Topic 6: The Process of Collective Bargaining Both management and labor face pressure in collective bargaining.

Unions must deliver an attractive bargaining agreement or the contract wont be approved and/or the union leadership will be ousted. Management often feels pressure from shareholders to produce high profits. They also feel pressure from other employers to hold the line. As the bargaining begins, each side must establish a bargaining position. Various sources of information are used to establish such positions. First, the sides must consider the companys ability to pay. This can be established from income statements and forecasts based on trends. Labor and management might also consult specific geographic and industry data. This can be obtained from the Bureau of Labor Statistics (BLS). Since this data is neutral, collecting efforts can be joint. The two sides might also use national information to establish a bargaining position. National data might also come from the BLS, and it might concern unemployment rates or inflation as measured by the consumer price index (CPI). Bargaining is comprised of several stages. In the initial stage, demands are presented by both sides. These demands are usually extreme to gain leverage, and they are often packed with emotional content. Almost any ideas from rank-and-file union members are presented. In the middle stage, more serious discussions begin. During these discussions, counterproposals are offered and priorities start to emerge. Usually, the two sides start to converge, and estimates are clarified. In the final stage, flexibility is key and lower limits must be made clear. Some face-saving may occur. Of particular importance is that the deadline looms in the final stage. Certain procedures can be followed to enhance the probability of reaching an agreement. First, labor and management should exchange proposals well in advance of contract expiration; they should avoid 11th hour bargaining. If necessary, labor and management should use the FMCS. Finally, the two sides should conduct negotiations at the table, not in the press. Example: The initial stage of collective bargaining often contains emotionally-charged demands that are extreme. After initial demands were given in 1976, a UAW negotiator described Fords proposals as the most regressive offer in all of my years of bargaining. It is entirely unresponsive to any of our problems. I. Types of Bargaining Collective bargaining can take various forms. The traditional type of bargaining is referred to as distributive bargaining. This is where goals are in direct conflict. In this type of bargaining, labor and management have an adversarial relationship they engage in threats and bluffing. Often, the agreement is reached with one side being the winner and the other the loser. Another type of bargaining is integrative bargaining. This is where the two sides goals are common. With this type of bargaining, labor and management have a cooperative relationship. They have the attitude that both sides can be winners. Integrative bargaining tends to have a lower emotional content.

Intra-organizational bargaining is used to gain consensus within an organization (within labor or within management). It is used to align expectations and ease political pressures. An alternative to distributive bargaining is mutual gains bargaining. With mutual gains bargaining, interests are again in conflict, but labor and managements relationship is one of cooperation built on trust. Interests are presented instead of demands. Multi-tiered bargaining is bargaining between labor and management on various levels. It allows for concession bargaining at the local level and plant-level bargaining. This type of bargaining has been increasing under recent threats of plant closure. With multi-employer bargaining, employers form a coalition with which to bargain with labor. This type of bargaining is used to prevent pattern bargaining. However, such bargaining is becoming less prominent. Multi-employer bargaining tends to be most effective when employers have similar costs, are all unionized, and entry into the industry by new firms is difficult. Pattern bargaining or whipsawing is where a particular collective bargaining agreement is used as a pattern to which others must agree. It is becoming less prominent. Example of distributive bargaining: Eastern Airlines and Frank Lorenzo (Katz and Kochran, 1992, pp. 128-130. Example of intra-organizational bargaining: UAW, the Administration Caucus, and the New Directions Movement (Katz and Kochran, 1992, pp. 159). Example of multi-tiered bargaining: GMs plant in Fairfax, Kansas, along the Missouri River (1985). Local 31 agrees to many changes including reducing crew sizes and job classifications. This results in a new 1.05 billion dollar plant being built. This also saves almost 5,000 jobs (Fossum, 1999, p. 239). II. Relative Bargaining Power The bargaining power of labor and management can be expressed in relative terms: the power of (X) = [costs imposed on (Y)] / [costs incurred by (X)]. The costs imposed on each party refer to the costs of a work stoppage if an agreement is not reached. If a work stoppage would be particularly costly on one of the parties, then that party has relatively less bargaining power (since failure to reach an agreement would result in an impasse). Costs On Management The extent of the work stoppage: the cost of a work stoppage on management will increase with the extent of the work stoppage. The extent of the work stoppage will increase with the degree to which the production process is labor intensive. However, the availability of temporary or permanent replacement workers will limit the extent of a work stoppage. Also, receiving overtime work from

employees who do not honor the strike will also limit the extent of lost production. The timing of a work stoppage: if sales are seasonal and a work stoppage occurs during the peak selling season, then the cost of the work stoppage on management will be greater. The nature of the product: if the product cannot be inventoried, then the cost of a work stoppage will be greater on management. This is because companies with inventories can continue to make sales even if production has stopped. Service sector companies have much less ability to inventory their product than manufacturing companies. This is because many manufacturing companies produce a durable that will not spoil. In contrast, perishable goods can only be inventoried temporarily and services cannot be inventoried at all. The level of competition: the cost of a strike will tend to be greater in industries with more competition because consumers can substitute with the product from a competitor whose production has not been stopped by an impasse. This means a strike will result in lost sales. It may also result in lost consumer loyalty for a particular brand. If an industry has less competition (or is a monopoly), then a work stoppage may merely postpone consumer sales. That is, without close substitutes, consumers will either have to postpone their consumption or go without. The health of the general economy: when the economy is booming, a work stoppage has the potential to result in more lost sales. This is because consumers tend to buy more when the economy is healthy. Conversely, if the economy is in a recession, the potential for lost sales due to a work stoppage may be reduced.

Costs on Labor Lost wages: the costs of a work stoppage on labor will increase with the amount of wages lost. Certainly management does not have to pay wages to workers on strike. And, a strike could result in lost fringe benefits like health care. However, this can be mitigated by strike benefits from the union war chest, income from alternative employment, and public assistance such as unemployment compensation. Further, dual-earner families and families with liquid financial positions may be better able to withstand lost wages due to a work stoppage. Union divisiveness: strikes can impose costs on labor by increasing union divisiveness. Sometimes a strike unites workers, but other times, strikes cause dissension. Work stoppages are particularly likely to cause dissension when the workers do not universally agree to strike. Membership loss: the costs of a work stoppage on labor are increasing with membership loss. Membership loss can result from workers quitting the union (and quitting the strike) and returning to work, from striking workers being permanently replaced by scabs who are unsympathetic to the strike and union, and from workers finding alternative employment during the strike and never returning to their original job. In extreme cases, the workers could call for union de-certification.
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The Mining Industry In 1991, the mining industry employed 685,000 people, 150,000 of which were in coal, one of the larger mining industries. Coal production is concentrated in the east and is growing in the west. Labor relations are scarred by violence. The industry bargains with one national union. Miners often live in isolated areas among themselves. They develop a strong sense of their own identity, which engenders strong loyalty towards their union. Mines in the east are closer and clustered, producing a uniform quality of coal. Mines in the west are spread out and produce an inconsistent quality of coal. The west has strip mines and the east has underground smaller mines with shafts. Coal is used to produce 50% of the electric power in the United States. Power plants can be built near coal areas in the east. In the west, power plants must be built near a mine or else transportation costs will be large. There are spot market transactions in the east. Long run contracts must be signed in the west. Once the power plant is set up, the mine has leverage over the power plant. There are two different kinds of contracts. The first is a fixed-price contract, where coal prices are fixed in advance. However, this type of contract might spur the coal companies to reduce coal production costs because the price is fixed and profits come from what is left over after paying costs. Thus, coal quality might be sacrificed. Also, what should be done if costs are more than the fixed price? The second type of contract is a costs-plus contract. This is where coal prices are determined by adding an agreedupon to the cost of coal production. However, with costs-plus contracts, coal companies have no incentive to keep production costs low and to operate efficiently, though this approach might preserve coal quality. There are independent coal companies, many of which are small and mine about half of the coal in the United States. For them, coal is their primary business. Steel companies also mine coal to be used in steel production. They are concerned with the impact of the price of coal on the price of steel. Oil companies also mine coal as an investment, and they consequently want coal to generate a good return. The Bituminous Coal Operators Association (BCOA) represents the entire industry in collective bargaining (Centralized Bargaining Structure). Independent coal companies view labor as part of the production process. The steel companies press for low wages to get cheap coal for steel production to be competitive. Oil companies consider themselves to be enlightened in industrial relations and are concerned to be grouped in bargaining with the steel companies and independent operators. They seek good returns on their investment in coal. Recently, several large companies have tried to break out of BCOA to get their own wage settlements with labor, though the union resists the fragmentation of the national agreement. Though the 3 kinds of companies have divergent interests, they stick together so as not to be whipsawed by the union. The union is The United Mine Workers (UMW), which is an industrial union with both skilled and unskilled labor. The union includes miners as well as construction workers who are hired to build the mines. There are 60,000 active miners in UMW and 110,000 retired workers. UMW membership is confined to the coal industry. After 1900, there was poor leadership, excess production, cutthroat price competition, illegal wage cuts, and strikes. John L. Lewis was president of the union from 1920 to 1959. At its peak, UMW had 600,000 members. The 1950s saw a decline in coal mining.

Peaceful contract settlements were achieved and smooth labor-management relations were achieved. The union established stiff penalties for wildcat strikes, and endorsed mechanization as a way to protect the industry from cheaper alternative energy sources. Mechanization resulted in inefficient mines closing, many of which were small. In collective bargaining, a national contract is signed every 3 years. The contract is very complex. For example, health insurance and pension benefits were provided by a series of trust funds. Prior to 1974, all health and benefit funds were paid for by a single trust fund, which employers paid into for each ton of coal produced. Surface mines produce more coal per worker than do underground mines, yet employees of both types of mines benefit equally from health insurance and retirement benefits. Surface mine employers were paying substantially more to cover each employees benefits than underground miners. A dispute over this issue almost broke BCOA apart. An agreement was reached in 1974. The 1950 pension trust would provide pensions and health insurance for miners who retired prior to 1976. The 1950 trust fund would be funded from royalties from the past. Pensions and health insurance for current miners and miners who retired after 1976 would come from employer contributions for each hour a miner works. Over a period of years, the new trust fund would replace the old one. The late 1970s and early 1980s saw unemployment within the UMW and a growth of nonunion coal production. There was a long strike in 1977-1978. Then, a long agreement was signed in 1984. In 1989, UMW struck Pittston Coal Group, Inc., in a dispute over the companys plan to cut back on its health benefits to retired and disabled miners in an effort to remain competitive. A long strike ensued and the government eventually intervened and brought about a settlement, but the union was placed in a precarious position. The United Mine Workers represent 2,000 Pittston Coal Company miners in Kentucky, Virginia and West Virginia. On April 5, 1989, 1,400 Pittston miners went on strike, protesting Pittstons refusal to contribute to a multi-employer trust fund that paid the medical benefits of 6,000 Pittston retired miners. The trust fund had been negotiated by Bituminous Coal Operators Association (BCOA), which negotiated on behalf of 14 major coal companies. Because Pittston withdrew from BCOA in 1988, Pittston also terminated its contribution to the BCOA trust fund. Instead, Pittston implemented a benefit plan that called for worker copayment of medical bills. While Pittston miners were on strike, news reports indicated that other coal companies were helping Pittston fill orders during the strike. Due to these reports, wildcat strikes began in northern and eastern West Virginia idling 40,000 miners. A U.S. District Court ordered the striking miners to end the wildcat strikes because they were considered to be sympathy strikes with UMW members. Further, UMW incurred $63 million in fines levied by the courts. At last resort, Labor Secretary Elizabeth Dole appointed a mediator to resolve the dispute. On February 20, 1990, the dispute was settled whereby pre-strike health benefits were maintained. But, Pittston achieved one of its work-rule goals whereby there can be continuous around-the-clock shift rotations to keep mines open continually. Pittston was also allowed to subcontract coal transportation and mine repair work. By 1990, about 65 percent of all coal mined in the US was nonunion. Mines in the west are less likely to be unionized. In about 1990, some companies began a doublebreasted strategy, whereby a company has some union and some nonunion divisions. In

1989, the UMW won a contract provision giving laid-off UMW preference in the hiring of new workers in new mines.

The Construction Industry The construction industry employs between 4 and 5 million people. However, construction is a unique industry. Instead of producing a product at a plant that is to be shipped to customers, construction is produced at a site selected by the purchaser. The product is not really priced for sale but is instead contracted at a fixed price or on a costsincurred basis before completion. Construction has a large portion of skilled workers, and these workers identify with a particular craft or occupation, not with a particular employer. Often the work is dangerous or difficult, and employment is unstable. Construction projects may involve mixing employees from different employers (for example, if subcontracting occurs), as well as the mixing of members of different unions. The Employers. Construction firms may be very small to very large. General contractors are responsible for an entire project, but most do a substantial amount of subcontracting. Most firms operate in a particular locality or geographic region. Thus, the average construction company has fewer than 10 employees, and many of these employees are temporary. That is, they do not work for a single employer but move from employer to employer as the availability of work dictates. Employers often join associations, and these associations bargain with local unions. Examples include the Painting and Decorating Contractors Association, Plumbing, Heating, and Cooling Contractors National Association, National Roofing Contractors Association, International Association of Wall and Ceiling Contractors, Mechanical Constructors of America, and the Mason Contractors Association of America. Employers and unions in construction are typically placed in a much more intimate relationship than in other industries. Further, the NLRA allows construction unions to mandate union membership in order to get a job. This is called a closed shop union security agreement. Union construction workers typically get paid more than nonunion construction workers, but many argue that this is because union workers are typically more productive and more highly trained. Nonunion construction firms feel the advantages of being nonunion are (i) freedom from costly restrictive work practices, (ii) cheaper construction, and (iii) absence of strikes. Conversely, union firms feel the advantages of union construction include a greater degree of training provided by unions to workers and higher productivity. The Union. There are more than 20 different crafts in construction and many more specialties. Thus, there are 18 to 20 national construction unions that represent workers by craft (though many represent more than one craft). Examples include separate national craft unions for painters, plumbers, roofers, plasterers, pipefitters, and bricklayers. Collective Bargaining. It is difficult to make generalizations about collective bargaining in construction because of the considerable variation by craft and geographic area. There are 5000 to 7000 collective bargaining agreements, and most are negotiated locally between local unions and employer associations. They often cover 1 to 5 years with the average being about 18 months. Thus, 2000 to 3000 are negotiated each year. For example, pipeline constructors negotiate four separate national agreements (by trade within pipeline construction pipefitters, operating engineers, laborers, and teamsters) with the Pipeline Contractors Association. Conversely, industrial construction workers have local agreements between individual companies and local unions (where a project is

located) in addition to a national agreement between the workers and the employers association (the National Constructors Association).

Problem Set 6: The Process of Collective Bargaining 1. Grand Rapids City Coach Lines, Inc. is in the business of providing bus operators and maintenance employees to the Grand Rapids Area Transit Authority for the operation and maintenance of public transportation. Though Grand Rapids City Coach Lines, Inc. is a private business firm, it is highly dependent on city government expenditures on public transportation. Likewise, the city of Grand Rapids is dependent on Grand Rapids City Coach Lines, Inc. Grand Rapids Area Transit Authority spent half of its budget for bus operators and maintenance employees with Grand Rapids City Coach Lines, Inc in 1986. (Its hard to find other companies in the business of supplying bus operators). In 1986, a year of relative prosperity, the company had gross revenue of $500,000. The workers are represented by the bus operators and maintenance employees unit of the Amalgamated Transit Union, a large national union that is well endowed with a large war chest. This union has the ability to pay workers a strike stipend, a characteristic that has engendered loyalty towards the union. The year is 1987 and the Grand Rapids City Coach Lines, Inc and the Amalgamated Transit Union are re-negotiating their contract. a) List the 5 major factors that determine the costs to a company of a production disruption by its workers. b) List the 3 major costs a union and its workers bear when they exert their bargaining power and go out on strike. c) Define the bargaining power of union x relative to company y when those two are collectively bargaining with each other. d) Evaluate the bargaining power of Grand Rapids City Coach Lines, Inc. relative to the Amalgamated Transit Union. Use your answers to parts a and b in your answer. e) How would the contract negotiations between the Grand Rapids City Coach Lines, Inc. and the Amalgamated Transit Union differ if the two parties engaged in mutual gains bargaining instead of distributive bargaining? 2. The International Union of Operating Engineers represents construction workers. They bargain with construction companies like the Stief Company, which makes the concrete barriers found on bridges and along highways during construction projects. Some construction companies like Kasler Corporation, M.C.M Construction, and Kiewit Pacific Company have come together to form the Associated General Contractors of California, which has bargained as a unit for the companies. The Associated General Contractors of California has recently bargained with the International Union of Operating Engineers to achieve an industry-wide collective bargaining agreement called the Master Labor Agreement (MLS). a) Define Pattern bargaining. b) In what kind of bargaining are the construction companies in California engaging? Define this kind of bargaining and explain how this benefits the companies. Also, discuss whether this kind of bargaining is becoming more or less prevalent and why. c) Define Concessions bargaining. Suppose the economy dips into a recession and public revenue for highway construction evaporates to the point that some

construction companies are about to go out of business. How might the bargaining between the California construction companies and the workers union change? d) Suppose the Stief Company decides to re-negotiate its contract directly with its construction workers and their union, the International Union of Operating Engineers, (independently of the Associated General Contractors of California). Suppose also that at the time of the contract negotiations, the Stief Company is heavily involved in a number of construction projects, such as constructing permanent concrete walks on freeway bridges on Interstate 10 in Redlands, California and building steel forms for bridges along the 710 freeway in Los Angeles. Analyze the bargaining power of the Stief Company relative to the International Union of Operating Engineers using the limited information that is given. Who has the relatively stronger bargaining position? e) How are mutual gains bargaining and integrative bargaining different? 3. Samsonite makes hardside luggage and offers the widest range of contemporary luggage and travel accessories in the industry. Both company-owned factories and thirdparty suppliers manufacture Samsonite luggage. Company-owned facilities are devoted to producing hardside cases and more complex softside products. The companys global sourcing network also recruits third-party suppliers to manufacture luggage. Facilities in the far East, Eastern Europe and elsewhere are reliable suppliers of high-quality products of this type. Luggage production requires considerable investment in both leading-edge technology and superior craftsmanship. Hardside luggage is assembled from precisionmolded plastic components, using state-of-the-art technology. Such luggage includes suitcases, attache cases and beauty cases. Hardside cases are produced using either injection molding or vaccum forming. Both processes use molds created by computeraided design. In injection molding, high-pressure jets force pellets of polypropylene into a cool mold. Orders for Samsonite luggage are processed immediately and stock is reserved for these orders to enable fast shipment. Careful stock control gives Samsonite an important edge over the competition. Samsonite hires workers who are members of the AFL-CIO affiliated United Rubber, Cork, Linoleum and Plastic Workers of America, which is a large national union with vast resources. f) List the 5 major factors that determine the costs to a company of a production disruption by its workers. g) List the 3 major costs a union and its workers bear when they exert their bargaining power and go out on strike. h) Define the bargaining power of union x relative to company y when those two are collectively bargaining with each other. i) Evaluate the bargaining power of Samsonite relative to the United Rubber, Cork, Linoleum and Plastic Workers of America. Use your answers to parts a and b in your answer.

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Answer Key 6: The Process of Collective Bargaining Answer to question 1: a) The extent of the work stoppage; the timing of the work stoppage; the nature of the product being produced; the degree of competition in the market; and the state of the general economy. b) The loss of wages, the creation of union divisiveness and union membership loss. c) The definition and measurement of the bargaining power of party X relative to party Y can be stated in terms of relative costs. We can equate the bargaining power of X to the ratio of the costs it can impose on Y relative to the costs it incurs in imposing these costs on Y. The costs in this model of bargaining power are usually measured in the context of a work stoppage: Bargaining Power of X = (costs imposed on Y) / (costs incurred by X) d) Grand Rapids City Coach Lines, Inc. is in a relatively weak bargaining position because a strike would be relatively costly. First, a strike would probably shut down production completely for the Grand Rapids City Coach Lines, Inc. because bus drivers and maintenance workers represent the key input in the production process; without drivers and maintenance workers, production would completely stop. The Grand Rapids City Coach Lines, Inc. doesnt appear to have a seasonal pattern of sales, so the timing of a strike would be irrelevant. Second, the product is a service, and it cannot be inventoried. So, the Grand Rapids City Coach Lines, Inc. cant prepare for a strike by stockpiling inventory. Third, the general economy was experiencing prosperity during 1987, so a strike during boom times would be relatively more costly in terms of lost profits. However, this market is not competitive because there are few other companies supplying drivers and maintenance workers, so the city of Grand Rapids will have difficulty finding another company to provide the services that were provided by the Grand Rapids City Coach Lines, Inc. in the event of a strike. The lack of competition in this market would add to the Grand Rapids City Coach Lines, Inc.s bargaining power, but the first three factors weaken the Grand Rapids City Coach Lines, Inc.s position. The union is in a strong bargaining position because the Amalgamated Transit Union has a large war chest with which to pay strike stipends, reducing effect of lost wages. Further, 1987 was a time of prosperity, making it easier for striking workers to find alternate employment during a strike. Because the Amalgamated Transit Union has the loyalty of the rank-and-file, divisiveness loss of membership caused by a strike will be relatively low. e) Distributive bargaining occurs between parties when their goals are in direct conflict. It is the essence of the labor-management relationship, reflecting the basic adversarial nature of that relationship. The outcome is a win-lose one, so each party is intent on winning. Thus, there is a high emotional content in the tactics, such as threats and bluffing. Mutual gains

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bargaining is a cooperative joint problem solving approach to collective bargaining. It is based on trust, so that each party can bring issues of interest to the bargaining table knowing the other party will seek acceptable solutions. And substantial preparation for bargaining, in terms of fact-finding, can be a shared effort. Mutual gains bargaining is a cooperative effort to solve issues of concern to the parties, whereas traditional distributive bargaining is adversarial-based, with each party trying to convince the other that its position is correct. In mutual gains bargaining, issues of concern to each party are brought to the table for joint solution, and those solutions will be crafted to be acceptable to both parties. In traditional distributive bargaining, demands are brought to the table by each party, and they try to sell the other party on their proposal, or force it down the other partys throat, if they have the power to do so. MGB is based on trust and mutual understanding, whereas traditional collective bargaining is based on suspicion and confrontation. MGB implies and requires sharing of information, whereas traditional collective bargaining is characterized by hiding information or even the use of disinformation. They are polar opposites. Answer to question 2: a) Pattern bargaining occurs when a large national union negotiates a contract with one company in an industry and uses this as the model for contracts with the rest of the companies in that industry. This model may be copied by other unions and companies in other, similar industries. Unions benefit from pattern bargaining by getting weak companies to agree to generous contracts, and then asking for similar contracts from more powerful companies that would otherwise have more bargaining power. However, concessions bargaining changed this, with weaker companies in an industry getting a break (lower wages, etc). However, unions in steel, autos, rubber and other industries are trying to re-establish industry patterns. b) You might describe this kind of bargaining as distributive bargaining, but more specifically, its multi-party or multi-employer bargaining. Multiemployer bargaining is a coalition of employers in an industry-wide grouping that bargains with the union. Multi-employer bargaining coalitions were formed in competitive industries composed of relatively small firms that faced a large, powerful union. To better equate labor and management power, the companies bargained as one. This was especially true in industries that had some weaker companies that, bargaining alone, would have been easy pickings for the union who would then try to impose the contract as a model on all companies in the industry (pattern bargaining). However, as de-regulation and accelerating globalization increased competition in many industries, multi-employer bargaining associations broke down. Many companies went off on their own to wring concessions from the unions under threats of closedowns or mass layoffs. Other companies, to meet new competition, left the coalitions to try to get

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c)

d)

e)

better bargains on their own. Overall, the coalitions either disappeared or shrunk dramatically. Concessions bargaining is where weaker companies get a break from the union (lower wages) in order to prevent the company from going out of business. In a weak economy, with companies on the brink of bankruptcy, unions often grant concessions to companies to prevent those companies plants from closing. The employers bargaining unit might disband as the individual companies go out on their own and try to get concessions from the union under the threat that otherwise they will close their plants. Stief Companys bargaining position is weak relative to the union because a strike or work stoppage would impose severe costs on Stief. Since labor seems to be a major input in the construction of concrete barriers and bridge sidewalks, the extent of a strike would be large, probably stopping Stief Companys production completely. A strike would also be untimely: because the Stief Company is currently involved in numerous projects, this is a peak time of production, making a strike result in the loss of important sales. Concrete barriers could be inventoried, but their placement along construction sites would require labor, so sales probably cant continue using inventoried items during a strike. Because there appear to be competing construction companies in California, competing companies can capture and retain the portion of the market that was held by the Stief Company if Stief workers strike.. We arent given any information on the state of the economy or on possible dissention and membership loss the union could experience during a strike. However, with other construction companies in the area, striking workers could find similar work at another company, making a strike have less impact on lost wages. Integrative bargaining occurs between parties when their goals are in sync, focused on solving a problem of common concern. It is joint problem solving. The outcome will be a win-win one, with disagreement focusing on the best way to solve the problem. The ends sought are the same, the means may be viewed differently. Mutual gains bargaining (MGB) is a cooperative approach to negotiating, based on trust. Opening proposals from both sides are composed of issues of concern, not demand. MGB can then proceed to determine how best to meet these concerns. In sidestepping confrontation, the two parties can work to jointly solve issues, rather than being in opposition. In terms of joint problem solving, mutual gains bargaining resembles integrative bargaining. But while the latter approach tends to be used on shared problems, MGB is joint problem solving of each partys problems based on each partys interests.

Answer to question 3: a) The extent of the work stoppage; the timing of the work stoppage; the nature of the product being produced; the degree of competition in the market; and the state of the general economy.

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b) The loss of wages, the creation of union divisiveness and union membership loss. c) The definition and measurement of the bargaining power of party X relative to party Y can be stated in terms of relative costs. We can equate the bargaining power of X to the ratio of the costs it can impose on Y relative to the costs it incurs in imposing these costs on Y. The costs in this model of bargaining power are usually measured in the context of a work stoppage: Bargaining Power of X = (costs imposed on Y) / (costs incurred by X). d) Samsonite Corporation is in a relatively strong bargaining position because a strike would be relatively costless. First, a strike would not completely shut down production because workers are not the only input in the production process. The production of luggage appears to be fairly automated, using machines to do much of the work. Production would not completely stop if management operated the production process while the workers were on strike. Also, much of the luggage is produced by third-party plants in Asia and Eastern Europe, which would not be affected by a strike. So, a large measure of production would continue in the event of a strike. The Samsonite Corporation doesnt appear to have a seasonal pattern of sales, so the timing of a strike would be irrelevant. Second, the product is a durable good, and it can be inventoried. So, the Samsonite Corporation can prepare for a strike by stockpiling inventory. Samsonite Corporation apparently stocks luggage for fast shipping anyway. We dont know from the information given what the state of the economy is. Finally, this market is not competitive. Samsonite Corporation is the main producer of luggage in the world. So, consumers will have moderate difficulty finding another company to provide the luggage that was provided by Samsonite Corporation in the event of a strike. Since luggage is a durable good, consumers may wait for the strike to end before purchasing needed luggage. This will mitigate the effect of lost sales due to the work stoppage. These four factors strengthen Samsonite Corporations position. The United Rubber, Cork, Linoleum and Plastic Workers of America is a large national union, which probably has a large war chest with which to pay strike stipends, reducing effect of lost wages. This factor does detract from the Samsonite Corporations bargaining power. It is not clear whether there is divisiveness within the union.

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