Industrial relations in transition: the paper industry example.

• Author: Getman, Julius G.
• Position: Symposium: Economic Competitiveness and the Law

CONTENTS

1. Introduction 1804 A. The Traditional System 1807 B. The Need for Change 1810 C. Two Alternative Strategies: Low Wages vs. High Performance 1812 D. The Paper Experience: A Summary 1814 II. The Relationship Between IP and the Paperworkers Union 1815 A. The Relationship Prior to 1986 1815 1. Bargaining History 1815 2. The Effort to Restructure Production 1817 B. The 1986 Negotiations 1820 1. The Demand for Concessions at the Androscoggin Mill 1820 2. Negotiations Company-Wide 1821 C. The Strikes of 1987-88 1824 1. Goals and Strategies 1824 2. Inspiring Union Solidarity 1826 3. Union Tactics: Applying Pressure to the Company 1828 a. The Picket Line 1828 b. Violence, Sabotage, and Other Unlawful Acts 1829 c. The Voting Pool 1830 d. The Corporate Campaign 1831 e. International Paper v. Town of Jay 1833 4. The Outcome of the Strike 1834 D. The Continuing Impact of the Strike on Productivity 1836 1. Relations Among Workers at the Androscoggin Mill 1836 2. Strikers' Attitudes Towards the Company 1839 3. Employee Work Behavior 1840 4. Replacement Workers' Attitudes Toward the Company 1842 5. Divisions Within the Union 1843 E. The Impact of the Strike on the Community 1844 III. Differing Approaches to Paper Industry Labor

   Relations Post-Strike 1846 A. Labor Relations at Other IP Mills After the Strike 1846 B. Labor Relations at Other Paper Companies 1849 1. Otis Specialty Paper 1849 2. Scott Paper Company 1855 3. Other Paper Companies 1862 IV. Conclusions 1863 A. The Paper Industry and Labor Relations Policy 1863 B. The Paper Industry and Economic Theory 1870 C. Jointness and the Law 1875 1. The Impact of Current Law 1875 2. Recommendations for Legal Reform 1877 a. The Elimination of the Mackay Doctrine 1877 b. Bargaining Limits 1882 c. The Pool and the Board 1886 d. The Division Between Labor and Management 1892 D. The Need for Further Study 1894 I. INTRODUCTION

   The United States is in the process of adjusting its industrial relations system to a more competitive, knowledge-based, global economy. The success with which the nation makes this adjustment will have serious implications for both personal and national economic welfare.

   This Article examines recent events in the unionized paper industry to highlight some of the legal and industrial relations factors that may retard the transition between the old and new industrial relations systems. In particular, this Article suggests that labor law and industrial relations policy reinforce management's growing bargaining advantage over labor, thereby frustrating the labor-management cooperation that is needed to promote high performance and competitiveness in the new knowledge-based economy.

   Legal structures may either facilitate or hamper the development of cooperative labor relations systems. We argue that the National Labor Relations Act (NLRA), as currently interpreted, hinders American industry from effectuating cooperative, high performance policies. A strong and independent labor movement is crucial to achieving high performance because such strength and independence allow labor to cooperate fully with management. Such labor-management cooperation (generally referred to herein as "jointness")(1) assumes an expanded role for unions in reducing the differences between labor and management. Yet the law as currently interpreted insists upon a limited role for unions and a sharp division between labor and management. Moreover, current law makes it easy for employers to resist unions and it invites some employers to use the process of collective bargaining either to eliminate incumbent unions or to render them ineffective. Finally, the law dealing with collective bargaining, from which joint labor-management efforts generally develop, is, as applied, overly technical and biased against unions. This bias is rarely expressed directly, but it manifests itself regularly in the Board and the courts' unthinking acceptance of the proposition that increasing management discretion will also increase economic efficiency.(2)

   We suggest specific changes in the NLRA and recommend a study looking to major statutory reform. Many of the changes in the law that we suggest could be achieved by reconsidering questionable decisions interpreting the NLRA. However, the problems to which we allude have become so ingrained in the Act, and are so supported by precedent, that we believe that only an amendment to the Act along the lines herein suggested would make the law an ally rather than an opponent of labor-management cooperation.

   We have chosen to deal with the issue of competitiveness not by breaking it down and analyzing each of its conceptual components, but by telling a complex story, utilizing the words and insights of employees. As told by the employees, this story is about a great many things other than unions and competitiveness. However, the issues that affect the lives and communities of these employees are the very ones to which policymakers and managers must pay attention if they wish to encourage high worker performance and high wages.

   The methodology of this Article will appear unusual and perhaps even confusing to readers familiar with traditional law, review writing.(3) Even labor law writing, which often concerns itself with the interests of employees, rarely includes the voice of employees. This Article draws on over two years of interviews and discussions with people in the paper industry. It includes many quotations from employees to describe the dynamics, both internal and institutional, that make a cooperative, high performance strategy effective.(4) Hearing the voices and listening to the experiences of those whose interests labor law and policy are intended to promote gives a unique and valuable perspective on labor law and labor relations. In particular, one can better understand the psychological dynamic that leads to high productivity in some circumstances but not in others.

   1. The Traditional System

      To understand the need for reform in the system of labor law and industrial relations, we must first identify the chief advantages of the prevailing system and then explain why these advantages have diminished over time. The industrial relations system that evolved in the United States after World War 11 was deeply rooted in the mass production economy which developed during the first half of this century. That economy derived its strength primarily from abundant natural resources, the mass production organization of work, and supportive institutions and policies. The mass production system allowed firms to amass wealth through scale economies, achieved through use of the assembly line and the associated authoritarian or "Tayloristic" organization of work.(5) Economic success was achieved mainly by spreading high fixed costs over large production runs of standardized products.

      The traditional collective bargaining model of industrial relations developed around these economic characteristics. This model remained in place from the late 1930's to the beginning of the 1980's. The traditional model emphasizes distinct roles for labor and management. Its main feature is an adversarial negotiation between labor and management which occurs roughly every three years, the outcome of which is significantly determined by the ability of the parties to apply and withstand economic pressure. Day-to-day relations are governed by a lengthy and carefully worded collective bargaining agreement, which provides high wages and significant fringe benefits for the employees, recognition of management's unilateral right to make basic decisions, clearly defined job functions, and the allocation of jobs and benefits on the basis of seniority. Disputes concerning the meaning and application of the agreement are resolved through a formal grievance system culminating in arbitration.(6)

      The traditional system had advantages for both labor and management. For the union, it provided a defined role, special recognition of key officers, and the ability to collect dues and fees easily. For employees (such as paper makers who worked at union mills) it provided a decent standard of living, security against arbitrary discharge, benefits based to a significant extent on seniority, and a voice in establishing working conditions. The union represented all employees and provided an opportunity for some employees to assume positions of leadership and responsibility. For management, the traditional model also had various advantages. It helped to ensure a stable, skilled workforce. It provided a system for resolving disputes, unquestioned control over key decisions and an efficient way of dealing with many employees simultaneously through their representatives.

      The traditional model also posed problems. One problem was price instability due to rivalry between oligopolies.(7) Mass production requires rival firms to acquire technology at high fixed costs, which firms then try to "spread" over as many items of output as possible. Such firms will continue to operate if they can cover variable costs and contribute anything to fixed costs (i.e., even if the firms cannot cover all costs). However, these fixed cost contributions are often sufficiently small that firms could operate for long periods of time without covering operating costs. Firms were thus encouraged to capture the market from the few competitors who had incurred similar fixed costs and thereby reduce the time needed to recover total costs. At first, rival firms tried to capture the market by competing on the basis of price. However, this created great price instability. Firms then discovered that it was more profitable to fix prices and to adjust to changing economic conditions by varying output and laying off workers. This strategy worked until the early 1970's and 1980's, when firms became vulnerable to foreign competitors who undercut their prices and had greater flexibility in responding to customers' needs.

      Another major...