Table Of Content'TOION-MANAGEMENT NEGOTIATION OP WAGES
An Examination of Current Practice and Economic Doctrine
by
Kenneth M’^Thompson
A dissertation submitted in partial fulfillment of the
requirements for the degree of Doctor of Philosophy,
in the Department of Labor and Industrial
Management in the Graduate College of
the State University of Iowa
August 1951
ProQuest Number: 10907255
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FRMFAOE
Negotiation of wage a by union and management
representatives is the method of setting wages for most of
America's industrial workers* Its success as an efficient
and just method of determining wages affects everyone in
the American economy in their roles as consumers and as
citizens* whether union<*management negotiations lead to
industrial harmony and Increased productivity, break down
in strikes, or lead to higher product prices, they are
always of obvious concern to the general public*
Yet, unlike other areas of business operation,
little systematic Inquiry has been directed to how wages
get be what they arc in our organized industrial
society* It is hoped that this analysis of collective
negotiation of wages, as it actually operates in Industry
today, may aid in clarifying this evolving wage process
in which we all have a vital stake*
To labor and management officials in the midwest
tractor Industry who cooperated in this wage study, the
author Is equally indebted* Without their free sharing of
ideas and full confidence in the purpose of investigation,
this examination of wage negotiation on the operational
ii
level would have remained a paper dream*
The contributions to this project by occupants of
both sides of the collective bargaining table set a worthy
example of cooperation furthering industrial relations
research* The author is particularly Indebted to the
following men* Mr* George W# Torrence, labor relations
manager, Caterpillar Tractor Company, and Mr* Harry
Leonardt, International representative, subregional office,
United Auto Workers (0*1*0*), Peoria, Illinois* Mr* John II*
McAfee, supervisor of wage administration, International
Harvester Company, and Mr* Lawrence Carlstrom, Director of
the Harvester Council, United Auto Viforkers (C.I.O*),
Chicago, Illinois* Mr* E* H* Christiansen, director of
industrial relations, LaFlant-Ghoate Manufacturing Company,
and Mr* Charles Hobble, international representative,
United Farm Equipment Workers (U«E*), Cedar Rapids, Iowa*
and Mr* Ralph Clifford, industrial relations representa
tive, Deere and Company, and Mr* Sam Grogg, International
representative, subregional office. United Auto Workers
(€»I •(>•), Moline, Illinois*
For their continuing Interest in, and encourage
ment of this venture Into the no man's land of modern wag©
formation the writer Is grateful to Dr* Walter L* Daykln,
ill
Frofeaser of Labor Economies, and Dr* Clark Bloom, Assist*
ant Professor of Economics, of the State University of
Iowa#
The pattern of investigation followed was
developed with the aid of stimulating suggestions from both
union and management officials* Especially helpful were
Mr* Carl Dahl, President, John Deere Tractor Local 338,
DAW-CIO, Waterloo, Xowa| Mr* Charles Cooper, President,
Caterpillar Tractor Local 974, UAW*CXO, Peoria, Illinois;
and Mr* George W* Torrence and Mr* Cliff Hathway, Labor
Relations Department, Caterpillar Tractor Company*
The sole responsibility for the analysis pre*
seated of the wage negotiation process, the method of
investigation, and the conclusions drawn rests entirely
with the author* Whate\Ter positive contributions this new
approach to wage phenomena may provide, they are to be
credited largely to these cooperating management and union
leaders who invested time, ideas and faith in its devel~
opment*
Every effort has been made in the writing of this
study to respect the confidences of the participating
company and union officials* It would be grossly unjust to
impute any statement in the chapters which follow to a
Iv
specific Individual or organisation# Presentation of the
collective experiences and judgments of management
negotiators, and similarly, of union negotiators in a major
American industry has been the only objective served#
Let those few who might seek to find * evidence”
in this study to tag individual companies or union organ!*
sations beware* It Is for those members of American
industry, organised labor and the general public v/ho have
an interest in making collective negotiation a more
effective democratic economic practice that this study is
written and dedicated#
v
TABLE OF COHTKNTS
Chapter page
Fart One
WAGE DETERMINATION AT THE ACTION LEVEL
I The Know-Hot of Wages 2
Summary • U
II A Setting for Wage Hegotiation— The Tractor
Industry 12
The Nature of the Tractor Industry • * • . * 14
Heprotentative Companies of the Tractor
Industry* • * * » * * » . • • • ♦ . • « # 17
International Harvester Company . * * • IB
Deere and Company • • » • « • • # • « * 19
Caterpillar Tractor Company • « # * * • 20
LaFlant-Ghoate Manufacturing Company# • 21
Labor Unions of the Industry • «• + * • « • 21
The Market Place for Wage Determination* • * 22
The Management Negotiators . * .......... 24
The Union Negotiators * * • • • • » • ♦ 25
Multi-Plant Negotiation Variations* * • 27
The Formulation of wage Policy • * « • « * # 30
Managementts Wage Position........* • 30
Union Wage Policy • • « • * • * * » # « 32
Recent Hesuits of Tractor Industry
Negotiations* • « « # ........ . » * » « 33
The Uni on-M&nagenient Relationships * • • • # 35
Summary • # * * # * • • * • « # • 3B
Part Two
TRADITIONAL WAGE DOCTRINE
III Orthodox Theory Gives Some Answers#........... 42
IV Impractical Answers from Unreal Assumptions • « • 50
vi
Chapter page
Part Three
THE * NEW1 LABOR ECONOMICS
V Wage Theory Developments at wid~Cenbury * # • ♦ • 64
The Attack Upon Orthodox Wage Theory • * * • 67
Questioning of Traditional As stamp tions
and Conclusions # * * • • • * • • • « • # 69
Man and His Social Institutions# * • • # # # 73
New Approaches to Collective Bargaining# « • 76
An Approach to Tractor Industry
Negotiations# # • * • • . . * • • * . * * BO
VI Labor and Industry View Rage Doctrine # • • # • « 84
Wages and Employment * « * • * « . . . * * • 85
Capital Substitution for Labor# • . • • 89
Marginal productivity and Wages . * * * 91
The Union and Quantity of Labor Sold* # 93
Unions and Wage Reductions. . . * . * * 95
Sales* Output* and Wages » • * • # * » « * * 98
Output Decisions and Labor Costs* * * * 100
The Determinant of Output and Labor
Demand • « • • • • « . • * • # * # * 101
Employment and Output Nummary * * * * « 103
Real and Money wages * • * . * * * * • • * . 104
Union Wage Agreements and Real Income * 106
Labor Supply and Wages • • * * * * * * • * • 107
Nature of the Labor Supply Curve# • * * 110
Wage Rates in the Labor Market* . . * # 112
Summary— Negotiators and wage Doctrine * • * 115
VII Union Belief® About fThe Company* • * * • • * • • 120
Industry Profits and 2*iarkets * • • • * . . • 121
Sharing in Company Profits* * * * * * * 123
Company Reception of Wag© Demands * * • 125
The Market for Company Products * * * * 127
The Company9® Role in Negotiation* • « • • • 130
Company Preparation for Negotiations# . 132
Company Competition With the Union • • • • • 135
Allegiance of the Worker# * * # . . . * 135
International Union Assistance. * * . * 157
vii
Chapter page
Company Acceptance of the Union. • • • * * » 138
Hestriction of Union Strength * * • • • 140
Summary— Union Beliefs • • • # • • • * * . ♦ 142
VIII Management Examine s the Jnlon% Hole * • « * . . « 145
Union Wage Demands • 146
Union Demands and Intraplant Wage
Differentials . . . . . . . 149
The Union Impact on Productivity * 161
Technological Improvements and Labor. * 162
Labor Productivity Under Unionisation * 153
Management Initiative and the Union . • 164
Union Members and Company Employees. . . . . 167
Union Impact on Management Structure# • 158
Union Preparation for Negotiation . . . 159
The Union and Employe© Loyalty# . # . « 161
Comuni cat Ion with Employees. . . . . . 163
The Union and Management Rights. . . . . . . 164
The Offensive in Collective Negotiation 167
Summary— Management Beliefs. ......... 168
IX Negotiators Evaluate Their Wage Bargaining. • * « 171
Things More Important Than Wag© a . . . . . . 172
Determining a * Fair9 Wage#......... 175
Is Wage Determination Scientific7# . . . . . 177
Understanding The Other Party. . . . . . . . 180
Price Competition and Harmonious Bargaining# 183
Flexibility In Wage Negotiation# ♦ # ♦ . . ♦ 185
Beyond Bargaining to Cooperation? • • » . . 188
Summary— Collective Wage Negotiation • • • . 193
part Four
TOWARD AH EXPLANATION OB1 WAGES
X Experience of the Tractor Industry I Findings • . 196
Traditional Wage and Supply Concepts # • # . 197
The Effect of 'Wage Changes upon
Employment......... 197
vlii
Chapter page
The Effect of 'Wage Changes upon
the Employer Firm* * • • « « • * . . 198
The Purchasing Foiver of tf/agee • . « * * 199
The Effect of Labor Supply* • * . * * . 200
Characteristics of Industry Bargaining
Relationships 200
Union Beliefs About the Employer* • . . 200
Management Beliefs About the Union* . * 202
The Concepts of Collective Bargaining
theory*............................. . . 205
Fundamental Conclusions. . . . . . . . . . . 205
Theory of Employment in Cax>ltal Croods
Industries . .......... . . . . . 205
Theory of Collective Bargaining
Accommodation. . . . . . . . . . . . 207
XI Unresolved Wage Issues* * ......... 210
The fro per Level for 'Cage Determination. * * 211
What Is a responsible Labor Union?......... 215
The Labor Union as a Political Institution » 218
XII Maturity In Collective ’Wage negotiation . . . . * 222
Appendix: A Hote on Methodology* ......... 225
Bibliography......... 229
ix
