Influence of Employee Voice on Pay Determination - Coursework Example

EMPLOYEE REWARD: INFLUENCE OF EMPLOYEE VOICE ON PAY DETERMINATION-A CRITICAL EVALUATION TABLE OF CONTENTS 1. The employee reward topic selected…………………………………….3 2. The titles of the three academic journals selected……………………….3 3. Critique of the three articles……………………………………………..3 4. Comparison of similarities and differences between the three articles….10 5. Conclusion……………………………………………………………….13 6. Reference List……………………………………………………………14 1) The employee reward topic selected for this paper is the ‘INFLUENCE OF EMPLOYEE VOICE ON PAY DETERMINATION’. 2) The following three academic journal articles were selected as relevant to the topic: (i) Marsden,David 2007 ‘Individual employee voice: renegotiation and performance management in public services’ International journal of human resource management, 18(7). pp . 1263-1278 also available at http://eprints.lse.ac.uk/3531/1/Individual_employee_voice(LSERO).pdf (ii) Blanchflower, David G 2007 ‘Workplace industrial relations in Britain 1980-2004 Industrial Relations Journal 38:4, 285-302 (iii) Hayter,Susan 2009 ‘A fair globalization: The role of collective bargaining in stemming the rising tide of inequality in earnings and income’ The International Journal of Labour Research’ 1(2) 27-42 3) Conduct a Critique of each article (Approximately 1800 words) Marsden(2007,p1) makes use of the concept of a ‘zone of acceptance’ as the core of his article ,in which, to put it in a nutshell, he suggests that employers need to periodically revise the roles and preferences of themselves and of employees as a necessary prerequisite for the process of adaptation through integrative bargaining, which deals with reaching in agreements to increase the size of the pie. The article discusses the ways in which collective employee voice can enable individual level integrative negotiations in the jurisdiction of non-codified elements of employment conditions that he calls ‘psychological contracts’, quoting Denise Rousseau(1995). The ‘zone of acceptance’ decides the range of tasks that employees are prepared to perform and their time periods. However, to keep up with changing production and market requirements, organizations need to revise the boundaries of this zone periodically, with employee consent, if the organization has to survive. This is accomplished by communication with the employees and revising their beliefs and expectations contained in the ‘psychological contract’. The relationship of employment contains both psychological and economic constituents. According to the mutual interests of the parties involved, its contractual form is chosen from among a range of alternative ways of organizing transactions. Its economic basis defines the individual voice as well as collective employee voice which form the basis for renegotiating and inducing changes in the boundaries of the ‘zone of acceptance’. Marssden(2007,p1) cites Ram et al(2001) to suggest that a negotiated order of varying degrees governs the workplace. Performance management in British public sector and private sector organisations combines employee goal-setting and appraisal to performance related determination of pay. Marsden (2007) seeks to extend the range of voice mechanisms employers choose and tries to find out the reasons as to why employers choose a particular voice mechanism over others by analyzing the individual-level renegotiation of the zone of acceptance as a form of integrative bargaining, whose quality decides its outcome. The author argues that the importance of collective voice lies in its ability to remove distributional elements away from the bargaining, thus enabling individual level focusing on “win-win’ aspects of integrative negotiation, which improves the design of systems and of procedural justice. Marsden (2007,p3) identifies the four stages of integrative bargaining as: identifying the problem, searching for alternative solutions, selecting the best alternative and commitment to implementation. The third stage is the most important stage since it has to consider the preferences of both the parties to the bargaining and hence it becomes a negotiation process. To illustrate his point, the author describes two examples of performance management case studies conducted in the British public services of which the first pertains to changing the zone of acceptance of teachers and the second study relates to changing the zone of acceptance of hospital staff in healthcare industry. The latter study involved harmonizing the pay system to support compatible zones of acceptance by scrapping special allowances in return for adjustments to basic pay and introducing a performance bonus based on objective criteria, which were chosen in such a way as to avoid any direct link between performance pay, goal-setting and appraisal. The employees were asked as to whether their review had been supportive, threatening, irrelevant or superficial. The new pay structure was finalized based on reviews from the survey conducted on the employees. The author goes on to discuss individual level instances of employee voice and its collective manifestation, which he feels can play a key role in the design of performance management systems in such a way that they will engage employees in large enough numbers so as to form a significant employee voice which will renegotiate the change in boundaries of the ‘zone of acceptance’. The author concludes by suggesting that employers will have to compensate for the perceptible decline of collective voice by increased use of channels of individual voice. Benchflower (2007, p287) reviews the effects of the five Workplace Industrial Relations Surveys (WIRS) conducted in Britain during 1980-2004 by analyzing their results in a systematic manner so as to study five areas of interest, namely, (i) the demise of collective IR, (ii) pay determination and union wage effects, (iii) pay settlements (iv) the climate of IR and (v) union effects on employment growth. Thus, the trends in the influence of bargaining, a form of employee voice, on pay determination, are covered in this paper along with the other issues as mentioned above. The WIRS was the first ever attempt to truly ‘map’ IR in Britain against all odds, including pessimist predictions doubting the suitability of such surveys to assess field data overcoming these oppositions and constraints by dynamically adapting the nature of survey instruments and survey design while retaining a core set of questions and along with an experimental panel built into the system. The WIRS of 2004 has interviewed non-union employees also. While analyzing factors influencing pay determination and union wage premium, Benchflower (2007,p289-290) points out the various trends as follows: i) The incidence of collective bargaining remained more or less constant during 1998-2004 in companies with at least 25 employees. ii) At least 4 in 10 companies used collective bargaining for pay determination of some of their workers. iii) The rate of decline in collective bargaining in the economy as a whole has slowed down since 1998 but on the contrary, has registered an increase in public sector companies, especially in the health sector. iv) Collective bargaining continued to have a significant impact in compressing pay at workplace level and in increasing the lowest pay. v) Collective bargaining was used to obtain fringe benefits premium Benchlower (2007,p290) argues that we can obtain detailed idea of the estimation of union wage premium from an analysis of the WIRS data and that by comparing union and non-union workplaces, Ceteris paribus estimates of union wage premium can be made more accurately. It was confirmed by such studies that monopolization was the source of union bargaining power. The size of the union premium is influenced by the union’s ability to monopolise the supply of labour to such an extent that weak union presence resulted in absence of premium. The decline of union wage premium in Britain is correlated to the demise of closed shop. The author has also quoted from his own earlier paper (Benchflower 2007,p290) to state that a higher premium was identified in non-manufacturing sector. He also quotes from Forth and Millward (2002) to point out that WERS 98 union premium was confined to employees in companies with high bargaining coverage synonymous with multiple union coverage. The author also points out that linked employee data was used in WERS to analyse union wage premia at both individual level and workplace level, in which correlation of bargaining power and union membership to linked employee data such as banded weekly earnings and continuous hours data have been studied. The author argues that union wage premium is in fact a measure of bargaining power rather than union membership, though the latter remains as the basis for the initiation of bargaining. Another point made by the author(2007,292) is that spillover effects of collective bargaining and union membership existed in unionized workplaces such as the presence of 4% wage premium correlated to the presence of recognized unions. The author also underlines the earlier observation made by Forth and Millward (2004) which identified existence of wage premium associated with ‘high involvement management’ (HIM) workplaces and suggests that in HIM workplaces tend be areas where employee voice is more influential with correspondingly higher wages. Hayter (2009) adds quite another dimension to the growing concern over the relationship between globalization and rise in earnings inequality of recent times by linking it to the rapid weakening of institutions which enabled collective bargaining till a few decades ago but which could not withstand the onslaught of globalization. She reviews afresh the various reasons ascribed to rising inequality as given in the academic literature and proposes that support for effective collective bargaining institutions is the need of the hour to ensure a fair globalization with less disparity in pay between the topmost and bottommost workers in the pay ladder. First of all, the author draws our attention to the global fall in share of national income spent on labour, the rise in inequality in earnings(measured by Gini coefficient) despite increase in average incomes and the increase in total wage inequality-defined as the difference in earnings of those at the 90th and 10th percentile of the overall wage distribution- in OECD countries (Hayter 2009,p28). She then ponders over the possible reasons for this development and identifies contributing factors such as technological change accompanying globalization with resultant substitution of labour with machines, revolution in information technology, capital attracting productivity gains at the cost of labour, the increasing advantage skilled workers have over unskilled workers and the increasing openness to trade and financial flows including foreign direct investment. The author suggests that the usually ascribed ‘skill versus trade’ reasoning given as the reason for rising inequality is not convincing, since large increases of low-wage workers were also registered during the same period as of these technological changes suggesting that the real reason for rising inequality in wages is the concurrent collapse of collective bargaining institutions (Hayter 2009,p30). The companies under globalization could leverage the capabilities for foreign direct investment and use the threats of relocation or outsourcing to foreign lands against workers, and thus increase their bargaining power over employees undermining the bargaining power of trade unions, resulting in decrease in share of national income towards labour as well as a rise in wage inequality. In the market of globalization, collective bargaining and wage-setting institutions thus face quite a new set of challenges. Moreover, several countries took policy decisions to weaken the bargaining power of trade unions dubbing market economy as the main objective of their economic policy, which was simultaneous with the assumption that collective bargaining institutions disrupt free flow of supply and hence were to be discouraged. This view led to deregulation and consequent weakening of collective wage-setting institutions in OECD countries such as Australia, New Zealand, UK and US and a consequent fall in both bargaining coverage and trade union membership, which in turn caused further increase in wage inequality since the late 1970s(Hayter,2009,p30-31). The author asserts that no conclusive evidence has been found to substantiate the assumptions of labour market performance impediments caused by collective bargaining institutions and that, on the contrary, all available evidence point out that collective wage-setting mechanisms such as trade union representation, multiemployer bargaining, or centralized collective bargaining structures produce more egalitarian pay structures characterized by equitable patterns of wealth distribution and enables a more compressed wage structure with more increase in wages at the bottom of the distribution scale. The author states that ‘ Diverse forms of evidence show that collective bargaining compresses wage structures and where it is more encompassing also reduces the overall dispersion of earnings’(Hayter 2009,p36). She concludes her article by opining that the adverse impact of globalization on collective bargaining mechanisms has not received the attention it deserves and advises imperative action towards restructuring and revamping collective bargaining institutions for pay determination with a broader national egalitarian agenda. 4) Compare similarities and differences between articles (Approximately 950 words) All the three articles has some similarities at the outset in that collective bargaining, which is one of the forms of employee voice has been discussed therein. According to Dundon et al (2004,p1154-55), employee voice can take the shape of individual dissatisfaction, collective organization, contribution to management decision-making or expressions of mutuality. In all the three papers considered in this paper, the form of employee voice has been collective bargaining, which is a sub-category of collective organization as termed by Dundon. Out of the three papers chosen, two, namely those of Blachflower (2007) and Hayter (2009) have more in common than the similarities between any other two papers taken together. This is because of the fact that the article of Marsden (2007) is primarily research oriented whereas the other two papers draw their data from pre-existing published papers. This has resulted not only in a lot of similarities in data unraveled but also similarities in conclusions as well between the papers of Blachflower( 2007) and Hayter (2009). For example, Blachflower (2007) talks about the demise of the collective IR and quotes Millward et al (2000: 234) ‘ The conservative government that came to power in 1979 confronted a system of collective employment relations that was dominant , though not universal…. That system of collective relations, based on the shared values of the legitimacy of representation by independent trade unions and of joint regulation, crumbled in the intervening eighteen years to such an extent that it no longer represents a dominant model’ The same development pertaining to weakening of the bargaining power of trade unions are described by Hayter(2009,p30) who, while describing the impact of globalization on the bargaining power of labour and collective wage-setting institutions, states thus: ‘As a result, trade unions were more likely to moderate wage demands which in turn contributed to decline in share of national income accruing to labour.’ Similarly, the issue of disappearing unions is discussed by both Blachflower( 2007) and Hayter (2009). For example, to quote the former: ‘One could nevertheless argue that by the turn of the century, the strongest form of unionisation – especially the closed loop- had all but disappeared in Britain, at least in the private sector.’ The above view is echoed by Hayter (2009, p31) who states : ‘ The result was the decentralization of collective bargaining to the enterprise level, the replacement in many instances of collective contracts with individual contracts, and a fall in both collective bargaining coverage and trade union membership in these countries’. The compressing of pay at workplace level also finds mention in both these articles. To quote Blachflower( 2007,p290): ‘Where collective bargaining occurred in 2004, it continued to have a substantial impact in compressing pay at workplace level and in reducing the incidence of low pay.’ Hayter (2009, p32-33), in an identical viewpoint states: ‘Unions typically act to increase wages at the bottom of the wage distribution, thus compressing the wage structure.’ The fall in trade unionism finds mention by Blachflower( 2007,p289) as: ‘The percentage of employees in private manufacturing covered by collective bargaining fell at twice the rate in 1998-2004 compared to 1990-98 and was identical to the rate of decline for 1984-90.’ The fall in trade unionism is commented upon by Hayter (2009, p31) thus: ‘A number of studies of the United States and the United Kingdom show that the decline in unionization accounted for a significant proportion of growth of wage inequality since the late 1970s.’ The fact that it is not able to conduct effective bargaining in the face of worker insecurity is commented upon by Blachflower( 2007,p290) thus: ‘For instance, Stewart (1987) found that the work-place level union recognition premium for skilled manual workers in WIRS80 was confined to those working in establishments with a closed shop.’ The same idea is presented by Hayter (2009, p30) when she says ‘This contributed to worker insecurity and has no doubt also undermined the bargaining power of trade unions’. Interestingly, the decline in collective voice, which may be synonymous with fall in trade unionism and bargaining power of collective wage-settling mechanisms discussed by Hayter (2009) and Blachflower( 2007) is echoed by Marsden,(2007, p14) when he proposes that the collective forms of voice have declined in their coverage in recent years. CONCLUSIONS: From a comparison of the above three papers, the idea that emerges is that unions are facing a tough time due to changes in economic conditions resulting from an increasingly market oriented world economy and financial investment trends fuelled by capital, the returns from which have a propensity to get concentrated in the hands of a few investors as compared to the earlier economy that existed last few decades ago. This has resulted in a weakening of employee voice as determined by collective representative voice which has lost its bargaining power, in favour of employers. However, it remains to be seen whether the final outcome of such decisive changes having repercussions on income distribution will be for common cause. In the meanwhile, the suggestion mooted by Hayter(2009) to refurbish collective wage-settling institutions needs to be taken seriously to obviate the possibility of the world drifting away from the concept of an egalitarian society. This is supported by Marsden,D(2007,p14) who suggests that ‘employers need to compensate for the decline in collective voice by increased use of channels of individual voice which can support this renegotiation’. REFERENCE LIST: Blanchflower, David G 2007 ‘Workplace industrial relation ns in Britain 1980-2004 Industrial Relations Journal 38:4, 285-302 Hayter,Susan 2009 ‘A fair globalization: The role of collective bargaining in stemming the rising tide of inequality in earnings and income’ The International Journal of Labour Research’ 1(2) 27-42 Marsden,David 2007 ‘Individual employee voice: renegotiation and performance management in public services’ International journal of human resource management, 18(7). pp . 1263-1278 also available at http://eprints.lse.ac.uk/3531/1/Individual_employee_voice(LSERO).pdf Rousseau,Denise 1995 Psychological contracts in organizations: understanding the written and unwritten agreements, Sage, London Ram, Monder, Edwards, Paul Gilman, Mark and Arrowsmith, James 2001 ‘The Dynamics of Informality: Employment relations in Small Firms and Effect of Regulatory Change’. Work, Employment and Society Forth, J and N. Millward (2002), ‘Union Effects on Pay Levels in Britain’, Labour Economics, 9,2002, 547-561 Forth, J and N. Millward (2004), ‘High Involvement Management and Pay in Britain’, Industrial Relations, 43, I, 98-119 Dundon,Tony,Wilkinson, Adrian John, Marchington, Mick Ackers, Peter 2004 ‘The Meanings and Purpose of Employee Voice’ International Journal of Human Resource Management, Vol 15(6) pp 1149-1170 Millward ,N.,A. Bryson and J .Forth 2000, All Change at Work? British employment relations 1980-1988 as Portrayed by the Workplace Industrial Relations Survey Series (London, Routledge) Read More