Retelling the International Paper story.

• Author: Leslie, Douglas L.
• Position: Response to article by Julius G. Getman and F. Ray Marshall in this issue, p. 1803 - Symposium: Economic Competitiveness and the Law

1. INTRODUCTION

In Industrial Relations in Transition: The Paper Industry Example,(1) Jack Getman and Ray Marshall contend that employers should follow a high-performance, as opposed to a low-wage, strategy. They try to justify this contention by comparing the labor relations experience of International Paper (IP) with that of other paper industry firms, which have viable unions. In order to have a high-performance strategy, they argue, a firm must have a union with enough power to protect the worker. They claim that our labor laws and the courts that administer them are destroying, not promoting, unionization. They conclude that policymakers ought to change these labor laws--including, among others, the legal rule allowing firms to hire permanent replacements for striking workers.

Getman and Marshall begin with the story of IP. I will begin by retelling that story, omitting much of the detail, but retaining the gist of the facts in Getman and Marshall's account. I argue that the political agenda that permeates their article, as well as the methodology that they employ, undermines the credibility of their conclusions and the persuasiveness of their proposal for labor law reform.

2. THE STORY RETOLD

   In the 1980's, as a result of changing economic climates in the United States and abroad, and due to technical innovations, managers of IP began a program to lower labor costs and thereby make the company more profitable. An important step in this program was to persuade the union representing the IP workers to agree to adjust wages to reflect the changed conditions and to relax restrictive union work rules that prevented new technology from being used effectively.(2) IP managers sought to enlist employee support through joint manager-worker meetings and committees. But because this would lead to a reduced role for union leaders, and presumably a loss of esteem for them, the leaders persuaded workers that the company efforts were not well-intentioned.

   The union's reluctance to cooperate was illustrated by an incident that signalled to managers that it would take a major effort to put IP employment on the right track. Top-level managers decided that they could begin to improve productivity and profitability by conducting a study of how the workplace was, in fact, presently organized. Employees were asked to cooperate by writing training manuals that would describe precisely the components of their jobs. While managers could have brought in outsiders to observe what employees did, a better (cheaper) approach was to ask the employees themselves. Union leaders, however, directed the employees not to write the manuals, on the ground that keeping the details of the production processes secret from managers, if the workers could do so, would make future strikes more likely to succeed.

   Despite such union intransigence, IP managers made another effort to secure changes by enlisting employee cooperation, this time through collective bargaining. What managers wanted most was to eliminate work rules limiting the tasks a particular worker would do to those described in her narrow job classification. If a maintenance mechanic had no maintenance work to do, for example, these work rules prohibited assigning her temporary clean-up duties. The union rejected out of hand the "team concept" proposal, contending that it would create safety dangers. In fact, the union rejected the proposal because it might allow the plant to produce the same output with fewer workers. Fearing a union strike, IP managers prepared by contacting a firm known for its ability to secure replacements for strikers.

   IP strategized that it had to modernize the work force throughout the company's North American operations. The company's goals were clear. Managers intended to emerge from a strike, if it came, with increased authority to direct the work force, reduce the number of employees and lower labor costs. After failing to accomplish these things by enlisting the support of current workers and their union, managers determined to take the steps necessary to accomplish them without the union's consent. Urged by local union leaders to reject the company's proposed bargaining agreement, IP workers struck. It was a big mistake for the workers and for their union.

   Unions win strikes for a number of reasons. Sometimes they win strikes by employing secondary boycotts, acts of violence, or intimidation. They can win by getting government to exert pressure on managers. Unions can also successfully use publicity campaigns against managers of the struck company, their suppliers, and customers. But most importantly, a union can win a strike if the workers possess skills and knowledge that are specific to the firm or the industry, so that managers cannot replace them with newcomers, at least in the short run.(3) The IP strikers lacked these specific skills and it cost them their jobs.

   The paperworkers union in Getman and Marshall's case study did not succeed in enlisting effective support from government--in this case, from the town of Jay, Maine--when two antistrike replacement housing ordinances were struck down in court.(4) The union also failed to succeed in its publicity campaign. (The authors do not say why the union failed, only that Jay residents won't drink Coca-Cola.)(5) Jobs vacated by union members were filled by replacement workers. The union sought to bring pressure against the managers by extending the effect of the strike to other, unionized company locations. It did this by persuading local unions not to accept a bargaining agreement with IP until they all did. However, local union defections doomed this pooling arrangement. Union leaders decided to end the strike, announcing that union members would unconditionally return to work, but it was too late. Most strikers had been permanently replaced. Shortly thereafter, the union was decertified.

   Among the IP workers, there are winners and losers. The winners include replacement workers (and their families), who but for the strike would not have found employment at IP. They were willing to work under terms rejected by union members. The losers include strikers who could not find new employment that they found as satisfying as their jobs at IP.

   There continues to be animosity between strikers and replacements at IP. There always is where jobs are at stake. Whether the management ideas for improving employee productivity at IP will be successful remains to be seen. There is no data, and it may be too early to know. But even if labor productivity never improves at the Jay IP plant, IP managers still count the effort a success because of its effect companywide. Workers in other IP plants have seen what may happen if they are inflexible in the face of changed economic needs.

3. THE GETMAN AND MARSHALL APPROACH

   My retelling of the IP story is consistent with the account offered by Getman and Marshall. It puts a different spin on the events, however. Their article is in the tradition of an industrial relations economics that has now largely been replaced by microeconomic studies largely based on...