UNIT CECONOMIC FOUNDATIONS AND FINANCING

5.03 Understand categories, advantages, and disadvantages of specialized and organized labor.

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Specialization of labor

The concentration of workers on specific individual tasks involved in the production process; making the best use of resources in the production of goods and services.

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Division of labor

The specialization of the functions and roles involved in production; a single worker or a few workers are each assigned a specific role.Important to mass productionClosely related to the standardization of production, the introduction and perfection of machinery, and the development of large-scale industryUnderlying principle of free trade as advocated by Adam Smith

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Division of labor (cont.)

Adam Smith’s classic example of division of labor is the pin-making process. Ten men, each performing one or more of the 18 operations necessary to make a pin, together produce 48,000 pins a day. Working separately, they could not make 200 a day.

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Specialization of labor by trade or profession

Specialization is based on the type of work performed in order to make a living.Most common type of specialization

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U.S. Department of Labor categories of trades/professions

Professional, technical, and managerialClerical and salesServiceAgricultural, fishery, forestry, and related ProcessingMachine tradeBench workStructural workMiscellaneous

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Specialization of labor by stage of production

Occurs when more than one stage of production is needed to convert a raw material into a finished product

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Specialization of labor by task

Occurs when jobs are so specialized that a worker does only one small part of the total jobAlso referred to as division of labor

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Advantages of specialization and division of labor

Simplified worker trainingIncreased employee interest and satisfactionIncreased production ratesIncreased level of skillIncreased quality of workEase of transferring to a similar job

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Disadvantages of specialization and division of labor

Increased interdependencyIncreased boredom on the jobDecreased pride in workDecreased morale and enthusiasm for the jobIncreased chance of obsolescence due to technological advancesHigh degree of specialization may cause difficulty transferring or obtaining another job.

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Ways of combating the disadvantages of specialization and division of labor

Job enlargementGive workers additional tasks at the same level of skill and responsibility in order to keep workers from getting bored.

Job rotationRotate employees periodically so that they are able to learn new job tasks and see how their old tasks relate to the new tasks.

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Ways of combating the disadvantages of specialization and

division of labor (cont.)

Job enrichmentAdd interest and satisfaction to a taskAllow workers to make more decisions, set their own pace, or supervise employees

Job satisfactionUse employee suggestionsFlexible or alternative work schedulesGive praise for work well doneCash incentivesContestsBonuses

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Labor unionobjectives and tactics

Labor union: A group of workers joined together for a common purpose.The major objective is to improve the terms and conditions under which employees work.

Increased wagesIncreased benefitsImproved working conditionsProtection of job securityFair treatment of members by management

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Labor unionobjectives and tactics (cont.)

Tactics used to achieve objectivesBargaining with management for favorable labor contractsRepresenting union members in disagreements with management regarding employment conditions and practices

Labor contract: An agreement that spells out conditions for wages, benefits, work hours, job security, working conditions, and grievance procedures.

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The organization of labor unions1. Industrial labor unions

- Comprised of workers within the same industry- Most members work in factories where

products such as cars, clothing, and steel are made.

- To become eligible to join an industrial union, new workers must successfully complete a probationary period and then become permanently employed by the company.

- Regular members are entitled to bid for positions within a company as positions become available.

- Promotion is based on seniority and qualifications.

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The organization of labor unions (cont.)

2. Craft/trade unions- Comprised of workers with a particular

skill- Membership is based on the degree of

skill and years of experience.• Apprentice• Journeyman• Master

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The organization of labor unions (cont.)

3. Considerations when deciding to join or not join a union

- The union’s accomplishments- The size of the workplace- The cost of union membership

4. Once a worker joins a union, he/she must abide by union rules and follow specific procedures for getting problems solved.

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Types of union representation

1. Closed shop- Employees must belong to a union before

they are hired.- Illegal under the Labor Management

Relations Act

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Types of union representation2. Union shop

- Employees must join the union as a condition of employment.

- Preferred by unions- Illegal in states with Right-to-work Laws

(NC)- Right-to-work Law: Law that gives

employees the right to decide for themselves whether or not to join or financially support a union.

- Workers employed in the railway or airline industries are not protected by a Right-to-work Law.

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Types of union representation (cont.)

3. Agency shop- All employees are required to pay union

dues, but do not have to join the union.- A union represents all employees

regardless of union membership.- Preferred by unions if union shops are

illegal- Dues may be donated to charity.- The first agency shop was established at

the Ford Motor Company plant in Ontario, Canada, in 1946.

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Types of union representation (cont.)

4. Open shop- Employees are not required to join the

union.- Preferred by management- Opposed by most unions- Required by law in Right-to-work states

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Significant issues confronting labor and management1. Wages

Number one issueUnions seek higher wages.Management seeks to reduce labor costs.

2. Job securitySeniority ratingsProtection from layoffsRules for discharging employeesGrievance proceduresDiscipline procedures

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Significant issues confronting labor and management (cont.)

3. Working hoursWorkers want a reduced work week.Flex time

4. Fringe benefitsPaid vacationsSick leavePension plansInsurance

5. Working conditionsSafetyPhysical surroundingsWorking conditions have a significant effect on morale.

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Significant issues confronting labor and management (cont.)

6. Union securityRecognition of union as official bargaining agentNegotiating power

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Labor negotiations

Collective bargaining: The negotiation process union officials and company representatives go through to determine the terms and working conditions for employees.

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Collective bargaining process

Prepare.Conduct bargaining sessions.

Marks the beginning of official negotiationsA mediator or arbitrator may be called in if an agreement cannot be reached.

Reach tentative agreement.Vote to ratify or to reject the contract. If contract is rejected, renegotiation is required.Settle the contract.

Signed by union and managementUsually lasts one to three years

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Union negotiation strategies

StrikesMembers stop working.May force management to meet demands

PicketingPositioning union members near company entrancesMembers carry signs and/or chant slogans.The goal is to publicize labor/management conflicts.

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Union negotiation strategies (cont.)

BoycottsUnion members try to get people not to buy a business’s products.May cause significant losses for the company

FeatherbeddingThe union requires more employees to be hired than are actually needed to complete the job.Union members may reduce their productivity level so much that the company may be forced to pay overtime or hire new employees.

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Management negotiation strategies

Primary goals of management when dealing with unions

Increasing worker productivity and control labor costsMaintaining control over decisions on how work is done and on how assignments are made to complete that work

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Management negotiation strategies (cont.)

Actions taken by management when negotiations are not successful

Lockout: Temporary work stoppage in which employees are not allowed to enter the business.Injunction: Court order that forbids workers to participate in acts such as pickets and strikes.Strikebreakers: New non-union workers hired by management to replace those on strike.

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The importance of the union-management relationship

Many businesses have never had a union strike, and a company thrives when managers and union workers are able to work closely together.When there is constant conflict between unions and management, everyone suffers.

Employees lose jobs.Production decreases.Businesses close.

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The importance of the union-management relationship (cont.)

Labor and management must work together to provide opportunities for education and retraining in order for employees and businesses to remain competitive.