Labor Relations: Compare and contrast labor and management strategies using the four schools of thought - Essay Example

The basic principle underlying the neoclassical theory is that utility or the achievement of that desired state, is a function of level of goods or income. The neo classical model of labor and management strategy represents labor as a commodity like any other, therefore defines labor relations and management from the perspective that determining payments for labor and the quantity of work done is an exogenous process. (Bowles and Boyer, 1998). As clarified by Kaufman (1999), the neoclassical mode views the human aspects of labor as models of rational choice while the external environment is the market system or the economic environment, as conditioned by existing laws and regulations.

The rational choice model conditioning the human element as applied in the neoclassical theories of labor indicate that human labor is directed towards the goal of achieving the maximum utility which is defined as “happiness” and there may be an underlying pattern of preferences existing in individuals which is not significantly impacted upon by the opinions of others. (Mas Collell, Whinston and Green, 1995). Bowles and Boyer have pointed out two aspects that are lacking in the neoclassical theory (a) analysis of aggregate demand as put forth by Keynes and (b) analysis of wage setting labor discipline.

These authors out forth the view that aggregate demand and the distribution of income is a function of class levels and the resultant conflicts will play out based upon levels of employment and will thus impact upon aggregate demand as well as the bargaining power of workers,. Hence these are important aspects that cannot be ignored in labor management strategies, but which remain uncovered in the neoclassical theories. Moreover, as pointed out by Simon (1982:209-28), the premise that there is a more or less fixed pattern of preferences that will determine demand may not be strictly true.

Such a premise ignores the behavioral or human resource aspect of the equation, which