in the public sector, to distribute the economic gains—the wealth—created by an ever-expanding economy. While unions and the workers they represented were essential to the growth of the U.S. economy, the process of collective bargaining tended to take place in industries sheltered from competition and allowed for an ever-expanding array of employee benefits and perks. All the boats were being lifted by a rising tide, and both labor and management became accustomed to generous settlements in collective bargaining. The tide, however, began to recede in the early 1980s for these same industries, and it has taken on a strong reverse current for many of us. I remember talking with a colleague at the Steel Workers Union in the mid1990s, during a time of robust economic growth overall, and I felt the pain he was experiencing as one steel company after another downsized, filed for bankruptcy, reorganized, or liquidated. More recently, after the terrorist attacks of September 11, one of our core industries in the Machinists Union, the airline industry, has undergone the same kind of cataclysmic restructuring. The auto industry is similarly entering into a period of painful realignment. The front cover of the Sunday New York Times on October 30, 2005, poignantly captured the pain that has come from this restructuring as thousands of workers have lost the retirement income they were expecting from their employer. Far from working on ensuring freedom, we are fighting to keep a modicum of dignity and economic self-reliance against forces far larger than what collective bargaining for one in ten workers can handle. And yet, for many people, outside of those directly affected, the restructuring of whole industries, even ones as essential to the economy as steel, air transportation, and auto production, has barely caused a ripple of outrage. It is as if by isolating the problem to the excesses of the industry (“bad management,” “greedy unions”) the public at large in the United States believes that it cannot or will not happen to them.

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The challenge for unions is to engage our members and the public in a highly visible discussion about what the future looks like without unions and collective bargaining: no pensions, limited health care, stagnant or declining wages—a race to the bottom where only the strong survive. Sounds a lot like the Wal-Martization of America to me. The labor movement, progressive business, and political leaders in the United States cannot allow that model to triumph. That inequality exists both within the United States and throughout the world is clear; what that inequality does to society, and our ability to live full and free lives, is not. The recent publication of the United Nations report on the World Social Situation 2005, titled The Inequality Predicament, paints a bleak picture and underscores the need for a global compact to spur economic development and raise the income of workers (United Nations 2005). While the global economy expands, extreme poverty remains the reality for over half of the world’s population. The imbalance between rich and poor globally, with 80 percent of the world’s gross domestic product belonging to the 1 billion people living in the developed world while the remaining 20 percent is shared by the 5 billion people in developing countries, is not sustainable (United Nations 2005, 1). The doubling of the world’s workforce engaged in global economic activity over the past sixteen years, with the addition of extremely low-wage labor in India, China, and the Soviet Bloc, has fundamentally altered the terms of employment for all workers. My cochair for this year’s LERA program, Richard Freeman, has written a provocative piece on this that I recommend to you (Freeman 2005). Creating Wealth in the Twenty-First Century The challenge for American unions is to move beyond the structure of collective bargaining that evolved just before, during, and after World War II. The creation of wealth through labor and employment relations, and the union role in that process, hinges on the successful application of capital in various forms: financial, human, and social. Moving beyond collective bargaining does not mean giving up on it; far from it. What I am suggesting is a strategy that brings our goals together at the bargaining table to deliver immediate benefits to our members, with a longer-term focus on creating wealth. The following are some examples of current activities of wealth creation that may serve as models organized labor should adopt more aggressively. Financial Capital Money is what makes the modern market economy go, and access to financial assets is the key to success in capitalist economies. The greatest store of financial assets exists within the pension funds of large institutional investors. Many sources of leverage exist for unions in this regard: multi-

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employer pensions, single-employer pensions in union-represented companies, public pension funds, and defined contribution funds where union members participate. Taken together the assets in these pension and saving funds total over $6 trillion, or 60 percent of the total capitalization of the U.S. financial markets. To be clear, trustees responsible for these assets must first assure that the plan participants’ interests come first and that collateral benefits only accrue without sacrificing those interests. Developing a coherent strategy around harnessing these assets has been a work in progress greatly aided by the work of the AFL-CIO and the Council of Institutional Investors (CII). In 1996, shortly after taking the reins of the AFL-CIO, John Sweeney charged secretary-treasurer Richard Trumka with the task of creating an aggressive response to harnessing workers’ capital. The results have been impressive with the creation of the Office of Investment. Together with the CII, the AFL-CIO and individual unions have pursued issues of critical concern to shareholders and stakeholders alike. Improving corporate performance, holding senior executives accountable, and making corporate decision making more transparent are outcomes that may not seem like big deals, but they have laid the foundation for further work. The stakeholder approach to corporate governance, with unions providing a mechanism for both employee voice and shareholder voice through our position as investors, has the potential to greatly democratize today’s imperial corporations (Evan and Freeman 1988). The disconnect between executives of today’s large enterprises and the people who actually make the organizations work is enormous. Executive compensation gets the most attention, and for good reason. As we have seen at companies operating in bankruptcy, such as United Airlines and Delphi, where workers either have or are being asked to make huge economic sacrifices while executives heap bonuses upon themselves, unions have stood up and helped organize other stakeholders to say “Enough!” It simply is not sustainable to have an ever-increasing gulf between what the average employee in an organization makes and what its leadership makes. This is a question of fairness, but also of fiduciary responsibility, that unions must take on headfirst on both accounts. Through aggressive proxy voting, allocating significant sums to private equity sources that are committed to high road investments that recognize basic human rights, and the positive role unions can play in giving workers a voice, unions can become a major force for promoting economic growth that is based on fairness and competitiveness. Human Capital Unions can also play an increasing role in the development of the skills of the workforce. When workers fear for their jobs, when they do not have the

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security that comes from a union contract that protects them from the arbitrary decisions of management, they are less likely to spend their time learning new skills that could help the organization. We have a looming skills crisis on the near horizon in the United States. A recent report by the National Academy of Sciences concluded with this sobering observation: “The scientific and technical building blocks of our economic leadership [in the United States] are eroding at a time when many other nations are gathering strength. . . . We fear the abruptness with which a lead in science and technology can be lost—and the difficulty of recovering a lead once lost, if indeed it can be regained at all” (National Academy of Sciences 2005). Today, companies are seriously underinvesting in the skills of the workforce. Of the 168 contracts the International Association of Machinists (IAM) has with aerospace companies, a technologically sophisticated industry, only 2 have apprenticeship programs with active participants. While we have been sounding the alarm on this issue for years, employers have been slow to understand that the long-term success of the firm depends on having a well-trained and informed workforce. For labor, developing an aggressive training program that borrows from the successes of the building trades and applying it across all sectors is a key way that we can create wealth for our members, the organizations they work for, and society as a whole. Social Capital The third leg of our capital strategy should be to focus more attention on what happens at the workplace itself. A well-funded company, with a skilled workforce, may still fail if all the employees in an organization do not work together well. Management has tried many different ways to overcome this hurdle: quality circles, team concepts, the Toyota production system, lean production, Six Sigma. For workers, these have become the flavor of the month as managers quickly lose interest if results are not seen immediately; if positive results are seen, then the managers get promoted and a new team comes in to try a new set of ideas. A true partnership between labor and management on workplace organization takes time and effort, and the payoff in enhanced production is more likely to follow a J-curve. True partnerships, what we in the IAM call High Performance Work Organization partnerships, require the independent voice that only a union can bring. Once realized, as in the case of Harley-Davidson and the IAM and the Paper, Allied-Industrial, Chemical, and Energy Workers International Union (PACE), true partnerships can lead to enhanced production, reduced absenteeism, more job security, and better performing bottom lines.

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Conclusion Despite the daily crises we face in the labor movement—some of our own making, some passed down to us by the external forces of globalization and technological change—I am optimistic that organized labor in the United States will play a central role in developing a response to a world that is increasingly split between the haves, the have nots, and the haves way too much! By developing a strategy to harness our capital resources, our money, our skills, and our ability to get people to work together, and by leveraging all of these assets for the betterment of our members, working people will come to see unions once again as their best source of protection in a world where individuals are at an extreme disadvantage to defend themselves. Mobilizing our capital assets, for the good of the country, will be the fight of our lives in the labor movement over the next period of time. I hope all of the constituents within the Labor and Employment Relations Association will join me in this fight as we search for the means to promote a world that is committed to human dignity, equity, freedom from need, and a fair distribution of the wealth we create. Thank you. References Ching, Cyrus. 1953. Review and Reflection. New York: B.C. Forbes and Sons Press. Evan, William, and R. Edward Freeman. 1988. “A Stakeholder Theory of the Modern Corporation: Kantian Capitalism.” In Tom L. Beauchamp and Norm Bowie, eds., Ethical Theory and Business. Englewood Cliffs, NJ: Prentice Hall. Freeman, Richard. 2005. “The Great Doubling: America in the New Global Economy.” Paper delivered at the W. J. Usery Lecture Series on the American Workplace, April 8. National Academy of Sciences, Committee on Prospering in the Global Economy of the Twenty-First Century. 2005. Rising Above the Gathering Storm: Energizing and Employing America for a Brighter Economic Future. Washington, DC: National Academies Press. United Nations. 2005. The Inequality Predicament: Report on the World Social Situation 2005. New York: United Nations.

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II. Why Are Older Americans Working More?

What Role Do Financial and Health Constraints Play in Partial Retirement? Sharon Hermes U.S. Government Accountability Office Abstract Although partial retirement usually refers to workers voluntarily transitioning from full-time work to complete retirement, health or financial problems may be causing these changes. Using data from the Health and Retirement Study, I find that partial retirees are less healthy than similar full-time workers and report that their health constrains their ability to work. In addition, over 26 percent of partial retirees return to work after retirement. The decline in hourly wages for partial retirees who were previously retired is substantially worse than it is for partial retirees who transitioned directly from full-time work. Regression analysis indicates that divorced women and older workers with defined contribution pension plans have an increased probability of returning to work or postponing retirement. Partial retirement, referring to the reduction in hours as workers age, has become a more widely recognized phenomenon by economists, but less attention has been paid to what causes people to partially retire. It is possible that partial retirement is truly a way of gradually reducing hours in transition to retirement. It is also possible that other workers are responding to financial or health problems. In addition, less interest has been given to examining the experience of partial retirees and other older workers who have

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returned to the labor force after being fully retired. Because partial retirement affects many older workers, it is important to examine possibly significant variations in their experiences. Previous research has found that a considerable number of older workers partially retire. Gustman and Steinmeier (1984) estimate that approximately one third of older white men will be partially retired at some point in their lives. Quinn (2003) estimates that between one third and one half of older workers will be employed in a bridge job (defined as a job held after a career job and that is held less than ten years). Using data from the Health and Retirement Study (HRS), I find that 20 percent of older Americans who were working full-time in 1992 became partially retired at some point by 2002. Though much of the current literature on partial retirement emphasizes the advantages it may offer, research has also shown that such jobs often have some drawbacks. Quinn (1996) finds that bridge jobs generally have lower wages and benefits. Additionally, bridge jobs usually represent a movement down the career ladder to less-skilled work. Aaronson and French (2001) find evidence that partial retirees earn significantly lower wages; they estimate that an older male worker who reduces his hours from forty to twenty per week will face an hourly wage penalty of 25 percent. Other research addresses the labor demand for older workers. Using an employer survey along with data from the HRS, Hutchens and Chen (2003) conclude that the availability of partial retirement may not be as high as it seems because employers are much less willing to offer partial retirement if it involves flexible scheduling, such as job sharing, and includes benefits. A recent report by the Government Accountability Office (GAO) also finds that many older workers do not believe they have opportunities to partially retire with their current employer (GAO 2005). In focus groups of older workers and retirees, very few indicated their employer would offer them an opportunity to gradually or partially retire. Many of the retired focus group participants felt their employment opportunities were limited to lowwage, low-skilled jobs. Although policy makers often advocate partial retirement as one possible solution to the fiscal pressures of an aging population (Burtless and Quinn 2002), this research suggests there are key questions left unanswered as to the quality and quantity of jobs that older workers may find and obtain. How and Why Do Older Workers Partially Retire? The literature on partial retirement characterizes the phenomenon as voluntary transitions made by older workers because they want to work less but are not ready for full retirement. For many partial retirees, this depiction appears to be accurate—data from the first six waves of the HRS reveal that

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33.57 percent were working full-time in the period immediately prior to partial retirement. However, a significant number did not enter partial retirement through the traditional route. Over 26 percent of partial retirees actually returned to work from full retirement. Another almost 14 percent were either unemployed, disabled, or not in the labor force before they were partially retired. For these groups of older workers, it is possible that partial retirement represents adverse employment or underemployment. Aside from those who were once fully retired, other workers may also be partially retired for adverse reasons. The loss of a job or health problems could cause older workers to reduce their hours when they would otherwise have preferred to work full-time. Among partial retirees who changed employers, 15 percent report having left their job involuntarily—their route to partial retirement began with a layoff or a business closure. Almost 55 percent of partial retirees who changed jobs report leaving their last job because of retirement. They may have changed employers in order to access a defined benefit pension or because of an inability to reduce hours at their career job. Alternatively, partial retirees may change employers to reduce stress or increase job satisfaction by pursuing a prior passion (Raskin and Gettas 2003). Thus, most partial retirees who have changed employers report doing so for voluntary reasons; however, a significant number do so involuntarily, and this group has not been adequately addressed in the literature. The economic situation among partial retirees is starkly different based on the nature of their transition. Sharply lower hourly wages of partial retirees who have gone back to work after retirement would suggest that these workers may have been pushed into this transition. Upon retirement individuals should have higher nonlabor income than before and, thus, a higher reservation wage. To examine their change in wages, I compare the individual’s last full-time hourly wage to the hourly wage earned in partial retirement. I find that partial retirees who were fully retired face a much larger wage penalty than those who transitioned directly from full-time work. Comparing median hourly wages, older men who returned to work from retirement experienced a decline of $6.78 in their hourly wage—a drop of 39.51 percent from their last reported full-time wage, when evaluated at the median. Older men who went directly from full-time work to partial retirement, however, earned $0.46 less per hour, which represents a 2.81 percent decline in hourly wages, evaluated at the median. The situation was similar for older women. Women who returned to work from retirement experienced a 17.44 percent drop in hourly wages, compared to an 8.68 percent drop for women who transitioned directly from fulltime work to partial retirement. Negative financial shocks may also cause older Americans to return to work or postpone retirement. In particular, the substantial decline in the

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stock market in 2000 may have had profound effects on retirement decisions. As seen in Table 1, the average change in the reported value of stocks held by those aged 60–65 was sharply negative in 2002. It is important to note, though, that 68 percent of people in this age group do not report owning stocks in the HRS. However, the vast majority of individuals aged 60–65 report having financial assets (not including housing wealth), and the average change for this measure was negative in both 2000 and 2002. Alternatively, older workers may be forced into partial retirement because they have health problems that interfere with holding a full-time job. A drop in productivity due to poor health may explain some of the decline in hourly wages. In order to test if partial retirees have more health problems than full-time workers, I use probit regressions to control for factors such as age, education, and race. I use detailed measures provided by the HRS covering a variety of health problems. The regression results indicate male partial retirees are significantly more likely to have health problems in almost every category (see Table 2). Compared to men who are working full-time, men who are partially retired are more likely to have a problem with mobility and large muscle activity. Partially retired men are also more likely to have problems with gross and fine motors skills and Activities of Daily Living (ADLs). Women who are partially retired are more likely to have problems with mobility/large muscle activity as well as gross and fine motor skills than their full-time counterparts. Both male and female partial retirees are significantly more likely to report that health limits their ability to work. The likelihood that health problems constrain the ability to work increases by 14 and 12 percentage points for partially retired men and women, respectively. Honig and Hanoch (1985) found similar evidence of health constraints on full-time work among partial retirees in their study using data from the Retirement History Survey (RHS). The evidence of significantly poorer health among partial retirees may imply they have reduced TABLE 1 Mean Change in Value of Total Financial Assets and Stocks for Those Aged 60–65, 1994–2002 Year

Change in Total Financial Assets ($)

Change in Value of Stocks ($)

1994 1996 1998 2000 2002

5,920.74 15,044.45 2,5291.46 –3,389.09 –14,276.66

2,031.42 15,799.37 13,717.75 8,935.70 –23,943.64

Note: Amounts in 2000 dollars. Change in total financial assets represents 89 percent of HRS sample in 2002. Change in value of stocks represents 32 percent of HRS sample in 2002.

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TABLE 2 Percentage of Partial Retirees with Health Problems in Comparison to Full-Time Workers, Regression-Adjusted Results, 1992–2002 Dependent Variable

Men

Women

Problem with Mobility/Large Muscle Activity

.01*** (.002) .02*** (.006) -.003 (.014) .03*** (.011) .001 (.009) .14*** (.014)

.01*** (.002) .01** (.004) .01 (.011) .01 (.008) .001 (.008) .12*** (.014)

Problem with Gross and Fine Motor Skills Instrumental Activities of Daily Living (IADL) Activities of Daily Living (ADL) Negative Health Change Health Limits Work

Note: Controls include indicators for age group, educational attainment, race, marital status, and year. HRS respondent level weights are used. Standard errors are reported in parentheses. * indicates significance at the 10 percent level, ** at the 5 percent level, and *** at the 1 percent level.

productivity due to health limitations, which could be one factor contributing to lower wages. Factors that Affect Working Later in Life In order to identify factors that cause people to return to work from retirement, I use the following probit model: (1) Rtwkit+1* = α + β* 0.56) or the incidence of medication errors (p > 0.65) but have a strong negative association with the occurrence of patient falls. Lastly, and surprisingly, organizational citizenship behavior was positively associated with medication errors and falls (both p < .02). This suggests that in dynamic and interdependent work like acute-care nursing, typically performance-enhancing behaviors can actually have negative unintended consequences. Conclusion In this paper I developed a behavioral approach to understanding how HPHR practices generate social capital and performance. My analyses revealed that implementing HPHR practices creates the opportunities for and signals the importance of respectful interaction. In turn, these respectful interactions create the relational infrastructure upon which the unit-level capabilities for rapid error detection and correction (that is, mindful organizing) can be built, which results in substantially lower levels of medication errors and patient falls. These findings are consistent with my hypotheses as well as an emerging body of research demonstrating the importance of relationships and relational processes on performance (see Gittell 2000) and provide evidence that the behaviors occurring within networks are also an essential mechanism for understanding the multifaceted effects of HPHR practices and organizational performance. Although my results suggest that respectful interaction and mindful organizing underlie social capital, future research needs to directly examine the relationship among network structure (for example, density), respectful interaction, mindful organizing, and performance. Such research could help further understand the complex ways in which HPHR practices affect performance as well as how network structure influences individual and collective action. References Baker, Wayne E., and Jane E. Dutton. 2006. “Enabling Positive Social Capital in Organizations.” In Jane E. Dutton and Belle Ragins, eds., Exploring Positive Relationships at Work: Building a Theoretical and Research Foundation. Mahwah, NJ: Lawrence Erlbaum. Bartel, Ann P. 2004. “Human Resource Management and Organizational Performance: Evidence from Retail Banking.” Industrial and Labor Relations Review, Vol. 57, no. 2, pp. 181–203. Cappelli, Peter, and David Neumark. 2001. “Do ‘High Performance’ Work Practices Improve Establishment-Level Outcomes?” Industrial and Labor Relations Review, Vol. 54, no. 4, pp. 737–75. Chatterjee, Samprit, and Bertram Price. 1991. Regression Analysis by Example. 2nd ed. New York: Wiley.

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Collins, Christopher J., and Kevin D. Clark. 2003. “Strategic Human Resource Practices, Top Management Team Social Networks, and Firm Performance: The Role of HR Practices in Creating Organizational Competitive Advantage.” Academy of Management Journal, Vol. 46, pp. 740–50. Dunlop, John T., and Douglas Weil. 1997. “Diffusion and Performance of Modular Production in the U.S. Apparel Industry.” Industrial Relations, Vol. 35, no. 7, pp. 334–55. Gant, Jon, Casey Ichniowski, and Kathryn Shaw. 2002. “Social Capital and Organizational Change in High-Involvement and Traditional Work Organizations.” Journal of Economics and Management Strategy, Vol. 11, no. 2, pp. 289–328. Gittell, Jody H. 2000. “Organizing Work to Support Relational Coordination.” International Journal of Human Resource Management, Vol. 11, no. 3, pp. 517–34. Huselid, Mark A. 1995. “The Impact of Human Resource Management Practices on Turnover, Productivity, and Corporate Financial Performance.” Academy of Management Journal, Vol. 38, pp. 635–72. Ichniowski, Casey, Kathryn Shaw, and Giovanni Prennushi. 1997. “The Effects of Human Resource Management Practices on Productivity: A Study of Steel Finishing Lines.” American Economic Review, Vol. 87, no. 3, pp. 291–313. Leana, Carrie R., and Harry J. Van Buren III. 1999. “Organizational Social Capital and Employment Practices.” Academy of Management Review, Vol. 24, no. 3, pp. 538–55. Long, J. Scott. 1997. Regression Models for Categorical and Limited Dependent Variables. Thousand Oaks, CA: Sage. MacDuffie, John P. 1995. “Human Resource Bundles and Manufacturing Performance: Organizational Logic and Flexible Production Systems in the World Auto Industry.” Industrial and Labor Relations Review, Vol. 48, pp. 173–88. Pearce, Jone L., and Hal B. Gregerson. 1991. “Task Interdependence and Extrarole Behavior: A Test of Mediating Effects of Felt Responsibility.” Journal of Applied Psychology, Vol. 76, pp. 838–44. Podsakoff, Philip M., Scott B. MacKenzie, Julie B. Paine, and Daniel G. Bachrach. 2000. “Organizational Citizenship Behaviors: A Critical Review of the Theoretical and Empirical Literature and Suggestions for Future Research.” Journal of Management, Vol. 26, no. 3, pp. 513–63. Preuss, Gil. 2003. “High Performance Work Systems and Organizational Outcomes: The Mediating Role of Information Quality.” Industrial and Labor Relations Review, Vol. 56, no. 4, pp. 590–606. Snell, Scott A., and James W. Dean. 1992. “Integrated Manufacturing and Human Resource Management: A Human Capital Perspective.” Academy of Management Journal, Vol. 35, pp. 487–504. Vogus, Timothy J. 2004. “In Search of Mechanisms: How Do HR Practices Affect Organizational Performance?” Diss., University of Michigan. Vogus, Timothy J., and Kathleen M. Sutcliffe. 2006. “The Mindful Organizing Scale: Development and Validation of a Behavioral Measure of Safety Culture.” Unpublished paper, Vanderbilt University.

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Vogus, Timothy J., and Theresa M. Welbourne. 2003. “Structuring for High Reliability: HR Practices and Mindful Processes in Reliability-Seeking Organizations.” Journal of Organizational Behavior, Vol. 24, pp. 877–903. Weick, Karl E., Kathleen M. Sutcliffe, and David Obstfeld. 1999. “Organizing for High Reliability: Processes of Collective Mindfulness.” In Barry M. Staw and Larry L. Cummings, eds., Research in Organizational Behavior. Greenwich, CT: JAI Press, pp. 81–123.

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X. The Shared Capitalism Route to the Ownership Society

Show Me the Money: Does Shared Capitalism Share the Wealth? Robert Buchele Smith College Loren Rodgers National Center for Employee Ownership Adria Sharf University of Washington Abstract Based on two sets of data—the National Bureau of Economic Relations (NBER) Shared Capitalism Project surveys of employee stock ownership plan (ESOP) companies and the national General Social Survey—we find that employees in ESOP companies have significant holdings of employer stock. While salaried workers in ESOP companies have larger account balances than hourly workers do, hourly workers in ESOPs do significantly better than hourly workers in general, both in terms of ownership and earnings. More broadly, the median pension wealth of ESOP participants is over four times higher than the median household pension wealth. ESOP retirement plans do, however, remain too concentrated in employers’ stock. Cheerleaders for the “ownership society” tout the growing share of U.S. households owning stock—from 31.7 percent in 1989 to 51.9 percent in 2001 Author’s address: 10 Prospect St., Northampton, MA 01063 174

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counting both direct and indirect ownership (Wolff 2004, Table 12b). What is less often advertised is that as of 2001 the bottom 90 percent of households own only 23 percent of all stock and just 12 percent of all directly held stock, which confers direct control (voting) rights on stockholders (Wolff 2004, Table 13a; Kennickell 2003, Table 10). Only 30 percent of households in the bottom 90 percent of the wealth distribution owns (directly or indirectly) more than $10,000 of stock (Wolff 2004, Table 13a). If the ownership society is defined in terms of households’ ownership stake in the U.S. economy, the huge majority of American households are decidedly minority owners. These statistics on the concentration of stock ownership are reflected in the data on pension wealth as well. Thirty-four percent of households have no pension plan (Wolff 2005, Table 5), and “more than one-fifth of all households nearing retirement (those between the ages of 56 and 64) had no retirement savings other than Social Security” (Weller and Wolff 2005, 2). In 2001 average pension wealth (in defined benefit and defined contribution plans) was $94,800, but the median—the pension wealth of the typical household—was only $10,900 (Wolff 2005, Table 11). This paper assesses the potential of employee stock ownership plans (ESOPs) for increasing both workers’ pension wealth and their ownership stake in the companies they work for. Employee Stock Ownership: Forms and Financials Blasi, Kruse, and Bernstein (2003, Appendix C) calculate that in 2002 there were 24.1 million participants in 11,561 pension plans that held company stock.1 About 8.2 million (34 percent) of these participants were in ESOPs, and these held 59 percent of all company stock in employee pension plans. In all, it is probably safe to say that at least half of all company stock owned by employees is held in ESOP retirement accounts (Rosen 2005). ESOPs were created as a form of defined contribution pension plan by legislation attached to the Employee Retirement Income and Security Act (ERISA) of 1974. Favorable tax treatment of income from the sale of company stock to ESOPs and of company profits contributed to ESOPs has encouraged their rapid growth and made them the most common form of employee ownership in the United States. Several studies of the wealth effects of ESOPs have been conducted in recent years. These include (1) a census of Washington State ESOPs (Kardas, Scharf, and Keogh 1998), which found median pension assets per participant of $31,600 (versus $5,400 for a matching sample of non-ESOP control companies); (2) a 2005 study of Ohio companies, which found median ESOP account balances of $30,000 (cited in Rosen 2005); (3) a 2005 census of Massachusetts ESOPs, which reported average assets per participant of $56,200

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(Mackin 2005); and (4) a survey of sixteen S corporation ESOPs, which found median employee account balances of $75,000–$100,000 (Rosen 2005). Here we develop new estimates of employee stock ownership and pension assets based on two large-scale employee surveys: the 2002 national General Social Survey (GSS), which provides a representative sample of 1,120 private sector employees, and the National Board of Economic Research (NBER) Shared Capitalism Research Project, which includes a sample of 6,000 employees in nine ESOP companies.2 A Profile of Nine ESOPs There are reasons to believe that employee stock ownership might have positive effects on workplaces and company performance, and the evidence, though mixed, broadly supports this view on some important measures (Kruse 2002; Kruse, Freeman, and Blasi 2006). Table 1 provides a first look at workers’ ownership stakes in the nine ESOP companies in the NBER study. These firms vary in size from a few hundred to thousands of employees. They are spread across service and manufacturing industries, and they vary in the length of time that their ESOPs have existed (from four to twentyfour years) and in the percentage of the company’s stock held in the ESOP. ESOPs are broad-based defined contribution pension plans, which normally include all full-time (and often also permanent part-time) employees meeting basic requirements of age, hours of service, and months of service, with limited exceptions allowed by ERISA) Self-reported participation rates among the nine companies in the NBER study vary from 64 to 95 percent, with an average of 84 percent. It may be worth noting that the three companies with the highest participation rates (all around 95 percent) have by far the highest average account balances—ranging from $129,000 to $257,000. At the other end of the range, the lowest average account balance is just $5,400. In all, the average account balance of all ESOP participants was $104,600, but including employees without ESOP accounts and participants with zero balances reduces the mean account balance of all employees to $81,500. The ratio of mean to median account balances is an indication of the dollar “distance” between the stock holdings in the largest accounts versus the typical account. This varies from 1.1:1 to 3.6:1 and is 3.5:1 for all ESOP participants in the data set. This higher ratio for all employees reflects the effect of interfirm differences in average account balances as well as the intrafirm inequality reflected in the company-specific ratios. All but one of the NBER companies had 401(k) pension plans as well as ESOPs, and almost two thirds of the employees of these ESOP companies had 401(k) retirement plans—one of which included company stock in the

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TABLE 1 Average ESOP Account Balances Company

Participation All Employees ESOP Participants* Mean/Median Rate (%) Mean ($) Median ($) Mean ($) Median ($) Ratio

1 2 3 4 5 6** 7 8 9

95.0 89.0 66.5 64.0 65.2 94.8 82.4 76.2 95.3

237,861 23,640 16,289 2,100 3,474 190,760 31,292 30,204 121,428

100,000 5,000 0 0 500 90,000 10,000 4,150 57,500

257,018 28,928 33,265 6,078 5,371 205,257 42,652 47,589 129,238

110,000 8,000 30,000 4,500 3,000 100,000 17,000 30,000 57,500

2.3 3.6 1.1 1.4 1.8 2.1 2.5 1.6 2.2

All N

84.0 5,305

81,461

15,000 4,098

104,615

30,000 3,191

3.5

Source: NBER data set (ESOP companies). *Participants reporting positive balances. (Medians for all employees are zero at two companies because some participants, as well as all non–participants, reported zero balances.) **This company’s ESOP is a 401(k) ESOP. All others are non–401(k) ESOPs.

401(k). Table 2 shows the value of total pension assets held in all retirement plans and the value of employer stock held in these plans. Mean pension assets for all employees of these ESOP companies is $105,900, and the mean for those who own some employer stock is $130,300. The mean value of employer stock held by employee owners is $90,600, and an average of two thirds of employees’ pension assets are in employer stock (though this percentage varies widely among companies from 25 percent to 100 percent). These figures suggest that while most workers in ESOPs have other diversified retirement plans, the bulk of their retirement assets remain invested in their employers’ stock. Diversification of pension assets would seem to remain an important issue for many ESOP participants.3 The Distribution of Stock Ownership and Earnings within Firms Table 3 compares the employees of the NBER ESOP companies with the GSS national survey of employees (or the subset of those who work for private for-profit companies). The GSS data indicate that about 25 percent of private sector employees own company stock, including 34 percent of salaried employees and 19 percent of hourly workers. Of course, the percentage of owners is much higher for employees of ESOP companies, and, more importantly perhaps, the ownership gap between salaried and hourly employees is much smaller (in relative terms).

105,940 3,854

240,853 55,532 45,666 26,698 31,656 225,041 35,981 57,762 148,128 130,335 3,099

257,018 61,416 81,491 55,783 41,564 242,564 47,171 86,263 156,901 90,553 3,099

257,018 26,481 26,807 6,078 15,772 172,257 39,906 49,365 95,202

Employer Stock Employee–Owners

67.2 3,099

100.0 50.4 46.3 24.7 40.7 70.8 85.8 54.4 58.3

Percent in Employer Stock**

Source: NBER data set (ESOP companies). *Including ESOPs, employer stock purchase plans, 401(k) plans, stock from exercised stock options, and open market purchases. **Value of employer stock as a percent of value of total assets in all plans.

80.5 5,727

94.0 88.0 65.2 58.2 70.9 94.5 78.5 61.5 95.3

1 2 3 4 5 6 7 8 9

Total Pension Assets in All Plans* ($) All Employees Employee–Owners

10/6/06

All N

Percent Owning Employer Stock

Company

TABLE 2 Value of Employer Stock and Other Assets

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TABLE 3 Employee Stock Ownership and Earnings in ESOP Companies and in the Private Economy NBER ESOP Employees Percent Owning Company Stock Salaried employees Hourly employees All employees Company Stock per Employee Salaried employees Hourly employees All employees Company Stock per Employee–Owner Salaried employees Hourly employees All employees Annual Earnings* Salaried employees Hourly employees All employees

GSS Employees

89.7 (1,861) 76.4 (3,743) 80.8 (5,604)

34.0 (397) 19.1 (650) 24.7 (1,047)

$130,522 (1,484) 32,053 (2,765) 66,444 (4,249)

$39,574 (413) 3,055 (698) 16,630 (1,111)

$149,803 (1,293) 47,091 (1,882) 88,920 (3,175)

$170,249 23,960 99,873

(96) (89) (185)

$ 62,695 (1,079) 32,956 (2,199) 42,745 (3,278)

$56,961 24,829 36,950

(364) (601) (965)

Note: Sample sizes are in parentheses. The NBER ESOPs are private, for–profit companies. The GSS subsample is for employees of private, for–profit companies. *For the NBER sample, earnings include base pay, overtime, commissions, and performance bonuses. For the GSS sample, earnings include all earnings from the job.

Average holdings of employer’s stock by salaried employees in ESOP companies is $130,500, and the average holdings of salaried ESOP participants is $149,800. For the wider economy represented by the GSS sample, salaried employee-owners have an average of $170,200 in company stock. But hourly employee-owners in the GSS hold an average of only $24,000 of their employers’ stock versus $47,100 for hourly employee-owners in the NBER companies. Employer stock in employee ESOP accounts is purchased by the ESOP and given to employees. (Employer stock acquired in other plans may be paid for by the employer or by the employee.) However, the formal accounting rules might not reflect the true incidence of the cost of employer stock contributions if those contributions substitute for other forms of compensation. Thus, employees with ESOPs might pay for their company stock with lower wages than they would otherwise earn. Comparison of the earnings of employees in the NBER ESOPs versus the GSS national sample (bottom of Table 3) shows that ESOP company employees’ earnings are 16 percent

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higher than earnings of the (private, for-profit sector) employees in the GSS ($42,745 versus $36,950). The earnings advantage to ESOP company employees is even higher for hourly employees, whose earnings are 33 percent higher than those of hourly employees in the national sample ($32,956 versus $24,829). Employer stock in ESOPs is allocated according to legal requirements that make it no less equally distributed than taxable (W-2) pay (with a cap of $210,000 on eligible earnings that limits allocations to top management). But what about the distribution of pay in employee-owned companies? Hourly workers’ earnings average 53 percent of salaried workers’ earnings in the ESOP companies compared to 44 percent for the wider economy (bottom of Table 3). Hourly workers in ESOP companies get lower pay and less stock than salaried workers, but they do significantly better than hourly workers in general, with respect to both earnings and ownership. Table 4 takes a closer look at the distribution of annual earnings in ESOP companies and the general economy. Here again we see that mean and median earnings are higher in the ESOP companies (column 1) than in the wider economy (column 2). Moreover, the earnings ratio between the highest (90th percentile) and lowest (10th percentile) paid employees is more than two and a half times higher in general than it is in ESOP companies (8.95 versus 3.48). In terms of earnings, for whatever reason, less-skilled (hourly) workers appear to do much better in ESOP companies than elsewhere. Pension Wealth Table 5 reports the pension wealth of participants in ESOPs, 401(k)s, and other plans in the NBER ESOP companies compared with employer stock ownership in the GSS sample and with Edward Wolff’s (2005) estimates of household pension wealth in defined benefit and defined contribution retirement plans. GSS employee-owners (many of whom are undoubtedly in ESOPs) have 10 percent more employer stock, on average, than employeeowners in the NBER ESOP companies, but their median holdings of employer stock are only 29 percent as much as ESOP participants’ median holdings. A comparison of all plan assets of workers in the NBER data with Wolff’s estimates of household pension wealth shows a 37 percent higher average pension wealth for ESOP participants and an over four times higher median pension wealth.4 Finally, we recall Wolff’s calculation that the bottom 90 percent of households owns just 23.1 percent of all stock. A similar calculation for employees of the ESOP companies in the NBER data (both participants and nonparticipants) finds that the bottom 90 percent owns 34.5 percent of the company stock and 39.8 percent of all assets their retirement plans.

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TABLE 4 The Earnings Distribution in ESOP Companies and in the Private Economy Annual Earnings* Mean 10th percentile Median 90th percentile Ratio P90/P10 N

NBER ESOP Employees

GSS Employees

$42,745 20,900 35,500 72,750 3.48 3,567

$36,950 7,269 26,596 65,063 8.95 969

Note: Sample sizes are in parentheses. The NBER ESOPs are private, for–profit companies. The GSS subsample is for employees of private, for–profit companies. *For the NBER sample, earnings include base pay, overtime, commissions, and performance bonuses. For the GSS sample, earnings include all earnings from the job.

TABLE 5 Pension Wealth of Employee Owners and All Households

NBER Employee Owners Mean Median GSS Employee–Owners Mean Median All Households* Mean Median

Employer Stock

Total Pension Assets

$90,553 26,000

$130,335 45,000

99,873 10,500

—– —–

—– —–

94,800 10,900

Note:*Wolff (2005, Table 11). Pension wealth is the value of a household’s defined benefit and defined contribution retirement accounts.

Conclusions This study of employer stock ownership in ESOP companies and in the wider economy indicates that average ESOP balances are substantial, compared to average levels of company stock ownership in general. While salaried employees do much better than hourly employees in these ESOPs, hourly employees do significantly better in ESOP companies than their counterparts do in the wider economy. Moreover, there is no evidence that employees with ESOPs (either hourly or salaried) pay for their company

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stock in lower wages. Quite the contrary—earnings are significantly higher in ESOP companies than in general, especially for hourly employees. Finally we note that, while far from adequate from the standpoint of financing retirement, the median pension wealth of ESOP participants is over four times higher than the median household pension wealth (Table 5) and that company stock ownership in ESOPs, while highly concentrated, is considerably less concentrated than stock ownership in general. If all employees worked for ESOP companies like those in the NBER study, the distribution of stock ownership would be considerably more equal than it is. Acknowledgments This research is supported by a grant from the Russell Sage Foundation and the Rockefeller Foundation. We thank Douglas Kruse for his invaluable service in compiling the employee survey data used in this study. Notes 1. As Kruse (2002) points out, these figures double count companies and employees who have more than one plan. His calculations (for 1998) suggest a lower-bound estimate of around 20 million employees (or 18 percent of all private sector workers) holding stock in their companies through various defined contribution pension plans (ESOPs, KSOPs, and 401(k)s that hold employer stock) and profit-sharing and employee stock purchase plans in 2002. 2. The NBER study includes fourteen companies, nine with ESOPs and six with broad-based stock option plans (one company had both types of plans). While the study selected companies to vary in size and industry, it is not a representative sample of all ESOPs or broad-based stock option plans, as key sampling criteria in some cases were researcher company contacts and company willingness/unwillingness to allow their employees to be surveyed. 3. The law provides for increased diversification for employees approaching retirement. Employees who have been participants for ten years and who have reached age fiftyfive have the right to diversify up to 25 percent of the employer stock in their accounts. At age sixty they can diversify up to 50 percent. 4. Note that this comparison understates the pension wealth gap between employees with ESOPs and other employees for two reasons: (1) Wolff’s Survey of Consumer Finance data includes ESOP participants, and (2) it reports pension assets per household, which may combine the pensions of more than one employee.

References Blasi, Joseph, Douglas Kruse, and Aaron Bernstein. 2003. In the Company of Owners: The Truth About Stock Options (And Why Every Employee Should Have Them). New York: Basic Books. Kardas, Peter, Adria Scharf, and Jim Keogh. 1998. “Wealth and Income Consequences of ESOPs and Employee Ownership: A Comparative Study from Washington State.” Journal of Employee Ownership Law and Finance, Vol. 10, no. 4 (Fall).

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Kennickell, Arthur B. 2003. “A Rolling Tide: Changes in the Distribution of Wealth in the U.S., 1989–2001.” Working Paper, Board of Governors of the Federal Reserve System. Kruse, Douglas. 2002. “Research Evidence on Prevalence and Effects of Employee Ownership.” Testimony before the Subcommittee on Employer-Employee Relations, Committee on Education and the Workforce, U.S. House of Representatives, February 13. Kruse, Douglas, Richard Freeman, and Joseph Blasi. 2006. “Do Workers Gain by Sharing? Employee Outcomes under Employee Ownership, Profit Sharing and Broad-Based Stock Options.” Paper Presented at the LERA meetings, January 5–8. Mackin, Christopher. 2005. “2005 Census of Massachusetts Companies with Employee Stock Ownership Plans (ESOPs).” Boston: Commonwealth Corporation. Rosen, Corey. 2005. “Retirement Security and Wealth Accumulation in S ESOP Companies.” Oakland: The National Center for Employee Ownership. Weller, Christian, and Edward N. Wolff. 2005. “Retirement Income: The Crucial Role of Social Security.” Washington, DC: Economics Policy Institute. Wolff, Edward N. 2004. “Changes in Household Wealth in the 1980s and 1990s in the U.S.” The Levy Institute of Bard College, Working Paper No. 407. Wolff, Edward N. 2005. “Is the Equalizing Effect of Retirement Wealth Wearing Off?” The Levy Institute of Bard College, Working Paper No. 420.

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XI. The Limits of NLRB Certification and Its Alternatives

The Employee Free Choice Act: A Reality Check Roy J. Adams McMaster University The AFL-CIO, as well as its allies such as American Rights at Work, has invested a great deal of time, energy, and money in promoting passage of the Employee Free Choice Act (EFCA). Those of us who believe in collective representation hope that this initiative will fulfill the hopes of its promoters and produce a major advance in the number of workers covered by collective agreements. However, with continuing control of Congress and the White House by Republicans, the odds against passage of the Act would seem to be high. Even if it should surmount the odds and pass, there are reasons to expect that the results will, unfortunately, fall short of expectations. Among the key elements of the Free Choice Act that are intended to spark new organizing are card-check certification, first-contract arbitration, and stiffer penalties for employers who offend the law. Since the commission by employers of unfair labor practices during certification election campaigns and stonewalling during the negotiation of first contracts are common practices, it seems obvious to American unionists that the establishment of procedures designed to counter those practices will significantly improve the labor movement’s organizing prospects. Maybe, but that is not what the Canadian experience indicates. In the private sector, where industrial relations are regulated by a legal framework similar to the one in effect in the United States, union density and bargaining coverage are falling even in provinces such as Saskatchewan and Quebec that have card-check and firstcontract arbitration clauses in effect (Adams 2006a). In the past several decades, union density in the Canadian private sector has fallen from about

Author’s address: Faculty of Business, MGD #242, Hamilton, ON L8S 4M4 Canada 184

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30 percent to less than 18 percent (Godard 2003; Adams 2006a). Despite devoting significant new resources to union organizing in the 1990s, Canadian unions have been unable to recruit enough new members to make up for attrition due to industrial change (Jackson and Schetagne 2004). Moreover, the entry into Canada of aggressively anti-union employers such as Wal-Mart may have emboldened employers to take stronger positions on union avoidance. Despite a well-funded and strongly focused campaign and the Canadian legislative advantages, the United Food and Commercial Workers Union was unable to achieve a collective agreement with any WalMart outlet through 2005. When issues in dispute at one certified store in Quebec were submitted to first contract arbitration, the company shut down the store (Adams 2005). Research in the United States indicates that nearly 60 million currently unorganized American workers would like to have collective representation via government-certified agents. There can be little doubt that overt employer opposition is a major cause of this unfulfilled demand. The Employee Free Choice Act is designed to make it costly for employers to thwart unionization by disobeying the law as they now do frequently with impunity. The theory is that fear of costly penalties will result in less law breaking, and less law breaking will result in more successful organizing. The theory may be true, but, even if it is, how much of a difference will it make? The Canadian experience indicates that the net benefit will be minimal. Employer opposition is effective even when employers refrain from illegal activities. Most unorganized Canadian employers make it known that they do not want to deal with a union and that any effort at unionization will be regarded as an unfriendly challenge to managerial competence and good will (Bentham 2002). Although illegality is not as prevalent in Canada as it is in the United States, most employers take the union avoidance steps that are legally available to them when the union organizer comes to call. In doing so they create a union-demonizing atmosphere. Combined with the availability of legal union avoidance, the existence of such an anti-union climate is enough to stop most people from organizing. Publicly expressed or even implied employer opposition to certification plants in the mind of the unorganized worker the seed that to organize is to upset the apple car,to make the employer angry, and to identify oneself as a troublemaker. A good example of this effect in practice is the Stelco and Subsidiaries Salary Employees Association (SASSEA; see www.sassea.ca). When the Steel Company of Canada put itself into a state of bankruptcy protection in 2004, unorganized salaried employees formed an association to represent their interests. Although the company had dealt with certified shopfloor unions for decades, the leaders of the new association felt compelled to

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make it clear that the initiative was intended to be a representation mechanism only during the bankruptcy proceedings. They explicitly stated that SASSEA was not a full-fledged trade union and there was no intention of developing it into one. They promised that the identity of those who joined the association would not be divulged to management. In short, even in a situation where collective bargaining is well established, the climate is such that yet-unorganized employees, although clearly desirous of relevant collective representation, are reticent to exercise their basic right to organize in order to participate over the long run in the governance of their employment relations. Employer opposition is especially effective when coupled with the majoritarian dynamics of the Wagner Act–model legal framework that is in effect in both Canada and the United States. Even if the EFCA goes through, those employees who want representation still will not be able to get a certified bargaining agent unless they are able to convince more than 50 percent of their colleagues to sign up for it. In an atmosphere where employer opposition to unionism continues to be regarded as legitimate, reaching this level of support will be very difficult. Organizing may be marginally easier, but, if the Canadian experience is indicative, it will not make a major difference in the overall outcome. Over and above these technical reasons for skepticism about the EFCA, the fundamental logic of the Act is flawed. Opponents of collective representation have developed and refined a theory of the union-free workplace that is pervasive in the media, among the general public, and, in my experience, even in the minds of many labor friendly academics and practitioners (Adams 2006b). The Free Choice Act plays right into the hands of the theory’s proselytizers. The fundamental tenets of union-free theory are the following: 1. Individual bargaining is the natural alternative to collective bargaining. 2. Unions are “outside organizations” to whom employees turn when they are unhappy with the outcome of their individual efforts. 3. If employees are satisfied with the individual employment relationship they have no need for a union. 4. If unorganized enterprises institute policies and practices that are acceptable, the employees will be satisfied, and being satisfied will have no need for a union. 5. Thus, unionization is a bad thing—the outcome of management failure. 6. The absence of unionization is an explicit indicator of good management.

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7. Thus, it is a duty of managers of unorganized enterprises to demonstrate good practice by avoiding unionization. 8. To become unionized is to fail, to be disgraced. 9. The proper role of government is to act as a neutral referee in the contest between unions and unorganized employers for the loyalty and support of the employees. This role lends support to the propositions that unions are “outside organizations,” that individual employment relations are the natural norm, and that unionization is the outcome of a failed attempt by management to create social harmony in the workplace. By implying that the choice between individual bargaining and collective bargaining is legitimate, the Employee Free Choice Act gives credence to this philosophy since each of its tenets follow from the initial statement. Although many human resource and labor relations professionals are willing to grant the legitimacy of individual bargaining, it is clearly not an effective alternative to collective representation. Every day there are reports in the press about companies announcing major layoffs, changes to their pension plans, the imposition of two-tier wage systems, and movement from full-timers to more part-timers and contract workers. Individuals cannot bargain about such aspects of employment. To have any influence over them they need a collective representative. That is a major reason why the right of all employees to collectively negotiate their terms and conditions of work has been heralded internationally as a fundamental human right. In 1998 the United States joined with nearly all of the nations of the world in affirming the human rights nature of collective bargaining (Bellace 2001). The agency that is recognized globally as the authoritative source regarding labor norms and principles is the International Labor Organization (ILO). That organization, of which the United States is a prominent member, promotes a labor relations vision that is the polar opposite of union-free philosophy. Its principle concept is that of social partnership, and the main tenets of the paradigm it promotes for all of the world’s nations are the following (Adams 2006b): 1. Collective bargaining is an inherently good thing and the preferred process for making democracy effective in the economic sphere of society. 2. Thus, it should be freely accepted as the norm by employees, employers, and society as a whole. 3. It is no disgrace to becoming unionized; indeed, the absence of unionization is an indicator of a potentially problematic, antisocial situation.

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4. The proper role of government is encouragement of collective bargaining, not neutrality. 5. While majoritarian certification is an acceptable policy, employees in any uncertified unit have a right to organize themselves and seek recognition in order to negotiate issues such as layoffs, pension change, and work organization change, and employers have a responsibility to recognize and negotiate in good faith with them even if the employee organization is composed of only a minority of the relevant employees and has not been state certified.1 The United States, as a member of the ILO, has endorsed its basic philosophy and principles. ILO membership may be interpreted as acceptance of a responsibility to put into place a labor relations system that is consistent with that organization’s basic ethos. Should that be accomplished and the tenets of social partnership theory be accepted as the norm in the United States, industrial relations would change dramatically. Employer opposition to unionization would be no more legitimate than opposition to diversity or condoning child labor. The only valid employee choice would be between certified representation by an exclusive agent and representation by less formal means. Although individual employment relations might still be appropriate for employees in very small enterprises, or for high-level managers, the absence of collective representation would automatically be suspect and in need of explanation. In short, the main obstacle to union advancement in the United States is not the law but rather the prevalence of an ideology that demonizes collective representation as a social, economic, and administrative negative. The promoters of the Employee Free Choice Act would seem to believe that the current legislative framework in the United States is sound but in need of certain revisions in order to become fully effective. Canadian experience does not support that theory. The principle obstacle to the advancement of collective bargaining in North America is the existence of a paradigm that accepts the choice of subservience to management control as legitimate. So long as that paradigm continues to dominate, the decline of the American labor movement is likely to continue. Unfortunately, the Employee Free Choice Act affirms rather than denies the paradigm’s legitimacy, thus enhancing its credibility and power to shape behavior. Note 1. This right exists in the United States but, because of the dominance of the certification process on both thought and practice, is little used. See, for example, Morris 2005.

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References Adams, Roy J. 2005. “Organizing Wal-Mart: The Canadian Campaign” Just Labour, Vol. 6/7 (Autumn), pp. 1–11. Adams, Roy J. 2006a. Labour Left Out: Canada’s Failure to Protect and Promote Collective Bargaining as a Human Right. Ottawa: Canadian Centre for Policy Alternatives. Adams, Roy J. 2006b. “America’s ‘Union-Free’ Movement in Light of International Human Rights Standards.” In Richard Block, Michelle Kaminski, Sheldon Friedman, and Andy Levin, eds., Justice on the Job: Perspectives on the Erosion of Collective Bargaining in the United States. Kalamazoo, MI: W. E. Upjohn Institute for Employment Research. Bellace, Janice. 2001. “The ILO Declaration of Fundamental Principles and Rights at Work.” International Journal of Comparative Labour Law and Industrial Relations, Vol. 17, no. 3 (Autumn), pp. 269–87. Bentham, Karen. 2002. “Employer Resistance to Union Certification: A Study of Eight Canadian Jurisdictions.” Relations Industrielles/Industrial Relations, Vol. 57, no. 1, pp. 159–85. Godard, John. 2003. “Do Labor Laws Matter? The Density Decline and Convergence Thesis Revisited.” Industrial Relations, Vol. 42 (July), pp. 458–92. Jackson, Andrew, and Sylvain Schetagne. 2004. “Solidarity Forever? Analysis of Changes in Union Density.” Just Labour, Vol. 4 (Summer), pp. 53–82. Morris, Charles J. 2005. The Blue Eagle at Work: Reclaiming Democratic Rights in the American Workplace. Ithaca, NY: ILR Press.

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Discussion Sheldon Friedman AFL-CIO The Employee Free Choice Act (EFCA) is the most significant federal legislative proposal in nearly thirty years concerning the freedom of America’s workers to form unions and bargain collectively. Since its introduction in the 109th Congress by Ted Kennedy (D-MA) and Arlen Specter (R-PA) in the Senate (S. 842), and by George Miller (D-CA) and Peter King (R-NY) in the House (H.R. 1696), EFCA has garnered 210 House cosponsors at this writing—just 8 short of a majority—and 42 in the Senate. EFCA’s three main provisions are democratic majority sign-up, first-contract arbitration, and stiffer penalties for illegal employer conduct. Democratic majority sign-up, also known as card check, would provide for certification of a union when a majority of the employees at a workplace has signed written authorizations stating that they want to form a union. Workers seeking to exercise their fundamental human right to form a union would no longer be forced into the meat-grinder of the NLRB representation election process. As Adams and others have noted, this process exposes them to weeks and months of employer threats, surveillance, coercion, firings, and intimidation, usually orchestrated by professional anti-union consultants—often followed by months and years of debilitating delays (Human Rights Watch 2000; Logan 2002; Mehta and Theodore 2005). When EFCA becomes law, workers will be able to form and join unions the same way people form and join most other organizations, including religious congregations, book clubs, the PTA, or amateur sports teams—simply by signing up. EFCA’s first-contract arbitration provision would address another widespread human rights violation: even after workers jump through all the hoops under current law and succeed in forming unions, employers refuse to agree to initial collective bargaining contracts nearly half the time (FMCS 2004, Table B). In most cases, the failure to reach an agreement results from employers’ delaytactics and unwillingness to bargain in good faith. There is no real remedy under current law for this denial of workers’ rights. EFCA would give newly formed unions (and employers) access to mediation and, if necessary, binding arbitration in order to achieve initial collective bargaining agreements on a timely basis. 815 Sixteenth Street NW, Washington, DC 20006 190

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Last but not least, EFCA would strengthen penalties for illegal employer conduct. Penalties are so light under current law that employers have little incentive to avoid breaking the law to prevent employees from forming unions. As a result, illegal employer conduct has skyrocketed: according to the NLRB, between 2002 and 2004 more than 20,000 workers per year were disciplined or fired for engaging in legally protected union activity, up from 6,000 in 1969 and fewer than 1,000 per year in the 1950s (Human Rights Watch 2000; see also NLRB annual reports). Adams correctly notes there is little chance EFCA will be enacted in the near term, but it has proven to be a valuable vehicle for educating and mobilizing union members, the public, and political leaders. More than 90 percent of union members have never been through an organizing campaign and have little firsthand experience of the employer interference that workers typically face when they try to form a union, especially in the private sector. Politicians, in particular, need education about the obstacles to workplace democracy and the high economic, social, and political price that the United States is paying for its failure to protect basic human rights on the job. The campaign for EFCA is an important element of the larger campaign for workers’ rights in the United States. EFCA is a modest reform, but contrary to Adams’s view its impact would likely be substantial. Susan Johnson (2004) estimates that as much as a quarter and probably more of the considerable difference in union density between the United States and Canada is attributable to differences in union recognition procedures—even though card check is the norm in only half of Canada’s provinces. If Johnson is correct, EFCA could spur an increase in U.S. union density of nearly 5 percentage points and perhaps much more. Indeed, there are reasons to expect an even larger impact, notably the much shorter time period between petitions and representation elections in Canada and—in most cases—less intense employer anti-union campaigns. In addition to benefiting millions of workers, the probable post-EFCA gain in union density could change the outcome of political elections and help blunt the right wing’s assault on the nation’s safety net. The NLRB representation election process has become such a death trap that the majority of successful union organizing today takes place outside of this process altogether. Only 70,000 workers were able to form unions last year via NLRB representation elections—a tiny fraction of the 57 million non-union workers who want a union in their workplace (NLRB annual reports; Peter Hart 2005). Labor’s abandonment of the NLRB representation election process has become so pervasive that James Brudney (2005) calls it a paradigm shift. Today, however, employers can insist on NLRB-supervised elections even when presented with clear evidence that 100 percent of their

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employees want a union. EFCA could tip the balance between workers’ aspirations and employer objections in favor of a more democratic workplace. Adams’s more fundamental concern is that EFCA is so deeply rooted in what he terms the flawed Wagner Act model that it reaffirms rather than challenges the legitimacy and primacy of “union-free” ideology in corporate America. My reading of history is different: despite its limits, initially the Wagner Act was a powerful force for workplace democracy, human rights, and social and economic justice. Wagner has since been perverted into nearly the opposite, as David Brody (2005) notes, starting with passage of Taft-Hartley—but EFCA would move the law, strongly, in a direction more protective of workers’ rights. Adams’s most compelling point is that under Wagner, and by extension EFCA, the default option in America’s workplaces is no collective bargaining/ no workplace representation. If workers want these, they must take affirmative—and in the real world, risky—steps to get them. He argues that collective bargaining and collective representation should be the default option in nearly all workplaces. This is a tantalizing prospect, but the devil is in the details, and Adams does not provide them. Nor does he offer guidance about how to achieve this laudable goal, apart from noting that the United States has an obligation to require corporate America to embrace the International Labor Organization’s social partnership model. Far stronger medicine than that will be needed, I suspect, to cure corporate America of its “union-free” sickness. References Brody, David. 2005. Labor Embattled. Champaign: University of Illinois Press. Brudney, James J. 2005. “Neutrality Agreements and Card Check Recognition: Prospects for Changing Paradigms.” Iowa Law Review, Vol. 90, p. 819. FMCS. 2004. Annual Report. Human Rights Watch. 2000. Unfair Advantage: Workers’ Freedom of Association in the United States Under International Human Rights Standards. Available at www.hrw.org/reports/2000/uslabor. Johnson, Susan. 2004. “The Impact of Mandatory Votes on the Canada-U.S. Union Density Gap.” Industrial Relations, Vol. 43, no. 2 (April), pp. 356–63. Logan, John. 2002. “Consultants, Lawyers and the ‘Union Free’ Movement in the USA, 1970–2000.” Industrial Relations Journal, Vol. 33, no. 3 (August), pp. 197–214. Available at http://www.araw.org/docUploads/Logan%2DConsultants%2Epdf. Mehta, Chirag, and Nik Theodore. 2005. “Undermining the Right to Organize: Employer Behavior During Union Representation Campaigns.” Report for American Rights at Work. Available at http://www.araw.org/docUploads/UROCUEDcompressedfull report%2Epdf. Peter D. Hart Research Associates. 2005. “AFL-CIO Union Message Survey.” Study No. 7518. Unpublished.

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XII. LERA Refereed Papers: Dispute Resolution, International and Comparative Industrial Relations, and Labor Unions and Studies

Union Cities and Voter Turnout Roland Zullo University of Michigan Abstract This research combines information from the AFL-CIO Union Cities program with national survey data to examine whether politically active labor councils affected voter turnout in the 2000 national election. Results indicate that congressional districts with a Union City were associated with approximately 5 percent higher voter turnout. This effect, however, is mediated by preexisting political activity. Further analysis indicates that districts with a Union City have relatively higher rates of voting among minorities and the working class. These results support the general theory that organized labor is socializing labor-capital conflict. In The Semisovereign People by E. E. Schattschneider (1960) proposes a theory on interest group behavior that applies to the contemporary union movement. The strategic response to intergroup conflict, according to Schattschneider, is essentially a choice over the scope of conflict. In most circumstances, when two or more groups are engaged in a confrontation the advantaged party will try to contain, or “privatize,” intergroup conflict. Keeping the conflict private preserves power relations and, by extension, the hegemonic status of the advantaged. Weaker parties, on the other hand, will

Author’s address: 1111 East Catherine Street, Ann Arbor, MI 48109-2054 193

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attempt to alter the balance of power by recruiting sympathetic outsiders in order to build a unified alliance against the dominant: a process Schattschneider refers to as “socializing” conflict. This dynamic of opposing tendencies toward the privatization and socialization of conflict can operate in reverse: formerly weak parties that become powerful tend to shed alliances to pursue an independent path. In most local, national, and international contexts, labor has lost power relative to capital, and consistent with Schattschneider, the tactics of labor reflect a shift toward socializing conflict. The evolving rhetoric behind organizing drives, with the right to bargain collectively increasingly advocated for in universal terms, such as “justice” or “respect,” is purposely framed to appeal to non-union organizations. Some unions are circumventing the legal conventions for achieving bargaining rights, rejecting NLRB supervised elections in favor of a card-check recognition process that often leverages local community support. Once workers are formally represented, pressuring employers to agree to contract terms is less a function of strike capacity and more dependent on corporate campaigns: a broad array of tactics that exert diffuse and multidirectional forms of pressure on industry leaders. As the recent phrase “social movement unionism” implies, these tactics are symptomatic of a strategic shift toward socializing conflict between labor and capital. A Return to Political Militancy One implication of the socialization of labor-capital conflict is that organized labor will become more politically active. This happens, in part, because the legal rules and economic policy that encumber new organizing and threaten existing members can be modified only through a political process. Pressure also comes from newly invited allies. Working coalitions entail interorganizational compacts that constrain the ability for one member to pursue policy that conflicts with interests of others in the coalition. Because the reform agenda of traditional and prospective non-union coalition partners, such as civil rights groups, interfaith councils, students, and environmentalists, are nearly always framed in political terms,1 it follows that any sustained strategy to socialize conflict requires labor to become politically engaged and respect, if not adopt, the issues of non-union coalition partners. Without genuine reciprocity, coalitions are either short-lived or they fail to grow beyond mere words. Union political expenditures do indicate a shift toward politics. Figure 1 provides inflation-adjusted election-cycle donations (in 2002 dollars) to political candidates for the 1990 through 2002 national elections. According to these aggregate data, organized labor nearly doubled the magnitude of political contributions to candidates over the twelve-year period.

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DISPUTE RESOLUTION, INTERNATIONAL, AND LABOR UNIONS

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FIGURE 1 Inflation Adjusted Union Political Donations in National Elections: 1990 to 2002 (in 2002 Dollars). 120

100

Millions ($)

80

60

40

20

0 1990

1992

1994

1996

1998

2000

2002

Source: Center for Responsive Politics. See: http://www.opensecrets.org.

This has occurred, by and large, without deviating from the “reward our friends, punish our enemies” formula of Samuel Gompers. The distribution of political contributions across the two major political parties was stable over the 1990 to 2002 time period, with anywhere from 93 percent to 96 percent going to Democrats. And as a group, the Democrats have been far more responsive to labor than Republicans. In 2000, for example, the average pro-labor voting record among Democrats was 87.6 percent, compared with an 8.6 percent average among Republicans. This trend in resource appropriation is consistent with historical evidence of an inverse relationship between organized labor’s ability to negotiate tangible gains at the bargaining table and labor’s role as an agent for political insurgency. Perlman (1922) describes labor’s embrace of egalitarian political reform during the nineteenth century—achieving suffrage for wage earners and public education—during a time when criminal conspiracy doctrines suppressed the growth of unions as economic organizations. Greene (1998) documents Samuel Gompers’s reluctant immersion into partisan politics during the first decades of the twentieth century to counter the assault on AFL membership.

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The CIO facilitated both economic agitation and widespread grassroots political mobilization during the 1930s, just prior to and during the greatest surge in U.S. union membership growth (Foster 1975). Yet in 1947, with private sector unions nearing their peak postwar economic strength, labor failed to muster enough political support to prevent a congressional override of Truman’s veto of the Taft-Hartley Act. In the Cold War era that followed, labor infamously purged leftist leaders from their ranks, opposed rank-and-file support of third-party candidates, was slow to join the Civil Rights movement, and alienated students by supporting the Vietnam War (Brody 1980; Meyer 1992; Rosswurm 1992; Zeiger 1986). Although there are notable exceptions to this pattern, a broad read of history indicates that when economic progress is achievable through bilateral bargaining, progressive alliances are disregarded and political militancy is suppressed. Coalition activity, progressive posturing, and political militancy ascend when bargaining fails. Union Cities and Voter Turnout Attempts to socialize labor-capital conflict are evident in “Union Cities,” the AFL-CIO program to revitalize labor councils (LCs) as centers of regional political activity (Moberg 2000).2 Union Cities was initiated after the Republican takeover of Congress in 1994, when it became doubtful that a block of reliable Democrats and a handful of labor Republicans could obstruct the passage of anti-labor legislation, let alone enact pro-labor measures (Dark 2000; Gerber 1999). Labor’s political influence was waning, due in part to inattention to regional capacity building. To augment labor’s political presence in areas of high union density, the Union Cities program instructs LC leaders to participate in community coalitions, perform political outreach in working-class neighborhoods, diversify and train labor-friendly political leaders, and expand labor’s voice through the media. The aim is to socialize the role of LCs by encouraging relations with labor-friendly constituencies, particularly targeting groups sympathetic to the interests of minorities and the working class. We explore the socialization hypothesis by examining the association between Union Cities and voter turnout for the general population in the 2000 election. Although researchers have examined voter turnout of union members (Delaney, Masters, and Schwochau 1988; Sousa 1993; Zullo 2004), few have tested whether unions facilitate voter turnout for the general population. After controlling for state-level rates of urbanization, education, and income, Radcliff and Davis (2000, Tables 3 and 4) estimate that a 1 percent increase in union density is associated with approximately 0.20 to 0.25 percent higher vote turnout. In a complementary analysis, Radcliff (2001) mod-

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els the propensity for U.S. citizens to vote as a function of national union density from 1952 to 1992. Factoring out whether a respondent is from a union household, and controlling for demographic factors, results indicate that union density is positively correlated with the probability of voting, leading to the conclusion that unions mobilize both their members and nonunion citizens. Our analysis draws a more precise bead on this topic by evaluating voter turnout at the congressional district level. Consistent with prior research on unions and voting (Delaney et al. 1988; Radcliff 2001; Sousa 1993), voter turnout is analyzed using National Election Study (NES) data. Turnout is modeled as a function of the existence of a regional Union City LC, labor PACs, district turnout in 1992, and relevant controls. Results indicate a positive association between Union Cities and voter turnout, although this effect is mediated by preexisting regional political activity. To further explore the socialization hypothesis, we compare voting with respect to respondent characteristics in districts with a Union City and those without, focusing on race, class, and 1992 turnout. Data and Variables Data were compiled from four sources. The list of LCs designated as Union Cities were recognized as “Central labor councils committed to becoming a Union City” during the 2001 AFL-CIO convention. Using geographic information systems (GIS) software, the zip code for each Union City LC was matched against the boundaries for the 106th Congress. If a congressional district boundary crossed the zip-code boundary of a Union City LC, then it was assumed that the LC was politically active in that district during the 2000 election. Congressional districts with a Union City LC were coded 1; otherwise they were coded zero. The Union City variable was merged with the 2000 NES data. The NES is a comprehensive biennial election survey conducted by the University of Michigan Center for Political Studies (Burns et al. 2001). The dependent variable (Voted) was derived from a question asking respondents whether they voted (v001241). Those responding “I’m sure I voted” were coded 1; otherwise they were coded zero. Two consistent predictors of voting from the NES were used as control variables. First, age has a strong curvilinear association with voting, with voting rates lowest for the young, peaking at around seventy years, and then declining afterward (Miller and Shanks 1996; Rosenstone and Hansen 1993; Wolfinger and Rosenstone 1980). Age in years and age-squared are in all equations. Second, those who have a strong psychological attachment to a political party vote at higher rates than independents (Miller and Shanks

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1996; Rosenstone and Hansen 1993). To capture the turnout effect related to partisan attachment, responses to the question “Do you think there are any important differences in what the Republicans and Democrats stand for?” are included (v001435). Affirmative responses are coded 1; otherwise they are coded zero. Several researchers report lower turnout among working-class citizens (Shields and Goidel 1997; Teixeira 1987; Wolfinger and Rosenstone 1980). To explore the association between class and voting, a variable was operationalized from the NES based on a series of questions on class (v000998 to v001004). Respondents who self-identify as “average working class,” “upper working class,” or “working class” were coded 1; otherwise they were coded zero. To examine the relationship between race and voting, an indicator variable was included for respondents who describe their race as white (v001006). Two final control variables are used in the analysis. First, to control for the intensity of the AFL-CIO political campaign by congressional district, total labor PAC donations to the candidates for the 2000 election cycle are included. These data originate from the Federal Election Commission and are compiled by the Center for Responsive Politics. Second, to control for the level of political activity by congressional district prior to the Union City Program, voter turnout was calculated for each congressional district in the 1992 election. Voter turnout by congressional district was estimated by dividing the sum of the votes for all 1992 presidential candidates (Barone and Ujifusa 1993) by the age-eligible population (over eighteen years old) in each district from the 1990 census. Variables and descriptive statistics are provided in Table 1. Results Union City and Voter Turnout Table 2 provides the probit regression estimates for voting in the 2000 election. Model (1) includes control variables for age and party difference along with the primary variable Union City. The positive and statistically significant coefficient for Union City (β = 0.153; p < 0.05) indicates that respondents located in congressional districts with a Union City LC were approximately 5.4 percent more likely to vote in the 2000 election. However, the Union City coefficient becomes insignificant when the equation includes a control for the district turnout rates in 1992. Model (2) indicates that the 1992 turnout is a positive predictor of the likelihood that a NES respondent voted (β = 1.395; p < 0.001). Although the coefficient for Union City in Model (2) remains positive, it fails to reach conventional levels of statistical signifi-

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TABLE 1 Variables and Descriptive Statistics Variable

Description

Source

Voting

Indicator of whether respondent was “sure they voted in the 2000 election” (Yes = 1) Age of respondent in years

NES NES

Age–squared/100 Age–squared of respondent divided by 100

NES

Age

Party Difference Working Class White Union City

Respondent perceives “important differences NES between what Republicans and Democrats stand for” (Yes = 1) Respondents that self–identify as either NES “average working class,” “upper working class” or “working class” (Yes = 1) Respondent identifies as Caucasian (Yes = 1) NES Congressional district that shares a zip code with a labor council described as “on the road to the union city” (Yes = 1) Labor donations by congressional district

Labor PACs ($ ten thousands) 1992 Turnout Congressional district voter turnout for 1992

Mean (s.d.) 0.655 (0.476) 47.197 (16.941) 25.144 (17.539) 0.592 (0.492) 0.435 (0.496)

0.773 (0.419) AFL–CIO 0.417 (0.493)

FEC B&U

1.032 (0.988) 0.560 (0.095)

Sources: NES—2000 National Election Study; AFL–CIO—AFL–CIO documents; FEC— Federal Election Commission records; B&U—Barone and Ujifusa (1993).

cance (β = 0.088; p = n.s.), and the point estimate for the Union City effect is reduced to 3 percent. These results imply that Union City LCs are more likely to exist in districts with historically above-average political activity. Model (3), which includes labor PACs, our proxy for the intensity of labor’s effort by congressional district, offers evidence that the Union City phenomena is local rather than national. If PAC expenditures were positively correlated with activist LCs, then the Union City coefficient should decline in Model (3). Instead, the stable Union City coefficient across Models (1) and (3) indicates independence between LC activity and the strategic allocation of national PAC resources. Consistent with prior research, these findings suggest that national unions do not allocate PAC funds on the basis of regional membership strength (Gopoian 1984). Model (4), which includes all the independent variables, affirms this conclusion.

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TABLE 2 Probit Regressions of Voting and Union City Variable Age Age–squared/100 Party Difference (Yes = 1) Union City (Yes = 1) Labor PACs ($ ten thousands) 1992 Turnout Constant –Log Likelihood Chi–square N

Model (1) 0.061*** (0.010) –0.044*** (0.010) 1.211*** (0.067) 0.088 (0.068) –0.047

–2.038*** (0.253) 936.38 434.40 1790

Model (2)

Model (3)

0.060*** 0.061*** (0.010) (0.010) –0.044*** –0.045*** (0.010) (0.010) 1.208*** 1.214*** (0.067) (0.067) 0.153* 0.156* (0.070) (0.068) –0.067 (0.036) (0.036) 1.395*** (0.360) –2.758*** –1.992*** (0.316) (0.256) 928.84 935.52 449.49 436.11 1790 1790

Model (4) 0.060*** (0.010) –0.044*** (0.010) 1.211*** (0.067) 0.087 (0.070) 1.486*** (0.364) –2.740*** (0.317) 927.13 452.91 1790

Note: * p < 0.05; ** p < 0.01; ***p < 0.001; standard errors in parentheses.

Union City, Race, Class, and 1992 Turnout Do Union Cities reflect the socialization of political conflict across race and class? To explore this question, Table 3 compares voter turnout in congressional districts with a Union City and those without with respect to race, class, and 1992 turnout. Models (1) and (2) test whether there is a difference in turnout across race. The positive and statistically significant coefficient for white voters (β = 0.248; p < 0.05) in Model (1) indicates that the probability of whites voting was 9.3 percent higher than non-whites in districts without a Union City. Model (2) offers the same equation for districts with a Union City. Here the coefficient for white voters is positive yet statistically indistinguishable from zero (β = 0.110; p = n.s.), implying that whites and nonwhites voted at comparable rates in districts with a Union City. A similar pattern emerges with class. Models (3) and (4) compare the voter turnout rates across class for districts with and without a Union City. In districts without a Union City, NES respondents who self-identify as working class vote at significantly lower rates than others (β = –0.281; p < 0.01). In such districts, the probability of voting by working-class respondents was 10.4 percent lower than for respondents who did not identify as working

567.87 231.28 1043

Note: * p < 0.05; ** p < 0.01; ***p < 0.001; standard errors in parentheses.

360.38 215.73 747

359.90 216.67 747

566.64 233.74 1043

1.661*** (0.463) –2.707*** (0.408)

0.055*** (0.014) –0.040** (0.013) 1.102*** (0.086)

Not Union City Model (5)

359.47 217.55 747

0.921 (0.578) –2.718*** (0.511)

0.069*** (0.016) –0.051*** (0.016) 1.381*** (0.109)

Union Model (6)

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569.98 227.05 1043

–2.119*** (0.403)

–0.140 (0.109)

0.069*** (0.016) –0.052** (0.015) 1.375*** (0.109)

Union City Model (4)

Voting and 1992 Turnout

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–Log Likelihood Chi–square N

–2.267*** (0.402)

–1.646*** (0.331)

–1.200*** (0.332)

0.053*** (0.014) –0.038** (0.013) 1.061*** (0.087)


Constant

0.069*** (0.016) –0.052** (0.015) 1.386*** (0.109) 0.110 (0.130)

Union City Model (2)

Voting and Class

–0.281** (0.087)

0.055*** (0.014) –0.040*** (0.013) 1.073*** (0.086) 0.248* (0.099)


Voting and Race

Working Class (Yes = 1) 1992 Turnout

Party Difference (Yes = 1) White (Yes = 1)

Age–squared/100

Age

TABLE 3 Probit Regressions of Voting on Race, Class, and 1992 Turnout

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class. By comparison, in districts with a Union City, coefficient estimates indicate no statistical difference between the voting rates of working-class and non-working-class respondents (β = -0.140; p = n.s.). The coefficient for working-class voters in Model (4) yields an estimated voter turnout differential of 4.7 percent. The final equations examine the extent that district turnout in 1992 predicts voting in 2000. Turnout in 1992 is a strong positive predictor of voting by NES respondents for districts without a Union City but less so for districts with a Union City. The coefficient for 1992 turnout in Model (5) (β = 1.661; p < 0.001) indicates that for every percentage point increase in 1992 turnout, the probability of a respondent’s voting increased by 0.61 percent. By comparison, the coefficient for 1992 turnout in Model (6) (β = 0.921; p = n.s.), while positive, does not reach conventional levels of statistical significance. Thus, voting rates in districts without a Union City were relatively undisturbed by events taking place between 1992 and 2000. Conversely, this finding supports the claim that the 1994 election results shocked LC leaders and other allies into a more activist mode. Discussion and Limitations The theoretical work of Schattschneider (1960), combined with the historic inverse between successful bilateral bargaining and union political activism, explain recent efforts by organized labor to reach out to progressive allies on the organizing front and the renewed emphasis on political militancy. These are mutually reinforcing tactics that enlarge the scope of laborcapital conflict. The question before labor leaders, then, is not whether unions should abstain from politics—for they cannot without undermining the progressive partnerships they need to rebuild collective representation in the private workplace. Instead, labor’s declining bargaining power should push unions toward political mobilization tactics that complement a general strategy for enlarging the scope of labor-capital conflict. Labor councils, as regional coalitions of local unions, are strategically positioned to expand alliances to include non-union organizations (Ness and Eimer 2001). If LCs are indeed shifting toward a strategy of socializing laborcapital conflict, there should be a positive association between the most active labor councils and the political participation of demographic groups traditionally aligned with organized labor. Our results do imply that LCs designated as “Union City” play a role in increasing political participation among the general population. Respondents in congressional districts with a Union City voted at rates that were approximately 5 percent higher than in districts without a Union City. This above-average turnout, however, was mediated by

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district turnout in 1992, suggesting necessary preconditions among the general population for the formation of Union City LCs.3 The supposition that LC strategy and capacity are partially a function of regional factors is reinforced when we examine other district characteristics with respect to Union City status. In districts without a Union City, nonwhites and working-class citizens voted at rates that were significantly lower than whites and non-working-class citizens. In districts with a Union City, nonwhites and working-class respondents voted at rates that were comparable to others. We tentatively conclude that relatively high levels of political participation by minorities and the working class help enable the formation of active LCs. This is not to imply that LC outreach has no effect on the voting rates of minorities and the working class. Indeed, outreach to workingclass voters is presently a directive by the national AFL-CIO. Rather, our findings suggest that active LCs tend to arise in contexts where it is possible to form coalitions with progressive organizations working to expand the political voice of minorities and the working class.4 Although this research improves upon prior work in this area, there are still limitations related to data precision. The “Union City” designation is a crude indicator of whether an LC has a functional political mobilization program. Certainly many LCs that have not earned Union City status are involved in politics, and a dichotomous indicator fails to capture variation in political tactics and effort. Subsequent research on this topic would benefit from more comprehensive data on LC activities and, in particular, on measures of coalition activity between LCs and non-union organizations. Finally, the spatial match can be improved by examining the LC effect on smaller geographic regions. Congressional districts are large and often oddly shaped regions. In all likelihood, communities within the immediate proximity of LCs are most affected by union political mobilization. Both of these limitations, however, would tend to understate our point estimate for the Union City effect. Notes I thank Craig Olson, Gordon Pavy, and Russell Lansbury for constructive comments during the 58th Annual Meeting. 1. For a cursory review, visit the NAACP at http://www.naacp.org/index.shtml; the Sierra Club at http://www.sierraclub.org/; the Interfaith Alliance at http://www. interfaithalliance.org/; and the American Civil Liberties Union at http://aclu.org/. 2. Although there are “seven steps” to reach Union City status, the most comprehensive asks leaders to “Engage in political action in your community by: Setting and meeting goals that include increasing voter registration by 10 percent; increasing Election Day turnout of union members by 5 percent and mobilizing 1 percent of union members for

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political action; Organizing a member-to-member, door-to-door political campaign; Conducting a worksite leafleting program; Helping union members run for public office and electing advocates for working families; Holding endorsed elected officials accountable for their record on working family issues” (see http://www.aflcio.org/aboutunions/unioncities/ stepsto.cfm). 3. One should not overemphasize this point. The larger and better-financed labor councils had political mobilization programs prior to 1992 and probably deserve partial credit for the above-average 1992 turnout figures. Data limitations prevent a rigorous test for the causal question of whether high levels of political activity are a precondition for Union City LCs. 4. I find additional evidence when equations include a variable for whether the household has a union member (not shown). Including this variable has no effect on the Union City results. I interpret this to indicate that the Union City influence is not limited to affiliated members.

References Barone, Michael, and Grant Ujifusa. 1993. The Almanac of American Politics 1994. Washington, DC: National Journal, Inc. Brody, David. 1980. Workers in Industrial America: Essays on the Twentieth Century Struggle. New York: Oxford University Press. Burns, Nancy, Donald R. Kinder, Steven J. Rosenstone, Virginia Shapiro, and the National Election Studies. 2001. National Election Studies 2000: Pre-/Post-Election Study. Ann Arbor: University of Michigan, Center for Political Studies. Dark, Taylor E. III. 2000. “Labor and the Democratic Party: A Report on the 1998 Elections.” Journal of Labor Research, Vol. 21 (Fall), pp. 627–40. Delaney, John T., Marick. F. Masters, and Susan Schwochau. 1988. “Unionism and Voter Turnout.” Journal of Labor Research, Vol. 9 (Summer), pp. 221–36. Foster, James C. 1975. The Union Politic: The CIO Political Action Committee. Columbia: University of Missouri Press. Gerber, Robin. 1999. “Building to Win, Building to Last: AFL-CIO COPE Takes on the Republican Congress.” In Robert Biersack, Paul S. Herrnson, and Clyde Wilcox, eds., After the Revolution. Boston: Allyn and Bacon. Gopoian, David J. 1984. “What Makes PACs Tick? An Analysis of the Allocation Patterns of Economic Interest Groups.” American Journal of Political Science, Vol. 28 (May), pp. 259–81. Greene, Julie. 1998. Pure and Simple Politics: The American Federation of Labor, 1881 to 1917. New York: Cambridge University Press. Meyer, Stephen. 1992. Stalin Over Wisconsin: The Making and Unmaking of Militant Unionism, 1900–1950. New Brunswick, NJ: Rutgers University Press. Miller, Warren E., and J. Merrill Shanks. 1996. The New American Voter. Cambridge, MA: Harvard University Press. Moberg, David. 2000. “Union Cities.” American Prospect, September 11, pp. 35–37. Ness, Immanuel, and Stuart Eimer. 2001. Central Labor Councils and the Revival of American Unionism. Armonk, NY: M. E. Sharpe.

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Perlman, Selig. 1922. A History of Trade Unionism in the United States. New York: Macmillan Company. Radcliff, Benjamin. 2001. “Organized Labor and Electoral Participation in American National Elections.” Journal of Labor Research, Vol. 22 (Spring), pp. 405–14. Radcliff, Benjamin, and Patricia Davis. 2000. “Labor Organization and Electoral Participation in Industrial Democracies.” American Journal of Political Science, Vol. 44 (January), pp. 132–41. Rosenstone, Steven. J., and John Mark Hansen. 1993. Mobilization, Participation and Democracy in America. New York: Macmillan. Rosswurm, Steve. 1992. The CIO’s Left-Led Unions. New Brunswick, NJ: Rutgers University Press. Schattschneider, Elmer E. 1960. The Semisovereign People: A Realist’s View of Democracy in America. New York: Holt, Rinehart, and Winston. Shields, Todd G., and Robert K. Goidel. 1997. “Participation Rates, Socioeconomic Class Biases, and Congressional Elections: A Crossvalidation.” American Journal of Political Science, Vol. 41 (April), pp. 683–91. Sousa, David J. 1993. “Organized Labor in the Electorate.” Political Research Quarterly, Vol. 46 (December), pp. 741–58. Teixeira, Ruy A. 1987. Why Americans Don’t Vote: Turnout Decline in the United States. New York: Greenwood. Wolfinger, Raymond E., and Steven J. Rosenstone. 1980. Who Votes? New Haven, CT: Yale University Press. Zeiger, Robert H. 1986. American Workers, American Unions, 1920–1985. Baltimore, MD: Johns Hopkins University Press. Zullo, Roland. 2004. “Labor Council Outreach and Union Member Voter Turnout: A Micro-analysis from the 2000 Election.” Industrial Relations, Vol. 43 (April), pp. 324–38.

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Institutionalism and Bargaining Power in Comparative IR Heiko Massa-Wirth Hans Boeckler Foundation Abstract The paper argues for an extension of both institutionalist as well as interest-based approaches to the study of comparative industrial relations. Taking concessionary bargaining in Germany and the United States as a comparative test case, it can be shown that a purely institutionalist analysis that stresses the persistent structural differences and predicts divergent IR outcomes is not sufficient to explain the high degree of similarities as well as the processes of convergence. The paper therefore proposes an extension of the institutionalist framework by explicitly incorporating bargaining power as a central variable in explaining international differences in IR policies and practices. Introduction In an insightful article Wailes, Ramia, and Lansbury reviewed the strengths and weaknesses of “the two main approaches to the impact of international economic change on national policy matters” (Wailes et al. 2003, 617), that is, the “new-institutionalism” and the “interest-based” approach. While both of these approaches have their virtues in explaining policy outcomes in the social sciences, Wailes et al. argue that each provides only partial explanations and is open to criticism. To summarize their argument, they blame the by now hegemonic new institutionalist paradigm of adopting a form of structural determinism that is unable to explain the sources of change. Insofar as the institutionalist framework stresses the persistence of diversity in policy outcomes that primarily result from path dependencies, it tends to understate the degree of similarities and the processes of convergence. While on the other hand Wailes et al. express sympathy toward the much less-dominant interest-based approach to the study

Author’s address: D-40476 Duesseldorf 40476, Germany 206

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of comparative industrial relations (IR) (Pontusson and Swenson 1996), they still acknowledge its shortcomings in that “interest-based models tend to be excessively parsimonious in deriving interests . . . and ignore the role that institutions may play in structuring politics and determining preferences” (Wailes et al. 2003, 623). Based on their review of the literature, Wailes et al. argue for an integration of the two approaches, as they see them as complementary, so that “the adoption of insights from one is likely to improve the explanatory power of the other” (Wailes et al. 2003, 623). This paper argues for a further extension of a theory to the study of comparative IR that incorporates bargaining power as a central variable in explaining international differences in IR policies and practices. While institutionalist variables are necessary for defining the constraints and opportunities within which the actors adopt their strategic choices, the “interest” variable even in Wailes et al.’s approach remains somewhat ambiguous. Specifically, when referring to “interests” as an explanatory variable, the authors underemphasize the fact that industrial relations are characterized by antagonistic interests between management and labor. It remains unclear as to which of the competing interests among management and labor should be expected to prevail. This paper proposes to incorporate a power dimension to the international study of IR that might offer a remedy to this problem because it rests on the insight that IR outcomes are the result of strategic interaction among rational actors. This approach is applied to a U.S.–German comparison of concessionary bargaining in the context of economic adversity and employment cutbacks. It can be shown that differences in the extent of employee concessions as well as employer quid pro quos can be explained by a power approach that is informed by institutionalist analysis. Other than a purely “interest-based” approach, the bargaining power approach is capable of identifying systematic power asymmetries that help to explain which of the often diametrically opposed material interests among employers and employees prevail in different institutional contexts. The paper is structured as follows: It starts with a presentation of recent survey data on concessionary agreements in Germany, which will be compared to the literature on concession bargaining in the United States (section 2). Section 3 sketches out a possible “Varieties-of-Capitalism”-type institutionalist explanation for the dissimilarities in the bargaining outcomes and criticizes it as being overly simplistic and incapable of explaining change in the actors’ behavior that is potentially damaging to a purely institutionalist analysis. Instead, a concept of bargaining power is presented in section 4 that relates asymmetric power relations to underlying asymmetries in the actors’ dependence in an exchange relationship. Section 5 demonstrates that a modified approach that takes account of both institutional differences as well as

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power asymmetries is fruitful for explaining concession bargaining in the United States as well as the decentralization of collective bargaining and the emergence of concessionary pacts in Germany. Concessionary Bargains in the United States and “Pacts for Employment” in Germany Concession Bargaining—The U.S. Experience Concession bargaining in the United States as defined by Bell to include “some kind of ‘giveback’ from workers to management in the terms of some earlier specified agreement” (Bell 1995, 260) reached its heyday in the first half of the 1980s (D. Mitchell 1994). Under pressure stemming from a prolonged recession, increasing international competition, and deregulation, workers in such union strongholds as the airline, automobile, or telecommunications industries had to agree to concessions including wage and benefits cuts or freezes, the introduction of two-tier wage plans, or the modification or elimination of cost-of-living allowance (COLA) clauses. Instead of basic wage increases, many unions could only secure lump sum bonuses or deferred compensation packages such as gain-sharing and stock option plans that only provided a payout in case the company survived and reached a certain level of future profitability. In many instances work rules were relaxed and job classifications reduced in an effort to improve labor productivity by increasing internal flexibility. Based on Bureau of Labor Statistics (BLS) data, Bell estimates that in each year from 1982 to 1988 between 48 and 76 percent of all workers were affected by at least one of these concession instruments (Bell 1989). In exchange for often significant wage concessions, workers generally received only marginal (if any) quid pro quos from management (Cappelli 1983; Chaison and Plovnick 1986). For the second half of 1982, Cappelli estimates that management concessions could be secured in about one third of concession cases (Cappelli 1983, 298). Furthermore, employer givebacks were often merely symbolic in that management promised to share in the sacrifices or that union leaders were put on company boards of directors without giving them voting rights and the power to effectively influence corporate strategic decision making. In those instances where job security improvements were negotiated, management for the most part only agreed to suspend employment cutbacks instead of giving explicit employment guarantees for the future (Cappelli 1983). The general picture of asymmetric concession bargaining trade offs holds true during the most recent negotiations in the airline industry. Facing the imminent threat of bankruptcy and liquidation, unions repeatedly agreed to wage and benefit cuts as well as

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work rule concessions at carriers such as, among others, US Airways and United Airlines that drastically reduced workers’ total compensation and lowered benefits for present and future retirees. Even with these massive cutbacks, though, the workforces did not get formal employment guarantees in return. If anything, management executed additional employment reductions and outsourcing in an effort to further trim labor costs. Germany Compared to the United States, company-specific concession bargains in Germany are strikingly different with respect to the extent of workers’ concessions and the give-and-take symmetry. Although worker representatives in Germany today face similar economic adversity as U.S. unions did in the 1980s, they are considerably more successful than their U.S. counterparts in securing quid pro quos from management. As a recent representative survey of works councils in 2,477 establishments in the private sector demonstrates, nearly one in four (23 percent) establishments with a works council applied a concessionary agreement in 2003 (Massa-Wirth and Seifert 2005). But whereas U.S. concession bargains are predominately targeted toward cost cutting by lowering wages and benefits, the majority of German concessionary contracts aim at increasing labor productivity and efficiency, thus (at least up until recently) minimizing the negative financial consequences for employees. Working time measures such as reducing or extending contractual work hours or flexibly aligning work hours to demand fluctuations by means of introducing working time accounts play a prominent role in these agreements. Overall, survey data indicates that 76 percent of the companies applying a concessionary pact use one or more instrument for modifying working time policies whereas only 42 percent adjust compensation. Moreover, the average amount of financial concessions is considerably smaller than in U.S. concession bargains. Instead of cutting basic wage rates, company-specific bonuses are reduced or scheduled wage increases are delayed. Multivariate analyses show that the choice of concession instruments significantly depends on the economic environment, with companies experiencing demand fluctuations using measures to adjust work hours while establishments that suffer from weak profits predominately resort to direct monetary instruments that reduce labor costs in the short run (Seifert and Massa-Wirth 2005). Speaking in terms of employer givebacks, one-sided concession agreements, which prevail in the United States, are fairly rare in Germany. Where worker representatives agreed to concessions, they could secure explicit employment and/or production guarantees in 87 percent of the cases. By far the most widespread guarantees have been explicit no-layoff and noplant-closure guarantees, which could be found in 71 and 44 percent of all

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concession cases, respectively. For example, workers at Volkswagen and DaimlerChrysler agreed to concessions in 2004 only after the companies offered long-term employment and production guarantees until 2011 (Volkswagen) and 2012 (DaimlerChrysler). Explaining Dissimilar Bargaining Outcomes—A Case of Institutional Variation? The considerable differences in the exchange relationship between U.S. and German concessionary bargains—that is, the virtual absence of explicit and long-lasting employment and production guarantees in the former and the dominance of two-sided give-and-take agreements in the latter IR system—might at first sight suggest an institutionalist analysis as Germany and the United States represent “most different cases” with respect to their IR institutions and policies (Katz and Wheeler 2004; Keller 2004). As Germany and the United States represent two distinct “social systems of production” (Hollingsworth 1997a), with Germany being a quasi-prototype for a “coordinated market economy” whereas the United States represents an “uncoordinated” or “liberal market economy” (Hall and Soskice 2001), dissimilarities rather than similarities in collective bargaining outcomes would be expected. Quasi-symmetric employment pacts in Germany might be explained by the fact that companies are embedded in quasi-corporatist mechanisms of nonmarket-based economic coordination at the national, industry, and company level that serve as “beneficial constraints for rational voluntarism” (Streeck 1997) and provide incentives for adopting long-term business strategies based on “diversified quality production” (Jürgens 2003; Streeck 1992). As German companies heavily rely on highly skilled and motivated workers and benefit from the continued cooperation of workers and their representatives, they refrain from demanding excessive and unconditional concessions during economic slumps and instead provide for contractual guarantees for future employment. Companies are afraid of breaking up the fragile “productivity coalition” (Windolf 1989) by playing hard ball and opportunistically terminating implicit contracts. Much of the literature on the rationale behind nominal wage rigidity and on how employers actually benefit from upholding the quasi–gift exchange in the “psychological contract” by providing continued stable employment follows this kind of reasoning (Bewley 1999; Franz and Pfeiffer 2002; Guest 2000). The U.S. political economy, on the other hand, with its voluntaristic and market-based logic of economic coordination, is said to favor business strategies based on Tayloristic mass production with a short-term focus on cost cutting rather than long-term considerations like productivity and quality improvement (Hollingsworth 1997b). Compared to German employers,

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U.S. companies rely much less on the continued cooperation of highly qualified workers with firm-specific skills, so that aspects such as fairness in employment relations and a long-term commitment to the workforce only play a marginal role in corporate strategic choices. Even during temporary cyclical slumps, U.S. companies resort to (mostly seniority-based) layoffs rather than keeping the staff level constant (Abraham and Houseman 1993). In the unionized sector of the economy (as this is the only sector where collective concession bargaining by definition can occur), the focus on arm’s length employment relations is exemplified by adversarial labor management relations and union avoidance strategies by management (Kleiner 2002). Because collective bargaining exclusively takes place at the company level, the cyclical variation in union wages is much higher in the United States than in Germany, because during economic slumps management does not hesitate to press for concessions while during economic upswings unions use their bargaining leverage to demand significant wage improvements. Quasi-symmetric employment pacts where both sides share in the sacrifices would thus contradict the confrontational logic prevailing in the United States (Block and Berg 2003). But a purely institutionalist approach to an analysis of U.S. and German collective bargaining outcomes during economic downturns fails to provide satisfactory answers to some puzzling questions. For example, why did German employers and business associations recently launch such full-blown attacks on collective bargaining and codetermination institutions if they purportedly benefit so much from cooperative labor-management relations (Thelen 2000)? And why, according to recent survey data, are concessionary pacts in Germany significantly more often found at large as compared to small establishments, and why have large corporations been the forerunners in negotiating concessionary bargains (Massa-Wirth and Seifert 2005)? According to conventional wisdom, large corporations are the backbone of the German IR system as they are union strongholds with self-conscious and professionalized works councils and militant workforces. Why did labor not succeed in fighting back concession demands at these companies? And why on the contrary did management at large corporations press so hard for concessions even though they risk the breakdown of consensual labor relations on which their business strategy of “diversified quality production” crucially depends? It becomes obvious that these anomalies are potentially damaging to purely institutionalist concepts that do not take account of the power resources and the microeconomic preferences of the relevant actors. The following section sketches out a power concept that specifies the circumstances under which actors with diverging preferences are able to achieve their goals.

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Bargaining Power Explanations Unfortunately, off-the-shelf concepts of bargaining power in the field of IR are difficult to apply in concession bargaining contexts. Bargaining power has traditionally been conceptualized as the “relative willingness and ability to strike and take a strike” (Livernash 1963, 18). This may hold true in “normal” bargaining settings where unions press for improved wages and working conditions by threatening to withhold production. But during economic slumps or in a context where management threatens to cut back on employment or even close down the facility, the union’s strike weapon dramatically loses its effectiveness. Sociological approaches to power relations in the tradition of Emerson’s “power dependance” theory (Emerson 1962) offer a possible solution to this conceptual dilemma. They view bargaining power in more general terms as a function of the relative dependency of the two parties in an existing exchange relationship. Here “the power of one party is based on the opponent’s dependence on that party” (Bacharach and Lawler 1981, 60), where dependence is itself a function of both a party’s alternative outcome sources as well as her commitment to the exchange relationship. Given these assumptions, “a party’s bargaining power should be greater, the lower the opponent’s alternatives and the higher the commitment of the opponent to the outcomes at issue in the relationship” (Bacharach and Lawler 1981, 63) so that “an increase in the ratio of A’s alternatives or commitment to B’s alternatives or commitment increases B’s relative bargaining power” (Bacharach and Lawler 1981, 210). The dependence approach does not pretend to offer a deterministic concept by which bargaining outcomes could unambiguously be inferred from “objective” constraints but rather leaves room for bounded rationality. Bacharach and Lawler acknowledge that “the cognitive use and manipulation of ‘objective’ conditions is more important to an understanding of bargaining than the objective condition themselves” so that “conveying an impression of power will yield the same consequences as having ‘real’ power; manipulating an opponent’s perception of the power relationship will have the same effect as an actual change in that relationship” (Lawler and Bacharach 1986, 195). So the by now familiar concepts developed by new institutional economics such as opportunistic behavior stemming from information asymmetries, incomplete contracts, and principal-agent problems can be easily incorporated into the basic dependence approach to bargaining power (Furubotn and Richter 1997). Indeed, information asymmetries play an important role in concession bargaining contexts as management has an incentive to overstate the economic crisis and labor cost disadvantages as well as its willingness to cut back on employment or relocate production.

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A Modified Power-Based Analysis The two concepts briefly summarized in sections 3 and 4 are now applied in an attempt to explain concession bargaining outcomes in dissimilar institutional and socioeconomic contexts. While differences in IR systems in particular and the wider political economy in general define the institutional “constraints and opportunities,” bargaining power theory makes us aware of the strategic choices of the key actors and the relevant factors that determine an actor’s bargaining power in an exchange relationship. The subsequent sections briefly discuss the relevant factors that determine each party’s dependence in terms of alternatives and commitment. Alternatives/Exit Options Alternatives can be regarded as the extent and the attractiveness of exit options for both management and workers. Based on the insights gained from bargaining power theory, labor’s bargaining power decreases with the attractiveness of management’s exit options and vice versa. management The company’s exit options are twofold. First, management may shift actual or future production and employment to alternative locations with lower labor costs and employment regulations. Second, the company may try to terminate or circumvent the existing exchange relationship by getting rid of the union and switching from collective to individual bargaining. Concerning the first alternative, globalization and especially regional economic integration has clearly increased the number and attractiveness of alternative production locations abroad. The possibility of international plant relocation and outsourcing has caused a shift in bargaining power in management’s favor in both Germany and the United States. But while foreign direct investment comes with uncertainty as companies have to cope with the problems of potential political instability and cultural differences in the host country, U.S. companies, unlike their German counterparts, have the possibility to lower labor costs not only by shifting production internationally but also domestically to non-union locations. Given the by now large non-union sector and the significant union wage premium in the United States, domestic regime competition is a viable option and an important source of employer bargaining power in the United States. This coincides with comparatively weak union security in the United States that makes unions vulnerable to employer opposition. There is by now a large literature that documents employers’ escape from collective bargaining, union avoidance, and union busting activities and how these strategies are facilitated by an unfavorable institutional environment (Bodah and

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Cutcher-Gershenfeld 1997; Klein and Wanger 1985; Kleiner 2002). In contrast, collective labor representation still has much more institutional support in Germany. Works councils are mandated by law and possess legitimation and power resources external to and independent from the specific employer. Furthermore, escaping from collective bargaining is still much more difficult for German compared to U.S. employers. Abandoning collective bargaining coverage (for example, by exiting the employers’ association that negotiates the union contract for the whole sector) is unattractive especially for mediumsized and large companies. Given the still considerable organizational strength of German trade unions, large companies that opt out of industry-wide bargaining coverage might well become the object of a union organizing drive that forces them to accept a company-specific union contract that provides for wage and employment conditions comparable to the respective sectoral contract (Thelen 2000). workers The exit options for workers are also twofold. Either they immediately change to an alternative job or they temporarily or permanently opt out of the labor force and collect non-wage income, that is, most importantly unemployment or (early) retirement benefits. The relative attractiveness of these exit options can be evaluated by comparing the expected future benefit streams from these alternative employment/income options relative to the present job. In general, the attractiveness of alternative employment options varies pro-cyclically with few attractive exit options during economic recessions. In comparative perspective, the expected cost of job loss and especially of losing a union job is much higher for U.S. than for German workers. With collective bargaining coverage as low as 9 percent in U.S. private industry and structural employment decline in those sectors that are heavily unionized, the likelihood of finding a comparable job at a unionized company is very low, especially during economic slumps where most unionized companies have workers on layoff that have preferential hiring rights. Moreover, the expected wage loss that occurs when switching from a union to a non-union job is much higher in the United States compared to Germany. Recent econometric analyses for the United States conclude that the union wage premium stands at around 15 to 18 percent (Belman and Voos 2004; Bratsberg and Ragan 2002; Card 2001); that might be as high as 24 percent after correcting for match and misclassification biases (Hirsch 2003). In contrast, the union/non-union wage gap for Germany is estimated to be an insignificant 4 percent (Blanchflower and Bryson 2003). The overall cost of losing a union job in the United States is even higher when taking into account that

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fringe benefits such as health and pension benefits are much more generous in the union as compared to the non-union sector (Mishel, Bernstein, and Allegretto 2005). Benefit differentials are much less significant in Germany with its system of nationalized health care and pension insurance. Still, this comparison may understate the real costs of losing a job at a large German company. In 2002 close to one half of all west German unionized companies but less than one in five companies in eastern Germany paid wages that on average were about 10 percent higher than that specified in the respective union wage contract (Kohaut and Schnabel 2003). The fact that the likelihood of effective compensation in excess of the union wage rises with firm size explains the puzzling observation that union strongholds such as DaimlerChrysler, Volkswagen, and Siemens have recently been among the forerunners in concessionary bargaining. Those companies could enforce hitherto unprecedented concessions as the prospect of losing company-specific bonuses and a lack of attractive exit options for the affected workers provided management with considerable bargaining power. When comparing workers’ alternative non-wage income sources after being laid off, German workers on average fare considerably better than U.S. union workers. Both the duration of unemployment benefits as well as the replacement rate are much more favorable to workers in Germany as compared to the United States (Werner and Winkler 2004). Furthermore, German social policy up until recently provided strong financial incentives to resort to early retirement as an effective instrument to reduce employment by way of “cooperative downsizing” (Streeck 2001, 4). Externalizing adjustment costs to the social security system helped stabilize existing wage and employment standards so that companies could reduce labor costs while at the same time uphold cooperative labor relations and offer job security for the remaining workforce. Recent reforms that curtailed the options for early retirement and made this exit option less attractive may be responsible for the fact that concessionary bargaining in Germany has since experienced an upswing while the terms of recent concessionary contracts have become markedly less favorable for workers (Massa-Wirth and Seifert 2005). To be sure, exit options into nonemployment for U.S. unionized workers are much more attractive than for non-unionized workers. Contractual provisions such as SUBs and extended benefit coverage while on temporary layoff or company-specific early retirement programs and severance pay packages provide for income security for workers on layoff (BNA 1995). But while those programs are on average still less generous than public social security benefits in Germany, they are also subject to renegotiation in U.S. concession bargaining and do not represent an external fallback position on which workers can rely. As these measures are generally funded by the employer, they are not an effective

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means to shift part of the burden onto the public and lower the adjustment costs to be shared among the parties to a concessionary agreement. Commitment The concept of commitment as the second major dimension of bargaining power represents the degree to which the actors have a stake in and are locked into the existing exchange relationship. All else equal, labor’s bargaining power increases with the degree of management’s commitment in the relationship. management The degree of management’s commitment is determined by both direct as well as indirect costs (that is, the transaction and opportunity costs) of terminating the relationship. Prominent among direct costs are redundancy costs that occur when the company announces layoffs. Due to stricter job security legislation and legal provisions that provide works councils with significant codetermination rights in case of mass layoffs, employment adjustment costs are considerably higher in Germany as compared to the United States (Jahn 2004; Kittner and Kohler 2002). Even though the “employmentat-will” doctrine does not fully apply to the U.S. union sector where job security provisions curtail management’s rights in layoff decisions, these contract clauses still do not restrict the company’s ability to reduce employment levels as such. Rather than raising the transaction costs of employment separation as in Germany (where employers are mandated to negotiate “social plans” to attenuate the negative consequences of job loss), job security provision in U.S. labor contracts typically provide for seniority rules in layoff decisions in order to prevent arbitrariness. Strict job security plans that contain outright no-layoff clauses or even set guaranteed employment levels such as in the U.S. automobile industry are the rare exception rather than the general rule (Block 2001). Furthermore, while for German management job security legislation and the associated costs are a fixed given, contractual job security provisions are itself subject to renegotiation and become a bargaining chip in concessionary negotiations. In fact, prominent among the nonwage issues in U.S. concession bargains have traditionally been the relaxation of strict work rules and job security clauses. Besides direct transaction costs associated with employment cutbacks, management also has to consider indirect or opportunity costs that arise from workforce reductions. Laying off experienced workers with firmspecific skills causes the loss of firm-specific human capital that the company needs to stay competitive in the future. Management’s commitment to uphold the existing exchange relationship (that is, to provide for job guaran-

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tees and to refrain from redundancies) should therefore be greater the more the company relies on the continued utilization of workers’ competencies in production and product innovation. While broad generalizations in a crossnational comparison are not feasible as the value of human capital depends on the company-specific business strategy, conventional wisdom in the literature on “social systems of production” and “varieties of capitalism” maintains that German companies predominately follow “high road” business strategies based on “diversified quality production” whereas institutional constraints and opportunities in the United States favor “low road” strategies based on “cost competition” (Turner, Wever, and Fichter 2001). While based on opportunity cost considerations German companies should tend to have more commitment to uphold existing employment relationships, a valid cross-national analysis would clearly have to be conducted on the industry or even company level as variation within countries is probably considerable larger than between countries (Katz and Darbishire 2000). The increasing focus of German companies on cost considerations (not least because of the adoption of shareholder value philosophies) and the introduction of cost competition in quality markets may have contributed to the recent increase in concessionary bargaining in Germany. workers As with firms, workers’ commitment to their present job depends on the direct as well as indirect costs of losing the job and leaving the current employer. The loss of non-vested fringe benefits can be regarded as the most important direct cost (O. Mitchell 1983). Company-specific defined benefit pension plans that are not transferable are much more important in the United States than in Germany and lock U.S. workers in the union sector into the existing employment match. Besides the loss of pension accruals, workers in both Germany and the United States may lose additional benefits that are linked to the current job such as accumulated seniority rights or future payouts of profit-sharing plans that were often negotiated as a quid pro quo in U.S. concession bargains. While most of these potential sources of “job stickiness” apply to workers in both Germany as well as the United States, they generally are considerably more relevant for unionized workers in the United States. For example, the fact that the pilots have generally been the first union to negotiate wage cuts in the recent wave of concessionary bargaining in the airline industry is in large part due to the large pension promises that would be lost in case of a carrier bankruptcy. While the Pension Benefit Guarantee Corporation (PBGC) takes over responsibility for the pension funds of liquidated carriers, it only secures pension payments up to an annual maximum of about $45,000, which is considerably less than what

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pilots, as the highest-paid labor group at a carrier, can normally expect when they retire. Besides these direct costs, firm-specific human capital can be regarded as a match-specific investment that serves as an additional source of employee commitment to the current job. Losing the job means also losing the quasirents that come along with utilizing idiosyncratic skills and competencies in a specific work environment. While this holds true for German as well as U.S. workers, the relative share of firm specific compared to general skills is said to be larger for U.S. compared to German workers (Hollingsworth 1997a). While in the U.S. system on-the-job and task-specific training prevails, the unique dual apprenticeship system in Germany provides workers with transferable general skills (Franz and Soskice 1995). German workers with vocational training are therefore not as much committed to a specific employer and tend to possess a higher level of external mobility, just like skilled trades in the U.S. craft sector. Again, this preliminary cross-national comparison is unable to provide clear-cut explanations with regard to the level of workers’ commitment; one would have to look closely at specific worker subgroups and their relative share of firm-specific versus general human capital. Again, the recent concessionary bargaining in the U.S. airline industry shows that the maintenance workers (mostly skilled trades) have generally been the employee group at each airline that has most vigorously fought against concessions. While pilots and flight attendants, because of their industry-specific skills, are locked into their current job, skilled machinists are much less committed to employment in the airline industry as they have considerably higher cross-sectoral mobility because of transferable skills. Conclusion This paper argues for an extension of both simple institutionalist as well as interest-based approaches in comparative IR by incorporating bargaining power considerations that shift the analytical focus onto power asymmetries in labor-management relations. While the “new institutionalism” framework tends to be overly simplistic as it infers IR outcomes from institutional settings and downplays the degree of variance as well as change in IR systems, purely “interest-based” approaches fail to provide satisfactory answers as to which of the competing interests among the actors to an IR system in general and to collective bargaining in particular should be expected to prevail. The comparative analysis of concession bargaining is used as a test case to demonstrate the weaknesses of both purely institutionalist and interestbased approaches as well as the strength of an extended concept that incorporates power considerations. Although a more in-depth empirical analysis would be necessary to strengthen the argument, this preliminary discussion

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of concessionary bargaining in Germany and the United States shows that a power-based analysis is able to avoid the pitfalls of both institutionalist as well as interest-based explanations. The overall differences in bargaining outcomes (that is, more drastic employee concessions and less employer givebacks in the United States as compared to Germany) are explained by a greater degree of power asymmetry in favor of management in the United States as compared to Germany. Besides explaining these cross-national differences, a power-based approach is also capable of explaining a substantial part of subnational variance, which is traced back to differences in the relative degrees of alternatives and commitment and ultimately dependence in labor-management relations. References Abraham, Katharine G., and Susan N. Houseman. 1993. Job Security in America: Lessons from Germany. Washington, DC: Brookings Institution. Bacharach, Samuel B., and Edward J. Lawler. 1981. Bargaining: Power, Tactics, and Outcomes. San Francisco: Jossey-Bass. Bell, Linda A. 1989. “Union Concessions in the 1980s.” Federal Reserve Bank of New York Quarterly Review, Vol. 14, no. 2, pp. 44–58. Bell, Linda A. 1995. “The Union Wage Concessions in the 1980s: The Importance of Firm-Specific Factors.” Industrial and Labor Relations Review, Vol. 48, no. 2, pp. 258–75. Belman, Dale L., and Paula B. Voos. 2004. “Changes in Union Wage Effects by Industry: A Fresh Look at the Evidence.” Industrial Relations, Vol. 43, no. 3, pp. 491–519. Bewley, Truman F. 1999. Why Wages Don’t Fall During a Recession. Cambridge: Harvard University Press. Blanchflower, David, and Alex Bryson. 2003. “Changes over Time in Union Relative Wage Effects in the UK and the US Revisited.” In John T. Addison and Claus Schnabel, eds., International Handbook of Trade Unions. Cheltenham: Edward Elgar, pp. 197–245. Block, Richard N. 2001. “Collective Bargaining, Competitiveness and Employment in the United States.” Transfer, Vol. 7, no. 1, pp. 697–715. Block, Richard N., and Peter Berg. 2003. “Collective Bargaining in Context: Comparing the United States and Europe.” In Richard N. Block, ed., Bargaining for Competitiveness: Law, Research, and Case Studies. Kalamazoo, MI: W. E. Upjohn Institute, pp. 1–12. BNA 1995. Basic Patterns in Union Contracts. 14th ed. Washington, DC: BNA. Bodah, Mathew M., and Joel E. Cutcher-Gershenfeld. 1997. “Employer Escape from Collective Bargaining: A Longitudinal Analysis.” In Proceedings of the 49th Annual IRRA Meeting. Madison: IRRA, pp. 7–14. Bratsberg, Bernt, and James F. Ragan. 2002. “Changes in the Union Wage Premium by Industry.” Industrial and Labor Relations Review, Vol. 56, no. 1, pp. 65–83. Cappelli, Peter. 1983. “Union Gains under Concession Bargaining.” In Proceedings of the IRRA 36th Annual Meeting. Madison: IIRA, pp. 297–305.

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Card, David. 2001. “The Effect of Unions on Wage Inequality in the U.S. Labor Market.” Industrial and Labor Relations Review, Vol. 54, no. 2, pp. 296–315. Chaison, Gary N., and Mark S. Plovnick. 1986. “Is There a New Collective Bargaining?” California Management Review, Vol. 28, no. 4, pp. 54–61. Emerson, Richard M. 1962. “Power-Dependence Relations.” American Sociological Review, Vol. 27, no. 1, pp. 31–41. Franz, Wolfgang, and David Soskice. 1995. “The German Apprenticeship System.” In Friedrich Buttler, Wolfgang Franz, Ronald Schettkat, and David Soskice, eds., Institutional Frameworks and Labor Market Performance: Comparative Views on the U.S. and German Economies. London: Routledge, pp. 208–34. Franz, Wolfgang, and Friedhelm Pfeiffer. 2002. “The Rationale for Wage Rigidity: Survey Evidence from German and US Firms.” ZEW Discussion Paper no. 02–60. Furubotn, Eirik, and Rudolf Richter. 1997. Institutions and Economic Theory: The Contribution of the New Institutional Economics. Ann Arbor: University of Michigan Press. Guest, David. 2000. “Management and the Insecure Workforce: The Search for a New Psychological Contract.” In Edmund Heery and John Salmon, eds., The Insecure Workforce. London: Routledge, pp. 140–54. Hall, Peter A., and David Soskice. 2001. “An Introduction to Varieties of Capitalism.” In Peter A. Hall and David Soskice, eds., Varieties of Capitalism: The Institutional Foundations of Comparative Advantage. Oxford: Oxford University Press, pp. 1–68. Hirsch, Barry T. 2003. “Reconsidering Union Wage Effects: Surveying New Evidence on an Old Topic.” IZA Discussion Paper no. 795. Hollingsworth, J. Rogers. 1997a. “Continuities and Changes in Social Systems of Production: The Cases of Japan, Germany, and the United States.” In J. Rogers Hollingsworth and Robert Boyer, eds., Contemporary Capitalism: The Embeddedness of Institutions. Cambridge: Cambridge University Press, pp. 265–310. Hollingsworth, J. Rogers. 1997b. “The Institutional Embeddedness of American Capitalism.” In Colin Crouch and Wolfgang Streeck, eds., Political Economy of Modern Capitalism: Mapping Convergence and Diversity. London: Sage, pp. 133–47. Jahn, Elke. 2004.”Employment at Will versus Employment against Will—Kündigungsschutz in Deutschland und den USA im Vergleich.” Industrielle Beziehungen, Vol. 11, no. 3, pp. 177–202. Jürgens, Ulrich. 2003. “Transformation and Interaction: Japanese, U.S., and German Production Models in the 1990’s.” In Kozo Yamamura and Wolfgang Streeck, eds., The End of Diversity? Prospects for German and Japanese Capitalism. Ithaca, NY: Cornell University Press, pp. 212–39. Katz, Harry C., and Hoyt N. Wheeler. 2004. “Employment Relations in the United States of America.” In Greg J. Bamber, Russell D. Lansbury, and Nick Wailes, eds., International and Comparative Employment Relations: Globalisation and the Developed Market Economies. 4th ed. London: Sage, pp. 67–90. Katz, Harry C., and Owen Darbishire. 2000. Converging Divergences: Worldwide Changes in Employment Systems. Ithaca, NY: Cornell University Press. Keller, Berndt. 2004. “Employment Relations in Germany.” In Greg J. Bamber, Russell D. Lansbury, and Nick Wailes, eds., International and Comparative Employment Rela-

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Waiving Goodbye to Gilmer? Early Signs of Repatriating Employment Disputes to Courts Michael H. LeRoy University of Illinois at Urbana–Champaign Peter Feuille University of Illinois at Urbana–Champaign Employment Arbitration Increasingly Disappoints Employers Employer exposure to liability rose sharply following implementation of the 1991 Civil Rights Act and Americans with Disabilities Act in 1992. Employment discrimination lawsuits in federal courts rose from 8,273 in 1990 to 15,965 in 1994, 19,059 in 1995, and 23,152 in 1996 (Administrative Office of the U.S. Courts 2004)—a nearly threefold increase in seven years. After the Supreme Court approved mandatory arbitration in Gilmer v. Johnson/ Interstate Lane Corp. (1991), employers saw an opportunity to opt out of these lawsuits. By the late 1990s, most Fortune 1000 companies used employment arbitration (Bureau of National Affairs 2004). Gilmer arbitrations initially functioned like sovereign islands. They provided a low-cost alternative to courts and sheltered companies from stricter law enforcement. Companies set damage limits below federal caps (Morrison 1999); shifted large forum costs to workers (Shankle 1999); limited class actions (Adkins 2002); selected arbitrators unilaterally (Penn 2000); and shortened legal filing periods (Chappel 2000). Some firms required workers to submit all claims to arbitration, while preserving their right to sue these individuals in court (Ferguson 2000). Today, Gilmer arbitrations are not the tranquil paradise that employers envisioned. Employees often win at arbitration. Hill (2003) finds that they win 43 percent of American Arbitration Association cases. This is similar to the 46 percent win rate for employees who arbitrate in the securities industry (Delikat and Kleiner 2003). Maltby (1998) finds that employees win 63

Author’s address: 504 E. Armory Rm 115, Champaign, IL 61820 223

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percent of arbitrations. Clearly, arbitrators are not puppet judges. Paradoxically, prospects are improving for employers who avoid arbitration. Only 3 percent of federal lawsuits go to trial (Litras 2000). Remedies are undergoing a similar turnaround. More employers are hit by large punitive damages in awards (Table 1). In contrast, trials offer employers safer ground. The Supreme Court recently limited punitive damages in trials (State Farm 2003). Judges now apply State Farm’s mathematical limit in employment cases. Williams (2004) reduced a $6 million punitive damages judgment for race discrimination to $600,000. Gilbert (2004) voided a $21 million jury award for sexual harassment. Employers did not TABLE 1 Punitive Arbitration Awards Decision

Summary

Sawtelle v. Waddell & Reed, Inc. 754 N.Y.S.2d 264 (2003)

Securities broker was awarded $2 million in compensatory damages and $25 million in punitive damages

Kanuth v. Prescott, Ball & Turben, Inc. 949 CEO was awarded $3 million for emotional F.2d 1175 (D.C. Cir. 1991) distress plus $1 million for punitive damages as part of overall award of over $38 million Eaton Vance Distributors, Inc. v. Ulrich 692 So.2d 915 (1997)

Award of $625,000 in compensatory damages supplemented by punitive award of $1,125,000

Siegel v. Prudential Ins. Co. of America 79 Cal.Rptr.2d2d 726 (Cal.App. 2 Dist. 1998)

$1 million punitive award added to actual damages of $338,000

Davis v. Reliance Elec., 104 S.W.3d 57 (Tenn.Ct.App. 2002)

Award of $50,000 for emotional distress claim plus other damages, and also $520,000 in punitive damages

Glennon v. Dean Witter Reynolds, Inc. 83 F.3d 132 (6th Cir. 1996)

Employee awarded $750,000 in punitive damages

Turgeon v. City of New Bedford 12 Mass.L.Rptr. 401 (Mass.Super 2000)

Arbitrator awarded unspecified punitive damages in addition to back pay and damages for emotional distress

Barvati v. Josephthal 28 F.3d 704 (N.D. Punitive award of $120,000 Tex. 1997) Fahnstock & Co., Inc. v. Waltman 935 F.2d Award of $100,000 in punitive damages 512 (2d. Cir. 1991)

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expect this moderation from courts a decade ago. In sum, remedies are capped in trials but unlimited in employment arbitrations. Employers also underestimated another drawback of Gilmer isolation. An arbitrator’s award is hard to overturn. Judicial review of Gilmer awards is governed by the very deferential standards in the Federal Arbitration Act. This dilemma is magnified because arbitrators often rule without explaining their awards in writing, leaving little basis for appeal. In contrast, 44 percent of employee verdicts in discrimination trials are reversed on appeal (Clermont and Eisenberg 2002). Gilmer arbitrations can also be time consuming (Table 2) and costly (Table 3). LaPrade (2001) took 74 hearing days, followed by Sobol (1999) with 62 days and Owens-Williams (1996) with 19 days. The company and employee paid more than $650,000 “in fees and costs related to the arbitration” (Brook 2002, 673 n. 3). The award of $160,000 in attorney’s fees to the employee in Cassedy (2000) is more evidence that Gilmer arbitration is a costly process. A federal appeals court (Morrison 2003) observed that “as the monetary stakes rise and more days of hearings are necessary, arbitration’s relative cost increases” (669). The present study examines an emerging employer response to these developments. Some firms are foregoing Gilmer arbitration and preferring TABLE 2 Lengthy Arbitration Hearings Decision

Summary

Kanuth v. Prescott, Ball & Turben, Inc. 949 7,000 transcript pages and 1,200 exhibits F.2d 1175 (D.C. Cir. 1991) Sobol v. Kidder, Peabody & Co., Inc. 49 F.Supp.2d 208, 223 (S.D.N.Y. 1999)

Arbitration took 62 hearing days from 1994–1998

LaPrade v. Kidder, Peabody & Co., Inc. 246 F.3d 702 (D.C. Cir. 2001)

74 hearing dates and conferences from 1991–1996

Owens–Williams v. Merrill Lynch, Pierce, 103 F.3d 1119 (4th Cir. 1996)

Arbitration took 19 hearing days

Kiernan v. Piper Jaffray Companies, Inc. 137 F.3d 588 (8th Cir. 1998)


Eisenberg v. Angelo, Gordon & Co., L.P. 234 F.3d 1261 (2d Cir. 2000)


Mays v. Lanier Worldwide, Inc. 115 F.Supp. 1330 (M.D. Ala. 2000)


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TABLE 3 High Costs Association with Arbitration Hearings Decision Brook v. Peak Int’l, Ltd. 294 F.3d 668 Cir. 2002)

Summary (5th

Parties spent over $650,000 in arbitration fees and costs

Cassedy v. Merrill Lynch, Pierce, Fenner & Smith, 751 So.2d 143 (Fla.App. 1 2000)

Employee awarded $160,000 in attorney fees

Campbell v. Cantor Fitzgerald & Co., Inc. 205 F.3d 1321 (2d Cir. 1999)

Employee was charged with $45,000 in forum fees

courts, provided that workers sign a pre-dispute agreement that waives their constitutional right to a jury trial. This follows legal advice from experienced counsel: “In light of the difficulties that many of our clients have recently encountered with arbitration, we’ve been advising them to consider entering into jury trial waiver agreements with employees instead of arbitration agreements” (Brody and Oncidi 2003). This study analyzes court enforcement of these agreements. Jury waivers are like Gilmer forum waivers. They are presented to individuals as a condition of employment. Also, they aim to lower employer liability from lawsuits by denying workers access to part of the civil justice system. Oddly, however, they preclude arbitration and require court adjudication. Firms relinquish criticized features of Gilmer arbitrations that tip the scales of justice in their favor. In another contrast, jury waivers alter just one part of a trial. They do not impose across-the-board dispute resolution procedures on unwilling individuals. Also, these contracts ensure that laws, rather than industry norms, apply to employment disputes. Ironically, compared to arbitration, this new type of waiver may improve employee access to procedural and substantive justice. Who Adjudicates Federal Employment Disputes: Judge, Jury, or Arbitrator? The Seventh Amendment provides a right to a jury in civil trials. But this right is not absolute. Early in the history of employment discrimination laws, Congress allowed only bench trials. The reasons varied. In Title VII cases, Congress feared racially biased juries (Medina 1997). Other individual employment laws were patterned after the Wagner Act. That law provided equitable remedies. In courts, this make-whole relief can be ordered only by a judge. By specifying only these remedies, Congress implicitly rejected jury trials. But over time, Congress added tort-like damages to employment laws

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and expressly authorized juries to award compensatory and punitive damages. Thus, juries play a greater role today in awarding relief to prevailing employees. But the recent empowerment of juries has collided with a different trend. Gilmer allows employers to disenfranchise juries by requiring workers to arbitrate. Complicating the picture, Congress approved arbitration in discrimination laws. The same institution that provided for juries in employment disputes also made these juries totally avoidable. Race Discrimination Title VII of the 1964 Civil Rights Act originally provided only bench trials. However, in passing the 1991 Civil Rights Act, Congress came to a new conclusion. Juries should be able to hear employment discrimination cases. A committee report concluded: “Just as they have for hundreds of years, juries are fully capable of determining whether an award of damages is appropriate and if so, how large it must be to compensate the plaintiff adequately and to deter future repetition of the prohibited conduct” (U.S. House 1991, 12). Remedies expanded to allow compensatory and punitive damages but were capped at $300,000. But Congress added a potentially confusing twist. Section 118 of the 1991 law allows for “alternative means of dispute resolution, including . . . arbitration.” This implies that employers can seclude themselves and their employees on a private dispute resolution island to avoid a more rigorous enforcement regime. Courts have ruled inconsistently on the contradictory legislative messages as to whether a judge, jury, or arbitrator should adjudicate a Title VII claim. Some emphasize Section 118’s approval of arbitration. Rosenberg (1999) says there is “no conflict between the language or purposes of Title VII, as amended, and arbitration” (13–14). Others conclude that Section 118 is just a half-hearted bow to arbitration. According to Gibson (1997), the main point of the 1991 law is to increase employer penalties. If Title VII plaintiffs are “forced into binding arbitration they would be surrendering their right to trial by jury—a right that civil rights plaintiffs . . . fought hard for and finally obtained in the 1991 amendments to Title VII, and they also have under the age discrimination and disability acts” (1129). Age Discrimination Originally, the Age Discrimination in Employment Act (ADEA) was silent on juries. Federal courts disagreed as to whether plaintiffs were entitled to jury trials. The Supreme Court resolved the issue in favor of juries (Lorillard 1978). Congress reached the same conclusion just before the Court decided this issue (U.S. Congress 1978). Lawmakers reinforced the importance of juries in age discrimination disputes when they passed the Older Worker

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Benefits Protection Act of 1990 (OWBPA). After studies showed that employers coerced older workers into waiving their right to sue under the ADEA as a condition for severance pay, Congress strictly regulated age discrimination waivers (U.S. House of Representatives 1990). The OWBPA has detailed procedures for an age discrimination waiver to be knowing and voluntary. Waivers must refer to all rights and claims under the ADEA. This implies that an ADEA waiver must disclose the procedural right to a jury trial. But Gilmer’s broad approval of mandatory arbitration rejected similar reasoning that the ADEA prohibits forced waiver of a trial because that law provides for a jury. By implication, Gilmer directs judges to ignore the strict, procedural waiver requirements for an ADEA lawsuit as long as arbitration provides a substitute for juries. Courts face conflicting public policies when they are asked to enforce arbitration agreements that omit OWBPA waiver requirements. Most favor Gilmer. Williams (1995) ruled that the OWBPA protects against the waiver of a right or claim but not waiver of a judicial forum. Only the Ninth Circuit has suggested that the OWBPA precludes Gilmer agreements (Duffield 1998), but that court reversed course (E.E.O.C. 2002). The Role of State Law in Mandatory Jury Waivers State law plays a growing role in regulating employment. Employmentat-will is a dominant common law rule, but it is eroding. Courts now apply an array of torts to employment disputes—for example, emotional distress, negligence, and defamation. Constitutions add to state regulation of employment by creating privacy rights for workers. State courts also regulate jury waivers. Most apply the same common law test in commercial and employment disputes. Appellate courts recently enforced commercial jury waivers in Alabama (Ex Parte Cupps 2000), Connecticut (L & R Realty 1998), Missouri (Malan Investors 1997), Nevada (Lowe 2002), Rhode Island (Rhode Island Depositors 2003), and Texas (In re Prudential 2004). Federal courts take a similar approach (Today’s Man 2000). While the trend is to enforce jury waivers, courts require clear evidence that a business makes a voluntary and knowing decision. These decisions have direct implications for employment contracts. In an example that relates to employment, Alabama enforces jury waivers but only if parties have equal bargaining power. In another business dispute opinion that bears on employment (RDO 2002), a court refused to enforce a waiver because the contract language “was buried in the middle of a lengthy paragraph, not set off from the rest of the text through differential bold, larger print, italics, or any other form of emphasis or distinction . . . [and was] wholly one-sided” (814). In addition, two states reject all jury waivers.

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Notably, these commercial decisions discuss employment contracts. Grafton (2004), a California appeals court decision, finds that pre-dispute jury waivers violate the state’s policy against coercive contracts. The Georgia Supreme Court (Bank South 1994) rejects pre-dispute jury waivers because they violate the state’s constitutional provision for civil juries. How Courts Respond to Employee Challenges to Mandatory Jury Waivers Gilmer was decided in May 1991. A General Accounting Office (GAO) study (1994) found that from 1990 to 1992 only eighteen discrimination claims were arbitrated in the securities industry. Even with a tiny sample, the GAO investigated this new process. By comparison, this study finds only five court opinions on employee challenges to jury waivers. However, because employers are easily able to diffuse a mandatory dispute resolution process, early signs of a change should be watched. The following reasons explain why jury waivers in employment are more numerous than these cases suggest. Lawyers have only recently advised employers to use bench trials instead of arbitration. Also, people may not realize they have waived a jury. Even if workers see this information, they may not understand the meaning and implication of these terms. Examples of waiver legalese in employment contracts appear at the bottom of Table 5. In addition, jury waiver challenges cannot be quantified unless there is a legal dispute, but these complaints are rare. The Equal Employment Opportunity Commission (EEOC) fielded 81,293 discrimination complaints in 2003, from approximately 140 million job holders. At the same time, in federal courts 20,507 workers took their complaint a step farther by filing an employment discrimination lawsuit. Thus, about 1 in every 7,000 employees annually files a federal discrimination lawsuit. This threshold step in the dispute resolution process may be the first time a worker learns that she waived a jury. Unless there is a legal complaint and it proceeds to this point, a jury waiver is unlikely to be noticed. In sum, this study is unlikely to reflect current use of jury waivers in employment contracts. No waiver can be analyzed here unless (a) an employer requires this pre-dispute agreement, (b) an employee is aware of the waiver, (c) an employment dispute occurs, (d) a legal complaint is filed, (e) the employee objects to the waiver, and (f) the court opinion is published. Three Decisions Enforced Jury Waivers In Schappert (2004) a publishing company fired a fifty-four-year-old female vice president after a younger male executive restructured the firm. After Schappert sued in a New Jersey court under that state’s employment

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discrimination law, the company moved to enforce its pre-dispute employment agreement. The contract required that an employment claim be adjudicated in a federal court without a jury. It also provided for fifteen months of severance salary, which the company paid to the plaintiff. Schappert then petitioned the federal court for a jury, claiming that her waiver was invalid because it violated the knowing and voluntary standard in the OWBPA. The court disagreed. The jury waiver was printed in conspicuous typeface above her signature. The generous severance payment ($243,750), which resulted from back-and-forth negotiation, defeated Schappert’s argument that she had no bargaining power. The court reasoned when a pre-dispute agreement is negotiable, its jury waiver is conspicuous, both parties have a degree of bargaining power, and the party waiving the right has business acumen, the high standards for enforcing a waiver are met. A similar result occurred in Morris (2004). An Iowa clinic recruited a California neurosurgeon. After the doctor closed her practice and moved she was unable to obtain an Iowa license. Thus, she did not meet a condition for employment. She sued the clinic for fraud, breach of contract, and negligence. The clinic moved to enforce a jury waiver in the contract. A federal court ruled that Dr. Morris executed a knowing and voluntary waiver. Again, there was evidence of bargaining over terms of employment. Dr. Morris persuaded the clinic to modify its contract offer by increasing her relocation expenses and reimbursement for malpractice insurance. The court reasoned that the doctor could have bargained the jury waiver, too. E-mail showed that Dr. Morris was happy with changes in her proposed contract. The court ruled that even if there was unequal bargaining power in the negotiations, this did not harm her. Also, the jury waiver clause was the only capitalized print in the contract and therefore was conspicuous. The third decision to enforce a jury waiver involved another welleducated professional (Brown 2002). The plaintiff earned an MBA from Harvard and worked as an investment banker before taking a job as a commercial real estate broker. After she was fired, she sued for breach of contract and sex discrimination. The firm moved to enforce a pre-dispute jury waiver. A federal court ruled for the employer. Giving weight to the plaintiff’s professional education and work experience, the court concluded that Brown could have negotiated the clause. The judge dismissed her contention that the waiver is unenforceable because she did not read the employment agreement before signing it. In addition, the court rejected Brown’s contention that the Pregnancy Discrimination Act precludes a jury waiver. If the firm could compel Brown to arbitrate her sex discrimination claims under Gilmer, it could also require a bench trial.

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Two Decisions Rejected Jury Waivers A seventy-three-year-old insurance office manager was fired in Hammaker (2002). This occurred soon after his former employer sold the firm. The new employer required him to sign a jury waiver. Hammaker also alleged that he was pressured to retire. After he was fired and sued under the ADEA, the employer moved in federal district court to enforce the pre-dispute jury waiver. Hammaker responded that the agreement did not expressly refer to his rights under the ADEA. Thus, he did not waive his right to a jury. The court rejected the employer’s contention that the OWBPA’s waiver requirements apply only to substantive rights and concluded that this law also strictly regulates waivers of trial procedures. In Mafcote Industries (1998) an employer tried to repossess a company car from a recently fired sales manager. This confrontation occurred when only a teenager was home and after the employee offered to buy the car while he disputed how much money the company owed him. The firm sued, claiming theft of a car, and the employee counterclaimed for emotional distress and breach of contract. As the case went to trial, the employer moved to enforce the jury waiver in the employment contract. The court denied the motion, concluding that a contractual jury waiver is not automatically enforceable. In its remand to the magistrate, the court sent instructions to consider the conspicuousness of the waiver, whether the parties were represented by counsel, whether there was a gross disparity in bargaining power between the parties, the business or professional experience of the party opposing the waiver, and whether the party opposing the waiver had an opportunity to negotiate contract terms. Questions About Gilmer Arbitrations and Changing Conditions in Federal Courts This study raises new questions about Gilmer arbitrations. Tables 1–3 present fresh evidence of employer problems with this forum. The study also reports on management lawyers who advise employers to return to courts. Companies are confronting comparatively low win rates, punitive awards, and poor efficiency. Some are now being advised to use contracts to customize trial procedures for workplace disputes. Several themes emerge from this study. Employment Arbitration May Be Part of a Broader, One-Size-Fits-All Corporate Strategy to Manage Dispute Costs and Outcomes Studies of Gilmer arbitrations focus on fairness and outcomes for employees. This worthwhile research is cited by courts to evaluate Gilmer

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procedures (for example, Bingham 1997, cited by Rosenberg 1999; and Alleyne 1996, cited by Cole 1997). But much of this research stream examines employment arbitration as a stand-alone process, without considering that mandatory arbitration may emanate from a one-size-fits-all approach that companies use to manage all dispute costs and outcomes. Lipsky, Seeber, and Fincher (2003) offer a notable exception. They view Gilmer arbitration as a point on a spectrum of conflict management strategies adopted by large corporations. This highlights a problem with mainstream employment arbitration studies: they may fail to anticipate changes in broader currents that modify use of dispute resolution procedures. This study sees pre-dispute employment contracts as an extension of a broader corporate strategy. For large companies, it does not matter whether a potential complainant is a customer, supplier, credit card debtor, or employee (Spencer 2004). Firms are largely free to impose terms that customize dispute resolution features to their liking. The recent upsurge of high-level jury waiver court opinions in commercial disputes across the country may be a telling sign. Similar contracts are beginning to appear in employment disputes. Together, these new cases suggest that some companies are interested in trials rather than arbitrations—as long as the firm’s boilerplate conditions apply. This magnifies the importance of current Gilmer agreements, now estimated to cover millions of workers. These contracts can be easily amended. In short, a low-cost infrastructure already exists to allow employers to migrate customized dispute resolution procedures from arbitration to courts. Federal Courts Are Becoming More Attractive to Employers This idea would have been absurd in the early 1990s, but the federal regulatory landscape is improving for companies. Meanwhile, arbitration is disappointing some employers. Data in Tables 2 and 3 perversely support Gilmer’s idea of forum substitution: arbitration is becoming a more court-like process, burdened by cost and delay problems. However, company lawyers also realize now that Gilmer arbitrators rarely grant motions for summary judgment to dismiss a claim, are less likely than judges to exclude evidence, and have a tendency to split the baby. These typical arbitrator behaviors are cause for employers to prefer a starchy federal judge who enjoys lifetime tenure (Estreicher and Johnson 2003). Also, changes in federal law may encourage some employers to avoid Gilmer arbitrations in the first place, or repatriate their private dispute resolution procedures to these courts. The recent 10:1 limit of punitive to actual damages gives federal courts a comparative advantage to arbitration, where no limit is recognized.

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Will Courts Enforce Mandatory Jury Waivers as Readily as Gilmer Waivers? This study does not answer whether jury waivers are good or bad for workers but it does reveal the complexity of this development. If bench trials are fair, there is no reason to force them on workers. Also, Congress clearly intended to make juries available to employees, knowing that this would expose unlawful employment practices to the judgment of a worker’s peers. On the other hand, Gilmer critics cannot argue persuasively that bench trials are worse for workers than mandatory arbitration. The repeat player concern about arbitrators does not apply to judges. Also, there are no required qualifications for arbitrators. To be nominated, however, a federal judge must first meet high minimum standards related to licensing and years of legal experience. It is also hard to argue that an employee cannot get a fair trial before a federal judge. Are bench trials a reasonable compromise of employer and worker interests? Gilmer allows an island for private adjudication of disputes. But when employers use the same contractual method merely to substitute bench trials for arbitration, courts apply a much more challenging test from commercial law. Only one case here (Brown) paid even passing attention to Gilmer. The others tracked the jury waiver test for commercial disputes, which pays close attention to bargainer sophistication. In the one pure age discrimination case, the Hammaker court ignored Gilmer and focused instead on a waiver-protection law, the OWBPA. This highlights the importance of the commercial cases in Table 4. Six of the seven state supreme court rulings occurred from 1997 to 2004. In addition, Grafton is now before the California Supreme Court. These recent controversies imply that jury waivers in form contracts are a growing phenomenon. The other striking features are the amount of negotiation and bargainer sophistication. As the table shows, negotiations involved lawyers or experienced business people. There was give and take before contracts were signed. This differs from the experience of ordinary workers. In Table 5 courts weighed an employee’s bargaining power. They found that a corporate vice-president, Harvard MBA, and neurosurgeon/clinic manager had business acumen. But these were elite employees. When courts refused to uphold jury waivers, the employees were salaried managers. Even then, judges were not convinced that they made knowing and intelligent decisions. No case dealt with hourly workers, but the implication is that courts will not accept their jury waivers as readily as in Gilmer agreements. In sum, employers face an increasingly difficult choice. They can seclude themselves on a Gilmer island that is more unfriendly and costly and less

TABLE 4

Waiver is enforced

In re Prudential (2004) Texas Supreme Court

Waiver is enforced

Waiver is enforced

Waiver is enforced

Waiver is enforced

Waiver is invalid

Lowe (2002) Nevada Supreme Court

Ex Parte Cupps (2000) Alabama Supreme Court

L & R Realty (1998) Connecticut Supreme Court

Malan (1997) Missouri Supreme Court

Bank South (1994) Georgia Supreme Court

R.I. Depositors (2003) Waiver is enforced Rhode Island Supreme Court

Ruling

Decision by Year Family business and shopping mall

Parties

Negotiation

“Lease agreement was product of six months ofactive negotiations,” with changes to standard contract Creditor sued debtor Lawyers as firm Law firm with three partners who partners and lender signed personal loan guarantee contained valid jury waiver Lender sued borrower Two businesses “Sophisticated and experienced business people” negotiated loan that contained jury waiver Bank sued on loan Bank and businessman Businessman negotiated 90–day repayment extension contract with jury waiver after he defaulted on loan Bank sued on loan Lawyers as realty Two of three partners were lawyers who partners and bank orally negotiated terms with bank’s senior vice president Lessor sues lessee Two businesses Lessee was represented by attorney when lease was transacted in an “arm’s length negotiation” Lender sued borrower Two businesses Supreme Court does not examine negotiations, but concludes that state’s constitutional guaranty of right to civil jury precludes all jury waivers

Lessor sued lessee

Legal Claim

State Supreme Court Rulings on Mandatory Jury Waivers in Commercial Agreements

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TABLE 5

Fraud/Contract/ Negligence Title VII/ADEA/ N.J. Discrimination Title VII/PDA

ADEA/OWBPA Emotional Distress/ Breach of Contract

Waiver Is EnforcedA

Waiver Is Enforced B

Waiver Is EnforcedC

Waiver Is InvalidD

Waiver Is InvalidE

Morris v. McFarland Clinic P.C. (2004)

Schappert v. Bedford, Freeman & Worth Pub. Group, LLC (2004)

Brown v. Cushman & Wakefield, Inc. (2002)

Hammaker v. Brown & Brown (2002)

Mafcote Industries v. Swanson (1998)

None

None

Harvard MBA and former investment banker held to terms of contract that she failed to read

Employee negotiated $243,750 severance at time she signed waiver

Doctor negotiated increase in relocation reimbursement when she signed waiver

Negotiation

“Each of the parties hereto irrevocably waives all right to trial by jury in any action, proceeding, or counterclaim arising out of or relating to this agreement.” B “Any dispute between the parties relating to this Agreement that they do not settle between them may only be resolved by the state and federal courts located in New York . . . . Each party hereby waives the right to a jury trial in any lawsuit arising out of or relating to the Agreement or Executive’s employment by the Company.” C “C & W and Employee shall and hereby do waive a trial by jury in any action, proceeding or counter–claim brought or asserted by either of the parties hereto against the other on any matters whatsoever arising out of this Agreement.” D “Employee and Company hereby knowingly, voluntarily and intentionally waive any right either may have to a trial by jury with respect to any litigation related to or arising out of, under or in conjunction with this Agreement.” E The employee “consents to the personal jurisdiction of the Superior Court of the State of Connecticut and the United States District Court for the District of Connecticut and agrees that any action to enforce the foregoing may be brought in either such court. In any action or proceeding relating to this Agreement, the parties mutually waive trial by jury.”

Sales Manager

General Manager

Commercial Real Estate Broker

Vice President

Neurosurgeon

Parties

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A

Legal Claim

Ruling

Decision by Year

Court Rulings on Mandatory Jury Waivers in Employment Agreements

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easy to control. Once there, they have little hope of rescue from an appeals court to vacate adverse awards—which occur in about half of all cases. An emerging option is to repatriate their dispute resolution procedures to the judicial mainland. Some experienced management lawyers see federal courts as a better alternative, as long as employers do not have to face a jury. This study finds early signs, however, that courts will not enforce employerimposed jury waivers to the degree that they have permitted Gilmer waivers of the entire judicial system. References Adkins v. Labor Ready, Inc., 185 F.Supp.2d 628 (S.D.W.Va. 2002). Administrative Office of the U.S. Courts. 2004. U.S. District Court Cases, Judicial Facts and Figures. Washington, DC: Government Printing Office. Alleyne, Reginald. 1996. “Statutory Discrimination Claims: Rights ‘Waived’ and Lost in Arbitration Forum.” Hofstra Labor and Employment Law Journal, Vol. 13, pp. 381–430. Bank South, N.A. v. Howard, 444 S.E.2d 799 (Ga. 1994). Bingham, Lisa B. 1998. “On Repeat Players, Adhesion Contracts, and the Use of Statistics on Judicial Review of Employment Arbitration Awards.” McGeorge Law Review, Vol. 29, pp. 223–56. Brody, Harold M., and Anthony J. Oncidi. 2003. “Careful What You Wish For: Is Arbitration the Employer’s Panacea? Perhaps There Is a Better Alternative.” HR Advisor: Legal and Practical Guidance, Vol. 7 (November/ December). Brook v. Peak Int’l, Ltd., 294 F.3d 668 (5th Cir. 2002). Brown v. Cushman & Wakefield, Inc., 235 F.Supp.2d 291 (S.D.N.Y. 2002). Bureau of National Affairs. 1997. “Alternative Dispute Resolution: Most Large Employers Prefer ADR as Alterative to Litigation, Survey Says.” Daily Labor Report (May 14), A-4. Cassedy v. Merrill Lynch, Pierce, Fenner & Smith, 751 So.2d 143 (Fla.App. 1 2000). Chappel v. Laboratory Corp. of America, 232 F.3d 719 (9th Cir. 2000). Clermont, Kevin, and Theodore Eisenberg. 2002. “Plaintiphobia in the Federal Courts: Civil Rights Really Do Differ From Negotiable Instruments.” University of Illinois Law Review, Vol. 2002, pp. 947–71. Cole v. Burns Int’l Sec. Servs., 105 F.3d 1465 (D.C. Cit. 1997). Delikat, Michael, and Morris M. Kleiner. 2003. “An Empirical Study of Dispute Resolution Mechanisms: Where Do Plaintiffs Better Vindicate Their Rights?” Dispute Resolution Journal, Vol. 58 (December/January), pp. 56–58. Duffield v. Robertson Stephens & Co., 144 F.3d 1182 (9th Cir. 1998). E.E.O.C. v. Luce, Forward, Hamilton & Scripps, 303 F.3d 99 (9th Cir. 2002). Estreicher, Samuel, and Rene M. Johnson. 2003. “Contractual Jury Trial Waivers in Federal Employment Litigation.” New York Law Journal (May 2), pp. 3–4. Ex Parte Cupps, 782 So.2d 772 (Ala. 2000). Ferguson v. Countrywide Credit Industries, Inc., 2000 WL 867103 (C.D. Cal. 2000).

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Hammaker v. Brown & Brown, Inc., 214 F.Supp.2d 575 (E.D.Va. 2002). General Accounting Office. 1994. Employment Discrimination—How Registered Representatives Fare in Discrimination Disputes. Washington, DC: Government Printing Office. Gibson v. Neighborhood Health Clinics, Inc., 121 F.3d 1126 (7th Cir. 1997). Gilbert v. DaimlerChrysler Corp., 470 Mich.479 (Mich. 2004). Gilmer v. Johnson/Interstate Lane Corp., 500 U.S. 20 (1991). Grafton Partners LP v. Superior Court, 9 Cal.Rptr.3d 511 (Cal. App. 1 Dist. 2004). Hill, Elizabeth. 2003. “AAA Employment Arbitration: A Fair Forum at Low Cost.” Dispute Resolution Journal, (May-July), pp. 12–16. In re Prudential Ins. Co. of America, 2004 WL 1966015 (Tex. 2004). L & R Realty v. Conn. Nat’l Bank, 715 A.2d 748 (Conn.App. 1998). LaPrade v. Kidder, Peabody & Co., Inc., 246 F.3d 702 (D.C. Cir. 2001). Lipsky, David B., Ronald L. Seeber, and Richard D. Fincher. 2003. Emerging Systems for Managing Workplace Conflict. San Francisco: Jossey-Bass. Litras, Marika. 2000. “Bureau of Justice Statistics Report for Civil Rights, Complaints Filed in U.S. District Courts.” Daily Labor Report, January 20, p. E-10. Lorillard v. Pons, 434 U.S. 575 (1978). Lowe Enters. Residential Partners, L.P. v. Eighth Judicial Dist. Court, 118 Nev. 92 (Nev. 2002). Mafcote Industries, Inc. v. Swanson, 1998 WL 27156 (Conn.Super. 1998). Malan Investors, Inc. v. Harris, 953 S.W.2d 624 (Mo. 1997). Medina, M. Isabel. 1997. “A Matter of Fact: Hostile Environments and Summary Judgments.” Southern California Review of Law and Women’s Studies, Vol. 7 (Spring), pp. 357–71. Morris v. McFarland, 2004 WL 306110 (S.D. Iowa 2004). Morrison v. Circuit City Stores, Inc., 70 F.Supp. 2d 815 (S.D. Ohio 1999). Morrison v. Circuit City Stores, Inc., 317 F.3d 646 (6th Cir. 2003). Owens-Williams v. Merrill Lynch, Pierce, 103 F.3d 1119 (4th Cir. 1996). Penn v. Ryan’s Family Steakhouses, Inc., 95 F.Supp.2d 940 (N.D. Ind. 2000). RDO Fin. Servs. Co. v. Powell, 191 F.Supp.2d 811, 814 (N.D. Tex. 2002). Rhode Island Dep. Econ. Prot. Corp. v. Coffey & Martinelli, Ltd., 821 A.2d 222 (R.I. 2003). Rosenberg v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 170 F.3d 1 (1st Cir. 1999). Schappert v. Bedford, Freeman & Worth Pub. Group, LLC, 2004 WL 1661073 (S.D.N.Y. 2004). Shankle v. B-G Maintenance Management of Colorado, Inc., 163 F.3d 1230 (10th Cir. 1999). Sobol v. Kidder, Peabody & Co., Inc., 49 F.Supp.2d 208, 223 (S.D.N.Y. 1999). Spencer, Jane. 2004. “Waiving Your Right to a Jury Trial, After Years of Requiring Arbitration, Companies Return to the Court System, but With Conditions.” Wall Street Journal, August 17, p. B-4. State Farm Mutual Insurance Co. v. Campbell, 123 S.Ct. 1513 (2003). Today’s Man, Inc. v. Nationsbank, N.A., 2000 WL 822500 (E.D. Pa. 2000).

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U.S. Congress. 1978. Conference Report No. 950, 95th Congress, Second Session. Washington, DC: Government Printing Office. U.S. House of Representatives. 1991. Civil Rights Act of 1991, House of Representatives Report 102–40(I) (April 24). U.S. House of Representatives. 1990. Older Workers Benefit Protection Act, House of Representatives Report 101–664 (August 3). Williams v. Cigna Fin. Advisors, Inc., 56 F.3d 656 (5th Cir. 1995). Williams v. ConAgra Poultry Co., 378 F.3d 790 (8th Cir. 2004).Williams v. Cigna Fin. Advisors, Inc., 56 F.3d 656, 660 (5th Cir. 1995).

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XIII. LERA Poster Session

Discretion and Performance: A Cross-National Comparison of Public Governance Matthew M. Bodah University of Rhode Island Martin Schneider Universität Trier In this paper we examine the political pressures placed on the U.S. National Labor Relations Board and German Federal Labor Court. Our principal hypothesis in that political pressures are stronger in the United States—since the NLRB is an administrative agency that must answer to Congress—than in Germany, where the labor court is an independent court staffed by judges with lifetime appointments. The statistical analysis of cases from both the United States and Germany reveal patterns in decision making consistent with our principal hypothesis. However, this research is in its early stages and results must be interpreted with caution.

Author’s address: 36 Upper College Road, Kingston, RI 02881–1328 239

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Courts of Appeals and NLRB Orders: A Longitudinal Analysis Clyde J. Scott The University of Alabama Edwin W. Arnold Auburn University–Montgomery1 From 1964 to 2003 the distribution of Courts of Appeals decisions regarding NLRB orders was 68 percent fully affirmed, 11.5 percent modified, 5.3 percent remanded in full, 2.5 percent affirmed in part/remanded in part, and 12.6 set aside. The average number of Courts of Appeals NLRB cases per year declined from 972 in 1979–83 to only 410 in 1999–2003. There was wide variation among the circuits in affirmation of NLRB orders over the past twenty years, and 50 percent of the cases occurred in three of the twelve circuits.

Portfolio Decisions of Older American Workers: The Role of Private Pensions Huan Ni SUNY at Stony Brook 2 Without differentiating pension types, previous literature has found pension ownership has positive effects on stock investments. However, individuals with defined contribution (DC) pensions are more exposed to financial market risks compared to those with defined benefit (DB) pensions. Using the data 1Author’s

address: Manderson Graduate School of Business, Box 870225, Tuscaloosa, AL 35487-0225 2Author’s address: 10 Nicolls Rd, Stony Brook, NY 11794-4384

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POSTER SESSION

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from the Health and Retirement Study (HRS), I empirically test the effects of DC pension ownership on individual stock investment in non–pension wealth by performing a two-step procedure. Results show that holding DC pensions both decreases individual probability of participating in the stock market by 29 percent and reduces the size of stock investments (by 38 percent). These results are relevant to the current debate on Social Security privatization that recommends transferring the current pay-as-you-go system (a DB, essentially) to a personal retirement account (DC) system.

From Command to Involvement: The Transformation of Authority at Continental Airlines Andrew von Nordenflycht Simon Fraser University I analyze the improvement in employee relations at Continental Airlines, which experienced a turnaround from one of the worst-performing to one of the best-performing major U.S. airlines. Interviews suggest that Continental’s improved employee relations stem from an “involvement-based” employment system fundamentally different from the “command-based” system at traditional airlines. Authority is exercised differently and management invests in treating employees as valued team members. Thus, focusing on formal programs, such as the on-time bonus, misses the essence of Continental’s distinctiveness. I also describe factors that likely facilitated the adoption of this system, despite a history of adversarial employee relations.

Author’s address: 8888 University Drive, Burnaby, BC V5A 1S6 Canada

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International Evidence on the Convergence of Female and Male Unemployment Rates Hervé Queneau City University of New York Amit Sen Xavier University We examine the relationship between the female and male unemployment rates across eight Organization for Economic Co-operation and Development (OECD) countries, namely, Australia, Canada, Finland, France, Germany, Italy, Japan, and the United States, over the period 1965–2002. We introduce the notion of convergence between the female and male unemployment rates based on two measures of the gender unemployment gap: (1) the difference between the female and male unemployment rates; and (2) the ratio of the female to male unemployment rate. Based on unitroot tests, we find evidence of convergence in Canada, Finland, France, Italy, Japan, and the United States.

Author’s address: 2900 Bedford Avenue, 223 Whitehead Hall, Brooklyn, NY 11210-2889

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XIV. 2005 Best Dissertation Competition

Differences Matter: The Impact of Social Policy on the Working Poor in Canada and the United States Daniyal Zuberi University of British Columbia It is 5:30 a.m. on an early spring morning in the Pacific Northwest. Pigeons mutter, squawk, and whistle outside bedroom windows on Capitol Hill. One hundred and twenty miles to the north, the sun hits the peaks of the North Shore mountains as the first buses carry drowsy passengers on their way to work. In Seattle and Vancouver, delivery trucks roll down largely empty streets, as the workers on the morning shift prepare for the new day. Both cities are carved out of the Pacific Ocean rainforests—flourishing in frequent misty rains—in valleys surrounded by towering snow-capped mountains. Sujita Hassam and Karen Hsu are ethnic minority immigrants who work for the Globe Hotel1—a major multinational hotel chain—in Seattle and Vancouver, respectively. Their stories illuminate some of the major themes of this dissertation. They work at the bottom of the labor markets of each country—in jobs that offer few intrinsic rewards—for the same firm straddling an international border that sharply demarcates two contrasting social policy regimes. The United States, with its comparatively weak welfare state and laissez faire tradition, and Canada, with its history of strong safety nets and interventionist social policy, offer divergent contexts through which the working poor must navigate.

Author’s address: 6303 NW Marine Drive, Vancouver, BC V6T 1Z1, Canada 243

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Sujita’s Story Sujita Hassam is a forty-one-year-old ethnic Indian woman who moved to the United States from Fiji during the fall of 2000. After marrying Amit Hassam in Seattle, Sujita Hassam found work part-time at a very difficult machine operator job in a Tacoma area factory, where her new husband also worked. “Oh it was very hard job,” she recalled. “Everything do with the machine. Cut every kind of rubber and everything. Press things and everything they use in the roofs.” She earned $8 per hour for her labor. Her husband continues to work at the factory and also works a second part-time job in a school cafeteria as a custodian. While Sujita Hassam is still “on-call” at the factory, she decided she wanted more hours of work. First, she found a new job as a room attendant for the Low-Cost Motel in Tacoma. She only worked there for three weeks, earning $6.90 per hour. She disliked this job because she was not able to secure enough hours and did not receive a uniform. She also hated cleaning what she described as really “stinky” rooms, particularly where people had pets living with them. She told me, “They bring dogs and kitties and they put inside the room, and when you go inside it smells very bad. Oh yea.” So she felt fortunate to get a new job at the Globe Hotel Seattle, where she said she enjoyed working so far. At the same time, she was frustrated with the low wages paid at her hotel. She said she thought that her job at the Globe Hotel would be better if it was unionized because they would get regular pay increases: “Why I think if union it would be better? If they work hard and after 1 year or 2 and they are only giving you like $7 and $7 [per hour], you can probably use union for something like this.” Only a small and declining percentage of hotel jobs in Seattle are unionized. Life for the working poor is stressful in Seattle. Sujita Hassam’s family rents a one-bedroom apartment. Maureen Hassam, her husband’s daughter, sleeps in the living room. She describes the apartment as “somewhat crowded,” with leaks and roaches. The landlord continues to promise, but not deliver, to spray the apartment for insect infestation. He charges them a $70 fine if they are even one day late on the $600 monthly rent. In the five months prior to the interview, Sujita Hassam’s family have been late paying the rent four out of the last five months—incurring $350 in fines—and had their phone cut off twice because they could not pay their bill. Their utility bills add up to $250 or more per month for electricity, garbage service, and water. There is no room in their budget for any unexpected expenses or extravagant expenditures. Sujita Hassam describes paying the household bills as “very difficult.” These material hardships land on Sujita Hassam, despite the fact that she and her husband hold multiple jobs. They regularly borrow from Maureen Hassam—her husband’s daughter—who works thirty hours per week at Burger Barn, a fast-food

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franchise. Amit Hassam also borrows money from Arthur Lowell—a coworker—although they try their best to pay him back quite quickly. Living on the edge financially was not unusual among workers in Seattle, with many hotel employees reporting difficulties making ends meet. While her husband commutes to Tacoma by car, Sujita Hassam takes the bus. On a typical day, she gets up at 5:00 a.m. so that she can shower and prepare for her husband and step-daughter to leave for work and school. Last year, Sujita Hassam estimates that she earned only $7,000 before taxes and her husband $23,000—working two jobs. Despite their low income, she tries to send money and gifts back to her relatives in Fiji whenever possible. Every few months, they donate a small amount of money to their church and a local hospital. Sujita Hassam lacks health insurance coverage. Although the Globe Hotel provides health insurance benefits, she is trapped in the new employee waiting period. Her husband, Amit Hassam, pays $50 per month for health insurance, a limited plan lacking dental coverage. Maureen Hassam, her step-daughter, is covered by a Washington state health program, so she has been to the doctor and dentist in the past year. But Sujita Hassam has no health insurance coverage, which worries her: “Yea, I am worried. Because I am thinking if I haven’t got any [health] insurance and maybe someday I’m gonna sick. And if I go to the doctor, I am going to have pay a lot without the insurance.” The family is very vulnerable to financial catastrophe in the event of a health emergency. Problems with health insurance coverage and accessing health care were much more frequent in Seattle compared to Vancouver. After three months Sujita Hassam qualifies for health insurance coverage benefits for herself but not for the rest of her family. If she switches employers in order to improve her wages—as she and many working poor hope to do—she will likely have to start again in terms of waiting periods for essential benefits such as health insurance coverage. As with most Seattle workers without health and/or dental insurance, Sujita Hassam has not received regular preventative medical checkups. Her job benefits are meager; she is eligible for one week paid vacation and six paid sick days this year. The job benefits are less generous in Seattle than Vancouver in part because of differences in labor policy that set different minimum standards for workers in each city. Hotel workers in Seattle lived in and around higher poverty neighborhoods compared to those in Vancouver. They experienced more problems with crime and greater feelings of personal insecurity. Sujita Hassam’s family lives southeast of downtown Seattle, close to Rainier Ave. Their neighborhood is close to shops. Sujita Hassam has noticed some “sketchy in and out”

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activity next door as well as cars cruising up and down the block (enough to scare her and cause her to bolt the door). In the past few months, Sujita Hassam has been the victim of petty thefts, which have left her feeling personally insecure. Someone stole Maureen Hassam’s expensive pants from the dryer in the common laundry room. Sujita Hassam dreams of buying a two-bedroom home. Her husband thinks they should move to a Tacoma suburb—closer to his job at the factory but much farther for her. Despite their hardships and insecure financial position, Sujita Hassam is still optimistic about her future. Her story illustrates the significant obstacles and hardships facing recent, working, poor immigrant families in U.S. cities. Karen’s Story Karen Hsu is a forty-nine-year-old mother with two teenage children who lives with her husband and mother-in-law. She was born in Guangdong, China, and moved to Vancouver, Canada, in 1980. In China she had only completed two years of high school. She quickly took advantage of educational opportunities after arriving in Vancouver; she took night courses in English as a Second Language (ESL) at Redlows High School from 1980 to 1985. Karen Hsu’s first job in Vancouver was as a seamstress in a factory. After toiling for several years—earning $3 per hour—in this difficult, low-paying job, she met her husband, Lee Hsu. Lee Hsu currently works full-time as an electrician and completes occasional handyman jobs. They were married in 1983. Soon after, she was laid off at the garment factory and began collecting unemployment insurance benefits. A Canadian government program— through Human Resources and Development Canada (HRDC)—paid Karen Hsu’s tuition and expenses to attend a six-month hospitality training course while she was unemployed. Many immigrant hotel workers I interviewed in Vancouver reported benefiting from these federal training programs. Through the course work and especially internship placements, these training programs lifted many from initial insecure poverty-wage jobs to more secure living-wage jobs. A close friend of Karen Hsu’s, Lucy Chen, had recently begun working at the Globe Hotel Vancouver. She recommended that Karen Hsu apply to the laundry department, where a position had recently opened. She got the job and began working at the Globe Hotel Laundry department at double her previous seamstress wage—earning $6 an hour—and held that job for nine years. During this time, the hotel began outsourcing most of its laundry to subcontractors, and the staff scrambled to find job openings in other departments. Fortunately, Karen Hsu’s hospitality certificate and selection privi-

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leges under the union contract helped her switch jobs within the hotel and secure a position as a room attendant while maintaining her seven-year seniority. After years of regularly scheduled wage increases, Karen Hsu currently earns $14.84 per hour and has generous extended health and other benefits, including five weeks of paid vacation per year. Labor policy organizing rules in Canada and British Columbia—in contrast to the United States and Washington State—create a context where a much higher percentage of hotel industry workers are unionized in Vancouver compared to Seattle. When we met Karen Hsu had worked in this establishment for twenty years and plans to continue until she retires, “maybe work over there five or ten years, retired.” Union-based seniority privileges allow Karen Hsu to work two or three days a week during the winter low season and full-time the rest of the year. She described the job: “Yea, it’s a hard work but it’s okay. If you want the money, it’s okay.” Karen Hsu’s story shows how stable unionized positions in the service sector can provide workers with mainstream, middleclass quality of life and resources. Karen Hsu estimates she and her husband earn a combined pre-tax annual income of $45,000. While taxes are higher in general in Canada than the United States, the income tax burden on the working poor is less in Canada, especially for parents, because of generous tax credits. Karen Hsu estimates they paid about $2,000 in taxes last year and received a $200 refund. Karen Hsu’s story contrasts with Sujita Hassam’s in ways that reveal how working poor families in Seattle must rely much more heavily on personal resources to make ends meet compared to in Vancouver. In 1987 Karen Hsu and her husband purchased a large five-bedroom home with a basement apartment, about one block away from where they had been renting. In Vancouver many single-family homes include a basement suite or small apartment, which homeowners rent out in order to help with their mortgage payments. The Hsus used to rent this apartment out for $600 per month. Today, Karen Hsu’s mother-in-law lives in the apartment. Their neighborhood is located southeast of the downtown core, close to Kingsway—where many other hotel workers interviewed live. The Hsus live in a classic split level, likely built in the late 1960s. The rambling house provided what she describes as “just the right amount of space” for her, her husband, their two teenage children, and her mother-in-law. They have two cars, a 1997 Geo Tracker and an older 1989 Chevy Lumina, though she generally commutes to work by bus—a forty-five-minute trip each way. Karen Hsu appreciates the quality of life in her east side Vancouver neighborhood and considers it a good place to raise her children. The impact of public infrastructure investment is obvious here. Karen Hsu’s neighborhood boasts community centers and other family-friendly institutions. Both Karen Hsu and

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her fifteen-year-old son Daniel Hsu think of their neighborhood as safe, and the family has no plans to move in the next several years. Like many immigrants, the Hsu family relied on their extended family for childcare when their children were young. While Karen Hsu and her husband worked, her mother and mother-in-law as well as other relatives watched after the children. “My mother-in-law, my mother and cousin. My father-in-law. Everyone help. Everybody help me.” When I asked if she paid them, she replied, “No afford to pay. I don’t want to pay.” Daniel chimed in, “Calling favors.” Karen Hsu’s mother-in-law is unfortunately now quite ill and requires regular dialysis; yet the family has never had to worry about health expenses because of Canada’s universal health insurance. The Canadian universal health insurance system mitigates financial stress that otherwise might be provoked by health crises. The family’s regular doctor’s office is located ten minutes from Karen Hsu’s home by car. She had recently visited because of “shoulder pain” but does not have any major health problems. In the past year she estimated that she visited the doctor four to five times. Her son went to the doctor once and her daughter twice. Although Canada’s publicly financed medical plans do not cover dental work, all of them had recently been to the dentist for a teeth cleaning. The Hsus report making small annual donations to the BC Children’s Hospital. Though her job is fairly low skilled, Karen Hsu perceived her family as being squarely in the middle of the middle class in Canadian society, reflective of a subjective sense of class location. In 1999 the Hsu family went on a family vacation, touring China for one month. With a paid-off home, rental property, and no credit card debt, the Hsu’s largest regular monthly expenses include $200 for property taxes, $700 to $800 for food, $220 for hydro (utility bills), $200 for life insurance, and $300 for piano lessons. They have about $3,000 in savings and some retirement savings as well, but the majority of their equity is tied up in their own home. Karen Hsu’s story was not unusual among room attendants and other hourly employees interviewed in Vancouver. Overview How do social and labor policy differences affect the quality of life and hardships experienced by the working poor in the United States and Canada? Chapter 2 describes previous research on urban poverty and the working poor as well as findings of U.S.-Canada comparative research. It also contrasts trend data on poverty and inequality between the two countries since the mid-1970s to show how differences in social transfers explain these macrolevel divergences.

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Chapter 3 tells the story of my research. It outlines the methodology of the Comparative Hotel Employee Study. I begin by explaining why I chose to compare the experiences of workers in Seattle and Vancouver. Then I describe my research design, sampling, and procedures utilized. Descriptions of the four hotel sites studied, and the divisions of each hotel focused on—housekeeping, maintenance engineering, and guest services—set the scene. Chapter 4 focuses on the differences in labor policy between the United States and Canada and the impact of these differences on hotel industry employees in Seattle and Vancouver. First, labor policy differences, in particular relating to union organizing rules and procedures, are described. These differences have resulted in a dramatic divergence between the two countries in the past forty years. What are the implications of this difference for hotel workers in Seattle and Vancouver? Directly, unionized hotel jobs provided better benefits, job security, and work conditions. Indirectly, higher levels of union coverage in Canada have translated into stronger labor force policy and other social policies that help all low-income workers. Chapter 5 examines the impact of the differences in the health systems of the United States and Canada on hotel employees and their families. The large and growing percentage of the uninsured in the United States is well established. It stands at 14 percent of the population or over 44 million people. Yet there has been little systematic research on how health care policy differences matter for the working poor. Maintaining continuous health insurance coverage was a problem for many hotel workers in Seattle, despite the provision of health insurance benefits by the hotel. Why? The main culprit is the “waiting period.” The waiting periods for health insurance benefits range from three to six months and were often longer for family coverage. Over 25 percent of the employees in Seattle did not have health insurance at the time of their interview. Even with insurance, many found the employee health benefits inadequate to prevent financial catastrophe. Fewer sought and received preventative care in Seattle. In contrast, the universal health care system in Canada decoupled financial considerations from most health care experiences. The findings suggest that the problems of the current health policy regime in the United States go well beyond individuals simply lacking health insurance. Chapter 6 focuses on how differences in social welfare policies between the United States and Canada affect the quality of life and material hardships of hotel workers and their families. What differences are most important? In Vancouver unemployment insurance provides the most important protection for hotel employees against material hardship. In Seattle unemployment

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programs fail the working poor; low replacement rate of benefits prevented unemployment insurance from acting as an effective social safety net. Unemployment benefits for hotel workers were well below the income that could be earned in a minimum wage job. Few hotel workers in either city reported relying on public assistance benefits, with the exception of minimal support benefits temporarily received by recently arrived refugees. In Vancouver other government programs prevented hardships by providing financial assistance directly or helping build up financial resources in order to protect workers during economic downturns. These programs include paid maternity leave, government subsidized savings programs, worker’s compensation, mandatory vacation benefits, and subsidized daycare. A comparison of income supplements for low-income parents with children, such as the U.S. Earned Income Tax Credit and the Canadian Child Tax Credit, reveals that the current system provides nearly double the supplement to similar families in Vancouver compared to those in Seattle. In Seattle, without government help, employees relied mostly on extended family or personal resources as well as working multiple jobs to make ends meet in difficult economic times. More also live with extended families to make ends meet. Chapter 7 examines how public infrastructure investment differences— in transit, neighborhood, and community institutions—affect the outsidethe-workplace experiences of the hotel workers. The more egalitarian pattern of public investment in Canada compared to the United States means that income differences between families or individuals do not dictate to the same degree the quality of life in Vancouver compared to Seattle. More workers in Vancouver were positive about their neighborhoods, almost uniformly describing them as “nice.” They had access to more institutionrich communities, such as government-funded community centers. Seattle employees did not report utilizing community centers and other neighborhood institutions as much and described more problems with crime such as theft and muggings. Chapter 7 goes on to describe the cumulative and interactive impact of these differences on how workers saw themselves and their families in society and their perceptions of what the future has in store for them. Fewer hotel workers in Vancouver perceived themselves to be far below the middle rung of the socioeconomic hierarchy compared to Seattle. Workers in Vancouver with children were also somewhat more positive about their children’s futures. In Seattle more workers expressed concern about their own place in society as well as hope in their predictions of their children’s futures. Chapter 8 concludes the dissertation with a summary of the main findings and discussion of their theoretical implications. In a global era, where

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branches of multinational franchises are opening in cities around the world, it is vitally important to understand the impact of government policy on the lives of low-income service-sector workers and their families. Social policies directly affect the quality of life and levels of material hardship experienced by working poor families. The findings of the Comparative Hotel Employee Study reinforce the importance of a multidimensional analysis of equality as involving more than just income and the central role of social policies in social stratification. Note 1. All names have been changed to protect the study respondents’ identities. All names of hotel workers and hotel chains as well as most other corporations and unions discussed have also been changed to pseudonyms. All dollar amounts are listed unadjusted in the currency of the respondent’s residence.

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XV. LERA Annual Reports

LERA Executive Board Meeting June 15, 2005 Capital Room, Hotel Washington, Washington, DC Call to Order—The meeting was called to order at 3:10 p.m. by President Stephen R. Sleigh. Present at the meeting were officers Sleigh, Marlene Heyser (past president), Pete Feuille (secretary/treasurer), David Lipsky (president-elect) and members Peter Berg, Jackie Blanchard, Paul Almeida, Jerry Calhoun, Joel Cutcher-Gershenfeld, Morris Kleiner, and Tony Oliver. Invited guests included Jim Auerbach, Paula Voos, and Charles Whalen (editor-in-chief, Perspectives on Work). Board members unable to attend included Sara Adler, Amy Dean, Ann Frost, Jill Kriesky, Andy Levin, Nancy Peace, and Robert Taylor. National Office staff present included Paula Wells and Lisa Sprinkle. Approval of Minutes—President Sleigh asked for approval or amendments to the minutes of the last board meeting on January 7, 2005. A motion was made to accept as presented, seconded, and unanimously approved. Committee and Officer Reports Report of the Development Committee—Chair David Lipsky began by giving a history on the committee and highlighted the recommendations that came from the recent committee meeting. He reported that since the formal fundraising activities were started in January 2004, over $670,000 has been raised through grants, donations, etc. The Committee recommended increasing the target fundraising goal to $1.5 million. Donations should reach $750,000 by January 2006. He reported all committee members have pledged their own participation in this effort and pledged to contact six people each by January 2006. Lipsky encouraged all members of the executive board to pledge to the campaign too. The Committee’s motion to increase the fundraising goal to $1.5 million was unanimously approved. It was agreed 252

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to announce the formal proposal for a three-year campaign at the annual meeting in January in Boston. The chair also reported that the committee was seeking approval on a motion to establish donation levels of silver, gold, platinum, the President’s Circle, and other, and to hold an annual fundraising letter campaign each year before renewal efforts began in the fall. The Committee’s motion to hold the annual fundraising effort to the general membership was unanimously approved. Report of the National Policy Forum Meeting—President-elect and program chair for 2006 David Lipsky made a motion to hold the National Policy Forum every other year in Washington, D.C., and teaming up with FMCS for the National Labor Management Conference (or another group) during the even number years. The motion was seconded and unanimously approved. Report of the 59th Annual Meeting (2007 in Chicago) Program Committee—Program chair David Lipsky discussed his idea for a theme for the Chicago meeting as Conflict and Cooperation in Employment Relations. Lipsky heard a number of suggestions and agreed to incorporate them in his call for session proposals. Industry Council Coordinating Committee—Chair Joel CutcherGershenfeld reported that there were two Industry Council charters that needed to be discussed and decided upon. These included the Construction Industry Council and the Utilities Industry Council charters. Joel reported Industry Council memberships increased from 482 members to 886 since last year. Of the new LERA members, nearly half signed up to join a council. The Committee presented a motion to accept the charters for the Construction Industry Council and the Utilities Industry Council and the Board approved it unanimously. He also reported that all the co-chairs of the Industry Councils will make up the Industry Councils Coordinating Committee along with an executive board member. Charles Whalen is an ex-officio member to coordinate Perspectives on Work reports. The Report of the Secretary/Treasurer and Executive Director—Treasurer Peter Feuille gave highlights of the LERA Mid-year Financial and Membership Report. He noted the unplanned and unbudgeted FMCS grant this year for Airline Industry Council research activities and its impact on staffing and the income and expense projections. He reminded the Board that grants tend to fund specific additional activities—not ongoing ones— and that the Association continues to run an annual operating deficit of about $30,000 and that this is the key driver behind the development campaign.

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A ten-year look at LERA financials and membership numbers show that the revenue has been basically the same over the years while membership numbers have been declining. Paula Wells pointed out that the number of nonrenewing members is slowing down and that we have an 87 percent renewal rate, which is good for an association. She also reported that she expected new member numbers to begin increasing this year, due primarily to the expanded efforts over the past two years and in 2005 to increase new members. However, she cautioned that rebuilding membership would likely be a long and slow process. Strategic Direction of LERA President Steve Sleigh led a discussion about the strategic direction of the Association, pointing out that the Association had been through some major transitions in the past year including the name change, adding Industry Councils, and the intense work of a new Development Committee to plan a fundraising effort. These are all positive areas designed to help grow LERA membership. The questions before the board are the following: How do we get membership to grow? What should we be doing to grow our influence in the labor sector? The academic sector? The management sector? The neutral sector? The discussion included the following observations from the members: Industry Councils. Many other organizations seem to be specific to one occupation whereas LERA is very broad in focus. Industry Councils are a way to bring focus to specific groups and topics. Getting people to join the Industry Councils is a great way to get them to know LERA as a result. Chapters. There was discussion on whether there is a disconnect between chapters and national. Steve Sleigh visited eleven chapters during the year. It was mentioned that people join associations to advance careers. If one had a local career, they tended to join local chapters, whereas if one had a national career, they were prone to join the national organization. It was asked what might be done to involve more chapter members in national membership. It was also pointed out that several major regions do not have chapters and suggested that appropriate Industry Councils could pave the way to start up some new chapters Focusing on Issues. It was suggested that providing a broader view of workplace issues (like Work and Family) would provide potential new members something of value and could be used to help the organization grow. Facilitating dialog on big issues is important. Also, focusing on where work is going in two, five, and ten years would be helpful especially since there have been so many fundamental changes to work. LERA should focus on bringing folks together in ways that tackle the issues.

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Not Focusing on Issues. Conversely, it was suggested that LERA is speaking to the issues of the day, which is not necessarily good for building membership. Issues come and go, and they are not a great platform to build membership on. Other Disciplines. Reaching out to adjacent disciplines—economics, sociology, psychology, etc.—to let them know what LERA has to offer them was recommended, as was reaching out to other associations for possible joint meetings or activities. President Sleigh asked the Board to think more on these ideas to further discuss at the January meeting, including how we can implement ideas to grow the membership It was put forward that a Strategic Planning Committee of approximately five people might be developed to tackle these issues rather than depending on a Board that had three-year terms. Sleigh suggested more discussion on that issue in January. New Business There was no new business. Other Business Nominating Committee Approval—President Sleigh nominated the following LERA members to serve on the Nominating Committee: Janice Bellace (chair), Mike Belzer, Jody Hoffer Gittell, Jerry Glass, Gordon Pavy, and Arnold Zack. Past president Marlene Heyser will also serve as directed by Association bylaws. The motion was seconded and approved unanimously. Finance and Membership Chair Approval—President Sleigh put forward the nomination of Paula Voos to serve as chair of the LERA Finance and Membership Committee, replacing Greg Woodhead. This motion was seconded and approved unanimously. President Sleigh thanked Ms. Voos for her willingness to lead this important LERA committee. Next Meeting—The next Board meeting will be on January 5, 2006 in Boston. Meeting Adjournment—The meeting was adjourned by President Sleigh at 5:32 p.m.

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LERA Executive Board Dinner and Meeting Thursday, January 5, 2006, 6:15 p.m. Arlington Room, Boston Park Plaza Hotel Boston MA Call to Order—The meeting was called to order at 7:00 p.m. by President Stephen R. Sleigh. Present at the meeting were officers David Lipsky (president elect), Marlene Heyser (past president), Pete Feuille (secretary /treasurer), Adrienne Eaton (editor in chief), Lavonne Ritter (NCAC), Steve Rynecki (Advisory) and board members: Sara Adler, Paul Almeida, Joel Cutcher-Gershenfeld, Ann Frost, Morris Kleiner, Jill Kriesky, Andy Levin, Anthony Oliver, Nancy Peace, and Robert Taylor. Other invited guests included Board-elect members: Jack Fiorito, Gordon Pavy; president electelect Eileen Hoffman; committee chairs and coordinators: Janice Bellace, Cheryl Maranto, Paula Voos, and Charles Whalen and NCAC chair elect Bill Canak. National Office staff present included: Paula Wells, Lisa Sprinkle, and Anna Mehl. Board members not able to attend included: Peter Berg, Jackie Blanchard, Jerry Calhoun and Amy Dean. Award Recognition and Announcements—Steve Sleigh recognized outgoing board members Jackie Blanchard, Joel Cutcher-Gershenfeld, Ann Frost, Andy Levin for their dedicated work over the past three years. Also honored was NCAC chair Lavonne Ritter who was completing her threeyear term. Newly-elected board members whose terms will begin following the 2006 annual meeting were also introduced: Jack Fiorito, Lisa Lynch, Gordon Pavy, Nancy Peace, and Donna Wilson Renner. President Elect David Lipsky recognized Steve Sleigh for his service as the 2005 LERA President. Approval of minutes—A motion was heard to approve the minutes of the Washington DC LERA Board meeting on June 21, 2005. It was seconded and unanimously approved. Committee and Officer Reports Nominating Committee Report—Chair Janice Bellace reported the slate of candidates on behalf of the Nominating Committee. The 2005 Committee 256

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included Michael Belzer, Marlene Heyser, Jody Hoffer-Gittell, Jerry Glass, Gordon Pavy and Arnold Zack. Bellace announced Anthony Oliver as unanimous selection as the 2007 president elect. A motion was made to accept the slate of candidates presented and was seconded (Feuille). The motion passed unanimously. Perspectives on Work Editorial Advisory Board Report—Charles Whalen, editor and chair, reported the current state of the Perspectives magazine and reported that from the readers surveys, sent out in the Summer 05 issue, it was found that readers view Perspectives as a balanced magazine, the most valuable publication of LERA, and a nice benefit. Another survey is included in the Winter 06 issue. Whalen thanked Robert Taylor, who will end his tenure as a book review editor in 2006 and said, Eileen Schwab and possibly another interested member will take over those duties in 2007. Foundations Committee—Marlene Heyser, chair, reported that this was the first committee meeting in 2 years and that the committee was going to work on identifying and applying for grants to feed into the Development committee effort. She indicated the Committee might focus on the topic of retirement income and benefits as a way to ask for new grants. Heyser reported that Joel Cutcher-Gershenfeld will remain on the committee as liaison to LERA Industry Councils and continue to work with the current Sloan grant for that project. Education Committee—Cheryl Maranto reported on the Excellence in Education award and suggested it was time to reconfigure this award as the number of nominees has dropped in the past few years. The Committee agreed to continue to focus on the impact on students as main criteria. They will look into identifying a partnership to underwrite the education award to increase the benefit and interest of nominees, possibly a cash award. President Sleigh mentioned that a representative from the United Federation of Teachers would be in attendance the next day and that it would be a good idea to discuss a partnership with them. He also asked for a formal proposal from the committee to discuss this more in 2006. Industry Council Coordinating Committee—Chair Joel Cutcher-Gershenfeld discussed the growth of Industry Council participation within the LERA membership and commented briefly on the activities of some of the Councils, including their participation of five out of six councils on the program for the upcoming National Labor Management Conference in August

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2006. He requested the Board approve the two charters to authorize new councils in the Health Care and Automobile industries. Following discussion, the committee motion was seconded (Ritter) and passed unanimously. Interest Sections Coordinating Committee—Jill Kreisky reported on the compliance of the eight interest sections within LERA; almost all have completed the minimum requirements to complete the requirements for a charter. She reported the section conveners felt it was burdensome to ask sections to serve as refereed paper readers and fulfill POW editorial advisory board requirements. Editor Eaton and director Wells agreed to look into the process to try to simplify but reiterated that the association did need (two) volunteers from each section (these should be recruited in advance) to serve as readers each year and only one volunteer appointee from each section was needed every three years to serve on the advisory board. Kriesky also reported other ideas and observations from conveners: that the busy PreConference day activities were cutting into their section attendance; that the Board tell ASSA that LERA needs more than 27 program slots; that Sections would like a calendar of when different things are happening and when they need to tell the national office who the readers are, etc. Development Committee—Chair David Lipsky reported he is ready to formally announce the launch of a fundraising effort, $1.5 million for LERA and that the Committee has been working for 2 years to plan this campaign. He said nearly $700,000 has been raised over those 2 years through grants, organizational commitments, cash, and pledges and that there is a new database in place to help track donations and donor information. The amount raised so far includes donations made in the fall for the first Annual Fund Campaign, the Sloan grant, FMCS grant, Susan Eaton award, Steve Sleigh’s efforts to raise money for the 2005 NPF sponsorship, and a few other efforts. Lipsky will circulate a price list at a future date for supporting efforts by LERA. Lipsky read the case statement for the Development committee, which had been sent to board members prior to the meeting and reviewed the contribution list from the Annual fund campaign. The next phase after formal announcement will be members contacting potential donors (past presidents). He pointed out that another key is strong organizational support, so we will continue to solicit from organizations. Endowments and planned giving is not available yet because the committee was still doing research on endowments. Report of the Secretary/Treasurer and Executive Director—Paula Wells reported that dues income remains around the $200,000 level with total

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income (including grants) over $400,000. She explained Sloan grant monies are paid over a three-year period and we will receive the final installment in March 2006; we have received a one-year no-cost extension (through 2007) to spend that money. She reported that FMCS grant monies are 90% reimbursements for expenses made in conjunction with the Airline Industry Council project and that project coordinator Tom Kochan had been able to get an extension on that grant as well to enable them to finish their project. Pete Feuille reviewed the projected year-end for 2005 and budget for 2006 noting that in 2006, meeting revenues and expenses would be considerably lower because a National Policy Forum is not be held in years when the FMCS held their National Labor-Management Conference. He also noted increased amounts set aside for fundraising activities in the new budget. The budget was approved for 2006. Wells also reported on membership statistics noting that 1) Dues for 2006 memberships went up $10 to $105 for a regular membership, 2) there was an increase in membership renewal rate to over 90%, and 3) While we are still gaining a net number of members, we are very close to reaching positive growth. We had 256 new members in 2005, most since 1999. Finance and Membership Committee—Chair Paula Voos pointed out that membership dues revenue presently does not cover organizational overhead and commented that we would need a lot more members for that to be the case. She emphasized we must increase membership fees and asked all board members to use networking and email to contact their colleagues who aren’t members and invite them to join. She emphasized we needed to look at increasing revenue in areas other than membership. She also commented that the committee wants not only to be an active committee, but also a strategic working committee. Voos reported the committee thinks it is important to increase dues $5 every year rather than $10 every two years. She offered a motion that student dues remain constant at $25 per year but that regular dues should go up $5 in 2007 and in 2008. Other dues categories, like family, emeritus, and library subscriptions could go up as deemed appropriate by the director and standing presidents. Lavonne Ritter seconded and the motion was passed unanimously. Voos discussed that not only must we keep a steady stream of income coming in but we should be prudent in the use of our resources. She said the Committee had discussed the publication of the 2006 Membership Directory with the Editorial Committee and put forth a motion: Rather than mailing all members a printed copy of the 2006 directory for free, to offer the 2006 printed directory at a minimal fee to members, thereby making use of

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a smaller print run. Our practice would be to send only to library subscribers and new members as they sign up. In conjunction with this, the online membership directory at the LERA website would be made even easier for members to access and use. Cutcher-Gershenfeld seconded and the motion was unanimously passed. Voos reported the committee was also looking into ways to make the industry councils self-sustaining, especially when the Sloan grant runs out. NCAC Committee—Lavonne Ritter, NCAC Chair, reported that six members of the NCAC with expiring terms had agreed to stay on the committee for 3 more years. She introduced Bill Canak as the new NCAC chair; his term begins in January 2006 and runs through the 2009 Annual Meeting. She reported that chapter liaisons (from NCAC) will contact chapters that are delinquent with dues. Editorial Committee—Adrienne Eaton, Editor in Chief, reported that the committee is brainstorming ideas for the 2008 and 2009 Research Volumes, the committee will meet by email in 3 months to determine ’08 volume and will have a proposal to the Board in August. She also reminded the Board that Perspectives on Work has an online version published at the LERA website in April and September and that back issues of the annual proceedings, Perspectives, LERA newsletters and the member directory were also online in pdf form. FMCS National Labor Management Conference—Joel Cutcher-Gershenfeld reported that the Industry Councils will be submitting proposals for this meeting and he will be working with them to organize their workshops for the August 2006 program in Chicago. LERA will once again be co-sponsoring the NLMC. Program Committee 59th Annual Meeting—David B. Lipsky, president elect and program chair, reported that Iain Gold and David Lewin have agreed to serve as vice co-chairs for the Program Committee for the 2007 program. The program will take place January 4-7, 2007, in Chicago, IL. The theme will be “Conflict and Cooperation in Employment Relations.” New Business Strategic Planning Discussion—President Sleigh started out with a comment that the function of the board is to provide guidance to the management on what to spend overhead dollars on with declining resources. He asked how, as a board, can we be more effective to get the Association back

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to growing members and building a presence for the group? There was a discussion on how best to plan to the agency’s future and the board agreed there needed to be a day set aside for such strategic planning in conjunction with the next Board meeting. Sleigh asked president elect Lipsky to put together a subcommittee and to get LERA organized for the board to hold a strategic planning retreat in August, one with structure and a facilitator, in order to produce an implementation plan for the Association over the next 3-5 years. Lipsky and the board agreed. Meeting Adjournment—President Sleigh thanked the Board and adjourned the meeting at 10:27 p.m.

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LERA General Membership Meeting and Awards Presentations Saturday, January 7, 2006, 6:00 p.m. Georgian Room, Boston Park Plaza Hotel Boston MA Call to Order—The meeting was called to order by LERA President Stephen R. Sleigh at 6:05 p.m. Welcome—President Sleigh welcomed the membership and acknowledged new members. Committee and Officer Reports Report of the Nominating Committee—Stephen Sleigh reported that the Executive Board has approved the Committees slate of nominees for the June 2007 elections. He thanked committee chair Janice Bellace and the Committee and shared with the membership that the 2007 President-Elect nominee is Anthony T. Oliver. Report of the Perspectives on Work Editorial Advisory Committee— Charles Whalen, editor of Perspectives on Work, gave a brief report on the plans for the Summer 2006 issue. The cover feature will be this year’s distinguished panel: Conflicts over Corporate Control: The Role of Labor and Employment Relations. Whalen invited members to contact him if they had ideas for features or articles. Report of the Finances/Membership Committee—Chair Paula Voos reported the board had recommended the budget for 2006 with a $40,000 deficit. To economize, the association has raised membership dues and initiated a development effort (to be discussed in detail by David Lipsky.) Dues were raised $10 for 2006 and will be raised $5 a year over the next two years. The Association now offers a 12-month rolling membership cycle enabling new members to receive benefits immediately upon joining. Voos reported dues revenue alone will not sustain the operating costs and that other action is needed. She challenged all members to participate in ‘personal contact’ membership building efforts.

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Report of the Development Committee—David Lipsky, Chair, announced the launch of a $1.5 million fund raising effort for the LERA. Almost $700,000 has been raised over the past 2 years through grants, organizational contributions, sponsorships and member donations through renewals. Steve Sleigh spearheaded the effort to secure over $50,000 in donations for the 2005 National Policy Forum. There is $800,000 left to raise in the next 3 years. The next phase will be contacting potential donors and to continue to solicit organizations. The Foundations Committee, chaired by Marlene Heyser is developing a strategy to secure grants. The LERA has a $400,000 operational budget with $200,000 of that budget coming from dues and the remaining made up from other revenue streams. We run an approximate structural deficit of $50,000 per year without grants. Lipsky indicated some programs may be revamped or cut if we cannot make up this deficit. We need members to help by 1) giving money, 2) providing contact names for donors, and 3) sharing ideas about how we can achieve our goal. Pledging and planned giving are options. This is an exciting opportunity to ensure we can keep this organization going. Report of the Industry Councils Coordinating Committee—Joel Cutcher-Gershenfeld reported that 1,000 LERA members have indicated interest in industry councils and seven chartered councils now exist—Aerospace, Airline, Automobile, Construction, Health Care, Public Sector-Federal, and Utilities. Through the Industry Council initiative, we are taking the charge from the Sloan Foundation to make a difference in Industrial relations on a national level. Each council is taking on important issues. LERA members should join and participate in an industry council to make a difference. Report of the Editorial Committee Report—Adrienne Eaton, editor in chief and chair, reported the 2006 Research Volume is being edited by David Lewin and will be titled, “Contemporary Issues in Employment Relations. It is a review of research in the field and the volume is in editorial development. The 2007 Volume with will be co-edited by Teresa Ghilarducci and Christian Weller and entitled: Employee Pensions and Labor Employment Relations. The committee is working on a proposal for 2008.

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LERA Awards Presentations Best Dissertation Award Co-Winners—Bruce Kaufman, Chair of the Dissertation Awards Committee presented the award to co-winners: Dan Zuberi, University of British Columbia who received his degree from Princeton University with his thesis, “Differences Matter: The Impact of Social Policy on the Working Poor in Canada and the United States” (Zuberi not present) and Danielle van Jaarsveld, also of University of British Columbia who received her degree from Cornell University with her thesis, “Boom & Bust: An Analysis of Information Technology Work Patterns.” Honorable Mentions included Mark Anner, Penn State University with his degree from Cornell University and Brenda Sun, London School of Economics John T. Dunlop Outstanding Scholar Awards Presentation—Morris Kleiner, LERA Awards Committee Chair presented two awards. For outstanding research addressing an IR/HR problem of national significance, David H. Autor, MIT won the award. For exceptional contributions to international and comparative labor and employment research, Rafael Gomez of the London School of Economics won the award. Susan C. Eaton Outstanding Scholar-Practitioner Award Presentation— Lois Gray of Cornell University was asked to present the award to this year’s winner. In recognition of outstanding research and practice emphasizing the value of bringing together the academic and practitioner communities in our field, Christian Weller of the Center for American Progress was given the award. Susan C. Eaton Scholar-Practitioner Research Grant—Awards chair Eileen Appelbaum, recognized co-winners: Patrice Mareschal of Rutgers University and Carol Zabin of the University of California at Berkeley (Zabin not present). A grant of $3,000 was shared by the researchers. Achievement Award in Education Presentation—Education Committee member Janet Conti, presented an achievement award in Education to Paul Cole, American Labor Studies Center. LERA Chapter Awards—Lavonne Ritter, Chair of the National Chapter Advisory Committee presented the following Chapter awards: The Chapter Star Award was presented to the Atlanta Chapter—Bruce Kaufman of the Atlanta Chapter accepted. Outstanding Chapter Awards were given to the Gateway LERA Chapter from St Louis with Jerry Parker of the Gateway Chapter accepting, and the

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Long Island NY LERA Chapter with Richard Roth of the Long Island Chapter accepting. Business Meeting Continuation Report of the Chapter Advisory Committee—Lavonne Ritter, NCAC Chair thanked the chapters and the committee and reported she was completing her term as chair. She introduced Bill Canak as the new NCAC Chair. Announcement of the Dates of Next Meetings—Stephen R. Sleigh announced the dates of our next meeting at the National Labor Management Conference August 16-18, 2006 at the Chicago Hyatt Regency Hotel. The theme for the meeting will be Confronting Changing Times: Paths to Partnership and LERA members are encouraged to submit workshop proposals to FMCS by January 20. Please visit the LERA website and watch for your LERA Newsletter in March for details on speakers, registration. LERA’s 59th Annual Meeting will be held in Chicago January 4-7, 2006. There is currently a call out for session proposals for the next Annual Meeting. David Lipsky is the Chair and the meeting theme is “Conflict and Cooperation in Employment Relations.” Members, interest sections, industry councils are encouraged to submit proposals for sessions. The deadline for proposals is January 20, 2006. Both symposium and workshop proposals are encouraged. Request for New Business from the Floor—President Sleigh recognized LERA secretary/treasurer Peter Feuille, who formally thanked the LERA National staff for their hard work, noting the quality of the new employees and the work of director Paula Wells. He invited participants to attend the Joint Universities Reception, held immediately following the General Membership Meeting. Concluding Remarks—Stephen R. Sleigh thanked the association for the opportunity to serve as the president for the past year. As ceremony, he turned the meeting over to the 2007 LERA President David Lipsky, who adjourned the meeting. Meeting adjournment—President Elect Lipsky adjourned the meeting at 7:01 p.m.

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ALPHABETICAL LIST OF AUTHORS Adams, Roy . . . . . . . . . . . . . . . . .184 Arnold, Edwin . . . . . . . . . . . . . . 240 Babson, Marshall . . . . . . . . . . . . 113 Bain, Trevor . . . . . . . . . . . . . . . . . 58 Bamber, Gregory . . . . . . . . . . 77, 97 Beaumont, Philip B. . . . . . . . . . . 86 Bird, Marian . . . . . . . . . . . . . . . . 97 Bodah, Matthew . . . . . . . . . . . . 239 Buchele, Robert . . . . . . . . . . . . 174 Chang, Chyi-Herng . . . . . . . . 58, 65 Chi, Wei . . . . . . . . . . . . . . . . . . . . 44 da Costa, Isabel . . . . . . . . . . . . 105 Freeman, Richard . . . . . . . . 44, 125 Feuille, Peter . . . . . . . . . . . . . . . 223 Freidman, Sheldon . . . . . . . . . . 190 Geist, Eric . . . . . . . . . . . . . . . . . . 52 Hoffer Gittell, Jody . . . . . . . . . . . 94 Gould, William . . . . . . . . . . . . . 150 Harvey, Geraint . . . . . . . . . . . . . . 86 Hermes, Sharon . . . . . . . . . . . . . . 8 Hiatt, Jon . . . . . . . . . . . . . . . . . . 156 Hirsch, Barry . . . . . . . . . . . . . . . 133 Jeffrey Hirsch . . . . . . . . . . . . . . 133 Hunter, Laurence C. . . . . . . . . . . 86 Brown Johnson, Nancy . . . . . . . . 69 Kleiner, Morris . . . . . . . . . . . . . . 44 Kochan, Thomas . . . . . . . . . 94, 120 Lansbury, Russell . . . . . . . . . 77, 97 Lawson, Daniel . . . . . . . . . . . . . . 18

LeRoy, Michael . . . . . . . . . . . . . 223 Mitchell, Daniel J.B. . . . . . . . . . 160 Massa-Wirth, Heiko . . . . . . . . . 206 Neuman, Kevin . . . . . . . . . . . . . 18 Ni, Huan . . . . . . . . . . . . . . . . . . 240 Pate, Judy . . . . . . . . . . . . . . . . . . . 86 Queneau, Herve . . . . . . . . . . . . 242 Rainthorpe, Kate . . . . . . . . . . . . . 77 Rehfeldt, Udo . . . . . . . . . . . . . . 105 Rodgers, Loren . . . . . . . . . . . . . 174 Scharf, Adrian . . . . . . . . . . . . . . 174 Schneider, Martin . . . . . . . . . . . 239 Scott, Clyde . . . . . . . . . . . . . . . . 240 Sen, Amit . . . . . . . . . . . . . . . . . . 242 Sleigh, Steven R. . . . . . . . . . . . . . 1 Tang, Zhi . . . . . . . . . . . . . . . . . . . 58 Turnbull, Peter . . . . . . . . . . . . . . 86 Turner, John . . . . . . . . . . . . . . . . . 28 Vogus, Timothy . . . . . . . . . . . . . 164 von Nordenflycht, Andrew . . . . 241 Voos, Paula . . . . . . . . . . . . . . . . . 143 Wallace, Joseph . . . . . . . . . . . . . 86 Weller, Christian . . . . . . . . . . . . . 32 Wenger, Jeffrey . . . . . . . . . . . . . . 32 Wright, Chris . . . . . . . . . . . . . . . . 97 Yazbeck, Claire . . . . . . . . . . . . . . 77 Zuberi, Daniyal . . . . . . . . . . . . . 243 Zullo, Roland . . . . . . . . . . . . . . . 193

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LERA CHAPTERS For contact information on a chapter in your area, visit the LERA website at www.lera.uiuc.edu. ALABAMA Alabama ALASKA Alaska (Anchorage) ARIZONA Arizona (Phoenix/Tuscon) CALIFORNIA Gold Rush (Oakland/San Jose) Inland Empire (Riverside/ San Bernardino) Northern (Sacramento) Orange County (Anaheim) San Diego San Francisco Southern (Los Angeles) COLORADO Rocky Mountain (Denver) CONNECTICUT Connecticut Valley (Hartford/New Britain) DISTRICT OF COLUMBIA Washington D.C. FLORIDA Central Florida (Orlando) West Central Florida (Tampa/Clearwater) GEORGIA Atlanta HAWAII Hawaii (Honolulu) ILLINOIS Chicago LIRA (University of Illinois) INDIANA Delaware County (Muncie) IOWA Iowa MARYLAND Maryland (Baltimore) MASSACHUSETTS Boston MICHIGAN Detroit Mid-Michigan (Lansing) MISSOURI Gateway (St. Louis) Greater Kansas City

NEVADA Southern (Las Vegas) NEW JERSEY New Jersey NEW YORK Capital District (Albany) Central New York (Syracuse) Hudson Valley Long Island New York City Western (Buffalo) OHIO Central (Columbus) Northeast (Cleveland) Southwestern (Dayton) OREGON Oregon (Portland) PENNSYLVANIA Central (Harrisburg) Northeast (Bethlehem) Philadelphia RHODE ISLAND Greater Rhode Island SOUTH CAROLINA / NORTH CAROLINA South Atlantic (Columbia/Charlotte) TENNESSEE Tennessee Employment Relations Research Association (TERRA) TEXAS Greater Houston North Texas (Dallas) WASHINGTON Northwest (Seattle) WISCONSIN Wisconsin (Milwaukee) CANADA British Columbia (Vancouver) Hamilton District (Ontario) FRANCE Paris

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LERA Organizational Memberships The LERA provides a unique forum where representatives of all stakeholders in the employment relationship and their views are welcome. We invite your organization to become a member of our prestigious, vibrant association. The Labor and Employment Relations Association (LERA) is the professional membership association and learned society of persons interested in the field of industrial relations. Formed more than fifty years ago, the LERA brings together representatives of labor, management, government, academics, advocates, and neutrals to share ideas and learn about new developments, issues, and practices in the field. Members share their knowledge and insights through LERA publications, meetings, and LERA listservs. In addition, the LERA provides a network of 50 chapters where professionals meet locally to discuss issues and share information. The purpose of the LERA is to encourage research and to foster discussion of issues affecting today’s workplace and workers. To that end, the LERA publishes an array of information, including research papers and commentary presented at Association meetings; the acclaimed practitioneroriented magazine, Perspectives on Work; a printed and online membership directory; quarterly newsletters; and an annual research volume. Recent research volumes include The Ethics of Human Resources and Industrial Relations, John Budd and James Scoville, editors: Theoretical Perspectives on Work and the Employment Relationship, Bruce E. Kaufman, editor; Going Public: The Role of Labor-Management Relations in Delivering Quality Government Services, Jonathan Brock and David Lipsky, editors; and Collective Bargaining in the Private Sector, Paul F. Clark, John T. Delaney, and Ann C. Frost, editors. Other member publications and services include online IR/HR degree programs listings, an online library, job announcements, calls and announcements, competitions and awards for students and practicing professionals, and much more. LERA is a non-profit, 501(c)(3) organization governed by an elected Executive Board comprised of representatives of the various constituencies within the Association. Organizational memberships are available on an annual or sustaining basis and include individual memberships for organization designees, a wealth of LERA research and information, and numerous professional opportunities. Organizational members receive all LERA publications and services. Your support and participation will help the Association continue its vital mission of shaping the workplace of the future. For more information, contact the LERA National Office, 504 East Armory Ave, Room 121, Champaign, IL 61820. Visit the LERA on the web at: www.LERA.uiuc.edu.

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The LERA gratefully acknowledges the continuing support of its Sustaining and Annual Organizational Members SUSTAINING MEMBERS Sustaining Members provide a one-time contribution of $5,000 to $10,000. AFL-CIO General Electric National Education Association

ANNUAL MEMBERS 2005-2006* Albert Shanker Institute American Federation of Teachers Bechtel Nevada, Labor Relations Department BlueCross & BlueShield Association Business School - Korea University Carlson School of Management - University of Minnesota Centre for Industrial Relations - Univ of Toronto Communications Workers of America Communications Workers of America, Local 1034 Dept for Professional Employees, AFL-CIO Dept of Industrial and Labor Relations - Indiana Univ of Pennsylvania Dept of Labor Studies & Industrial Relations - Penn State Univ Dept of Management - California State University-Fresno Dept of Professional Studies - Chapman University Erivan K. Haub School of Business - St. Joseph’s Univ Industrial Relations and Human Resource Management Program - LeMoyne College Inst of Conflict Resolution - Cornell University Inst of Human Resources and Industrial Relations - Loyola Univ of Chicago Inst of Labor & Industrial Relations - Univ of Illinois at Urbana-Champaign Integro Leadership Institute Intl Association of Machinists and Aerospace Workers Intl Brotherhood of Teamsters Las Vegas City Employees Association Las Vegas Metropolitan Police Department Lucent Technologies Master of Human Resources Program - Rollins College Merrimack Films Michelin North America National Labor College National Pilots Association Orange County Transportation Authority School of Industrial and Labor Relations - Cornell Univ School of Labor and Industrial Relations - Michigan State Univ School of Mgmt and Labor Relations - Rutgers Univ Sloan School of Mgmt - Massachusetts Inst of Technology Society for Human Resources Mgmt (SHERM) United Food and Commercial Workers, Local 1776 United Steelworkers of America Wilson Center for Public Research Working for America Inst, AFL-CIO *Annual organizational memberships are available at the following levels: Benefactor, $5,000 or more 6 employee members Supporter, $1,000 to $4,999 6 employee members Annual or Major University, $500 2 employee members Educational or Non-Profit, $250 2 employee members

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Labor and Employment Relations Association

Enrollment Form

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Please update the following information (Select only one) Academic: ❏ Business Administration ❏ Economics ❏ Human Resources ❏ Industrial Relations ❏ Labor Education ❏ Law ❏ Management ❏ Organizational Behavior ❏ Political Science ❏ Sociology ❏ Student ❏ University Administration ❏ Other (specify) ___________________ Professional: ❏ Arbitration/Mediation ❏ Consulting ❏ Government ❏ Legal Practice ❏ Management: Industrial/Labor Relations ❏ Management: Human Resources ❏ Management: Public Sector ❏ Management: Other ❏ Trade Association ❏ Union ❏ Other (specify) ___________________

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LERA Interest Sections Select up to two (2): ❏ Collective Bargaining ❏ Dispute Resolution ❏ International ❏ Labor and Employment Law ❏ Labor Economics/Markets ❏ Labor Unions/Labor Studies ❏ Globalization, Investment, and Trade ❏ Work and Employment Relations (HR) LERA Industry Councils Select up to two (2): ❏ Aerospace ❏ Airline ❏ Automobile ❏ Construction ❏ Health Care ❏ Hospitality ❏ Materials Processing ❏ Public Sector ❏ Public Sector - Federal ❏ Utilities ❏ Other (specify) ___________________

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