Alternative methods of dispute resolution III

The final form of third-party intervention in labor negotiations is binding arbitration. Under a system of binding arbitration a neutral third party listens to both sides of the dispute and then issues a decision that the parties are committed to accept. Binding arbitration is the most intrusive form of third-party intervention because it allows an outsider to dictate the terms of the settlement.

There are several forms of binding arbitration. Interest arbitration is the use of arbitration to determine the terms and conditions of a new contract, while rights arbitration on the other hand is used to adjudicate grievances or disputes over the interpretation or application of the terms of an existing contract. The use of binding arbitration to settle grievance disputes is quite common and is one of the most distinctive features of collective bargaining. Virtually every collective bargaining agreement provides for a grievance process where workers can seek redress against an owner, company or management decisions or policies that are thought to violate the contract. Most grievance procedures involve a series of hearings culminating in binding arbitration if the dispute cannot be resolved at an earlier stage. The major impetus behind the widespread adoption of rights arbitration is the desire of both the employees and the employers to replace the strike with an alternative form of dispute resolution that is less disruptive to the day-to-day employment relationship and that imposes lower costs on both sides.

In the private sector interest arbitration is much rarer. When it comes to negotiation of a new contract, few unions or companies are willing to give up their right to strike or to place their futures in the hands of an outside arbitrator.

Interest arbitration is much more common in public sector bargaining primarily because many public sector workers do not have the right to strike and an alternative form of dispute resolution is necessary. The positive side of interest arbitration is that it permits bilateralism between the employees and employers in public sector negotiations without the threat of a strike. Interest arbitration also has several negative aspects. It is often alleged that interest arbitration has a chilling effect on the motivation of the employer and the employees to bargain and make concessions. Without the prospective costs of a strike neither side loses as much by being intransigent. Also if both sides anticipate that the arbitrator will split the difference between their respective positions, they have a strong incentive to exaggerate their final positions in order to win a more favorable settlement. Interest arbitration may also lead to what is known as a narcotic effect in bargaining. The narcotic effect refers to the possibility that once the bargainers have used arbitration they may automatically resort to arbitration in subsequent negotiations rather than reach a settlement on their own. The bargainers may for example find it easier to rely on a third party to resolve their dispute rather than undertake the hard work and political risks within their own organizations of fashioning an agreement. A final negative impact at least from the perspective of public officials and taxpayers of interest arbitration is that it seems to result in higher wages and benefits for workers relative to negotiated settlements.

These negative side effects of interest arbitration have led to the development of final offer arbitration. Under final offer arbitration the arbitrator chooses the final offer of one side or the other as the settlement. The hope is that the ‘all or nothing’ nature of the award will provide a strong incentive to both sides to moderate their positions and reach a settlement on their own - it also leaves a stronger residue of bad feelings between the employees and the management because it produces a clear winner and loser.

Alternative methods of dispute resolution II

The next higher level of third-party intervention in bargaining is fact-finding. Fact-finding is most frequently used in the public sector and often begins when mediation has failed to bring about a settlement in negotiations. Under fact finding procedures, a neutral third party enters the negotiations and prepares a report that outlines the conditions surrounding the dispute and the positions of the parties. Fact-finding often goes beyond mere determination of the facts, because in many instances the fact finder is also empowered to prepare a set of recommendations as a suggested basis for a settlement of the dispute.

Proponents of fact-finding argue that it facilitates a settlement of collective bargaining disputes in three ways. First, fact-finding can resolve important disagreements between TWU Local 100 and MTA over the truthfulness of the information with which each side buttresses its demands. Second, the fact-finder’s recommendations can serve as a focal point around which a settlement can be reached. Finally and perhaps most importantly, it argued that fact-finding subjects the bargainer’s demands to public scrutiny therefore inducing both sides to adopt more moderate positions than they would if the negotiations remained behind closed doors. Despite these claims in its favor, evidence suggests that at least in the public sector fact-finding has declined in its effectiveness as a means of dispute resolution. The major reason seems to be that fact-finding does not, contrary to its proponents’ claims, arouse enough public pressure to move the parties to a settlement.

Alternative methods of dispute resolution I

Mediation is the most common form of third-party intervention in collective bargaining and also the least intrusive. Mediation is a procedure in which a neutral party joins the negotiation to assist the TWU Local 100 and MTA in reaching an agreement. The mediator has no power to impose a settlement on the parties. Rather the mediator facilitates the bargaining process by serving as a go-between in the negotiations.

The central purpose of the mediator is to help the parties reach agreement since the mediator cannot impose sanctions or costs on the negotiators. The major influence the mediator can have on the speed with which an agreement is reached is by improving the flow of communication between the bargainers and suggesting possible areas of compromise. Mediation will usually be more effective in some types of disputes than others. For example in a labor negotiation where one party has boxed itself into a ‘must strike’ position through inexperienced or clumsy bargaining a skillful mediator can suggest a compromise that allows an effective face saving retreat. Another important service the mediation can perform is facilitating concession. As noted earlier each negotiator must be careful not to convey weakness to the other side by ‘coming clean’ too soon. A mediator can therefore suggest x as a point of settlement when neither parties would have dared to put it on the table themselves.

In other disputes/situations mediation may be relatively ineffective in bringing about settlement. This is particularly true when matters of principle are involved or when the costs of disagreement are too low to induce the parties to compromise. 

Bargaining process

Unfortunately the nature of the bargaining process is such that it is quite difficult to construct models that are realistic or analytical, the reason is because of the strategic interaction that takes place between the bargainers. Strategy interaction arises from the interdependency between the wage demands of TWU Local 100 and the MTA. 

One issue rises here which is the MTA’s wage offer, can we assume that it would not influence our demand? Which then causes the MTA to modify its offer, which may cause a further change in our position and so on. However we know what we had previously which can be used as a bench mark.

Lets take a single approach of the TWU Local 100 - MTA bargaining in order to see what reaction functions for the MTA and the TWU Local 100. This reaction functions are a pair of mathematical equations that predicts the wage demand of each bargainers over the x rounds of the negotiations.

Lets assume the equation contains two major parts - an objective function which states what it is that the bargainers are trying to maximize and a learning function which states how the bargainers alter their wage demands given what they have learned from their opponent’s most recent bargaining move. In many fields whether in automobile, real estate or even some kind of service always one bargains to what he or she feels comfortable with. If you are an automobile purchaser you would prefer to purchase that automobile as cheaply as possible while the dealer wants to maximize his profits. These equations are solved to yield the predicted time path of the bargaining demands of the TWU Local 100 and the MTA and the wage rate that the two sides will eventually agree on.

Questions - 1. Occupations A and B are identical except occupation B requires people to work at night. Assume that some people prefer night jobs, but that others do not. Will the wage in occupation B be higher, lower, or equal to that in A? 2. Consider the following statement: ‘As long as even one person dies from an assault incident there is not enough safety at the workplace.’ Evaluate this statement from an economic point of view. Critics charge that human life cannot be assigned a dollar value and benefits of additional safety cannot and should not be balanced against costs as advocated by economists. What do you think about this argument? 3. Only 2 percent of airline pilots are women and only 2 percent of dental hygienists are men. What reason can you give to account for this pattern?

Free rider

Many working conditions are what economists call public goods. A public good is some product or service that many people can consume together without reducing the total amount of it. A second feature of a public good is that it is difficult or impossible to deny people who have not helped to pay for it from consuming it. The classic example of a public good is national defense.

Many working conditions are also public goods. One example is the speed of the assembly line and a second is the installation of an improved ventilation system. The problem with public goods is that each individual has incentive to be a ‘free rider’ hoping  that someone else will pay for the good and that he or she can then enjoy it for free. 

Thus each worker may be concerned about safety in the plant yet none will actually speak up, hoping someone else will do so. While this behavior is non optimal from the group’s point of view, however from the perspective of each worker it is entirely rational since he or she would bear the cost of possible management retribution or displeasure while everyone else would reap the gain. As a result a system of individual bargaining may produce less than optimal working conditions. In TWU Local 100 who are the ‘free riders’?

Questions - 1. Unionization among nurses and school teachers increased substantially in the 1970s. Among bank employees on the other hand unions made few inroads - can you explain what factors might account for this difference? 2. What do you think are the growth prospects for labor unions in the next 10 years? 3. In a number of respects the Teamsters union has a poor public image. Each year, however more workers vote to join the Teamsters than any other union - do you have an explanation for this phenomenon? 

Who bargains with whom

The structure of bargaining is important because it plays a pivotal role in determining the relative bargaining power of the employer against the union in the negotiation process. 

There are two dimensions of bargaining structure, the first dimension is the MTA as the employer unit is defined as the plant, firm, or group of firms covered by a specific collective bargaining contract. The smallest or most decentralized form of the employer unit is a single plant/single employer bargaining. The chemical and petroleum industries typify this form of bargaining structure. DuPont, for example has several dozen branch plants throughout the country, only a minority of which are unionized. In this situation the management of each unionized plant bargains separately with its union and signs a separate collective bargaining agreement that applies only to that plant.

The second type of employer unit is multi plant, single employer bargaining. The automobile industry is the classic illustration of this form of bargaining structure. General Motors Corporation, for example has over 120 separate plants or facilities nearly all of which have been organized by the United Automobile Workers. Rather than bargain on a plant by plant basis, the union and the company have centralized the bargaining at higher levels of authority in the union and the company. With this form of bargaining one master agreement is negotiated that covers all the organized plants of the company.

The third type of bargaining structure on the employer side is multi employer bargaining. Classic examples are the coal and construction industries. Multi employer bargaining usually occurs in industries where numerous small firms have been organized by one or more unions. To increase their bargaining power and prevent the union from playing one employer against another, these firms form employer associations such as Bituminous Coal Operators Association (BCOA) that then represents all the employers as a group in the bargaining. The collective bargaining agreement in this case covers workers in different plants and among different employers. Questions - 1. We in the TWU Local 100 fit which model? 2. A common saying is ‘a union organizer’s best friend is bad management’ what does that mean? If a union succeeds in organizing a firm is that necessarily a sign of management failure?

Trams

Maybe the geniuses in the department of buses DOB could be creative by offering a plan of encompassing trams low floor design that allows loads of passengers including the disabled directly from the sidewalk in the near future. Such as those ‘passengers appreciate the ease of boarding and alighting from low-floor trams and moving about inside 100% low-floor trams. Passenger satisfaction with low-floor trams is high. Low-floor trams are now running in many cities around the world, including Milan, Dublin, Prague, Riga, Melbourne, Hiroshima, Houston, Vienna, Istanbul and Strasbourg’ - Wikipedia

Imagine that those trams go above surface and lets also assume that they start all the way from the tip of the Bronx to Brooklyn - if the DOB brass are imaginative by observing simple mathematical calculations of what we know then they would start making plans. We know that the population is increasing, we know the price of fuel is increasing, we know there will be tremendous increases in the demand for mass transportation, we know the elderly and disabled are not served by the DOS, and we also know that the buses are being suffocated by traffic which will be constant.

It is obvious that the tram being above surface should be in the plans of the DOB, however do not hold your breath.