Industrial Relations in the Global Economy Morley Gunderson and Anil Verma, University of Toronto Custom Essay

New Industrial relations issues have arisen with increased international trade and investment, and professors Morley Gunderson and Anil Verma see labor standards as the most pressing one. Three mechanisms govern the employment relationship:
market forces, employee representation, and laws and regulations. Market mechanisms rely on demand and supply to determine pay and labor allocation, ensuring efficient utilization of labor and production of items that consumers want. But markets have imperfections, and even perfectly functioning ones can lead to efficient outcomes, but not necessarily what society would consider fair.
Employee representation, which includes unions and other devices for employee voice in the workplace, mitigates market forces by providing a bargaining mechanism and/or assuring due process to employees. Some argue, however, that unions also reduce the managerial flexibility and organizational competitiveness needed for joint survival of employers and employees. Laws regulating the employment relationship are those governing collective bargaining, setting wages and hours, banning discrimination, fixing health and safety standards, and providing social insurance. By establishing a floor below which market transactions are not allowed to occur, labor regulations and legislation provide a safety net when the market mechanism creates disadvantages for workers.

Freer flow of
goods, capital, people, and ideas across borders has enhanced the market
mechanism role, with decisions being made on a global basis. Since labor
flexibility and adaptability enable employers to respond quickly to changing
circumstances, collective bargaining is put on the defensive. Unions have been
unable to attain any form of transnational collective bargaining and plummeting
membership in many countries means that they are less able to set national
standards. Domestic regulative initiatives also are inhibited by fear of
repelling investment.

Gunderson and
Verma point out that, from its foundation, IRC was interested in issues of
labor standards, worker voice and fair wages, recognizing that, while such
practices may not maximize profits in the short run, employers who promote good
labor standards can benefit in the long run from better relations, improved
productivity, and enhanced quality. There was another rationale for promoting
better labor policy—reducing competition among firms on the basis of lower
labor standards. Indeed, Mackenzie King set forth the “Law of Competing
Standards” (based on Gresham’s Law with respect to precious metals), that, left
to market forces, labor standards would decline to their lowest possible
denominator. He argued that progressive employers should undertake to stem this
slide because, in doing so, they would secure their firms’ and indeed
capitalism’s future.

Corporate
codes of conduct have been adopted among those firms that subcontract
production to locally owned and managed companies in developing countries, but
the issue of international labor standards continues to fester. The authors see
the International Labor Organization as the body best structured to deal with
global solutions to labor problems. The ILO follows a voluntary, cooperative
approach and rejects the use of trade sanctions against countries that do not
adopt its standards, because labor standards must reflect the ability of different
countries to afford them.They conclude that globalization has implications for
all the stakeholders in the employment relationship. Individual workers must
acquire the human capital (education and training) valued in the market and
gear skills towards flexibility and adaptability. Unions should concentrate on
those aspects of their role—providing voice, articulating employee preferences,
insuring due process—that do not imply large cost increases. Government policy
should emphasize adjustment assistance that facilitates labor allocation geared
to market changes, rather than income maintenance that encourages workers to
remain in declining sectors or regions.Employers should build employee
commitment and loyalty by providing workers with skills, decent wages according
to the standards of the nation, and a safety net, and they should make sure
that HR strategies are an integral part of the business strategy