Labour Economics and Labor Relations Labour in Industrial Society: There was little discussion of labour problems in England

or France in 1750. Now, it is a major concern in both Countries. Union Organization and Wage disputes are lively political issues in most countries of Western Europe, Japan, Canada, Australia and US. These differences in the severity of labour problems are rooted in the structure of the economy. The proportion of the economically active population engaged in agriculture in the early fifties was 61 % in Egypt and Mexico, 69% in India & Burma, 76 % in Turkey and Thailand and 79% in Pakistan and the Belgian Congo. The remaining population was engaged in Trading, Handicraft and personal service etc. At some point in past, however, numerous countries of the world have experienced a sharp shift away from agriculture toward urban and industrial employments. This process of industrialization may be dated from about 1783-1802 for Great Britain, 1830-1860 for France, 1833-1860 for Belgium, 1843-1860 for Sweden, 1878-1900 for Japan, 1890-1914 for Russia, 1896-1914 for Canada, 1935 for Argentina, 1937 Turkey. Features of Industrialization: Appearance of new industries & Occupations: Most Obvious and dramatic is the growth of large-scale growth in Manufacturing, Construction, Rail Roading, Transportation, Public Utilities, government service and Profession employment has led to steady shrinkage of the proportion of labour force engaged in Agriculture. Marked increase in the proportion of national income devoted to investment to construction of new buildings, machinery, and public improvements. Today, an average from 5 % to 30% of the national output is devoted to investments depending upon the country requirement. The Rise of New Business and Professional Class. The Growth of industry requires many more managers, engineers and technicians. There is also a rapid increase of doctors, lawyers, teachers and civil servants. This new middle class grows in wealth, prestige and political influence and gradually supersedes the older landed aristocracy. Along with it, there develops a class of urban wage earners, trained in the multifarious skills required by the new industries, detached from the land, owning little or no property, and dependent on wages for a livelihood. In the early stages of industrialization, new workers are recruited and mainly from agriculture. The new industries, employing power machinery and large-scale organization, typically show a higher output per man-hour than prevails in agriculture and can thus afford to offer wages well above the agricultural level. This serves as a magnet drawing people from the farms to the cities. In most countries, too, high rural birth rages produce a chronic excess of population on the land. This makes it possible to transfer millions of workers from country to city while at the same time increasing agricultural output. In Mexico, Egypt, India, Pakistan and the rest there are millions of underemployed agriculturalists waiting to leave the land as rapidly as jobs develop in the cities. These generic features of industrialization appear in communist as well as capitalist countries. The process is differently organized, financed and controlled. But in Russia, Poland, Yugoslavia, China one finds the dominant features described above: a rapid growth of manufacturing and related industries and a decline in the relative importance of agriculture; a sharp rise in the proportion of national output devoted to investment; a rapid increase in the number and prestige of managers, technicians, and professional people; and the growth of a property less wage earning class recruited mainly from the rural population. The problems of these workers are basically similar to those of workers in capitalist countries. After the first few decades of industrialization, the working class reproduces itself increasingly from within. There is a continuing influx from agriculture, but this becomes relatively less important. There is also some movement upward from manual labor to the higher occupations, the size of this depending mainly on how many workers children have opportunity from high school and college training. Even with adequate opportunity, however, most children of workers will become workers in their turn. The wage earning group becomes increasingly a stable, self-perpetuating stratum of society. During the 19th Century in England, many writers observing the rapid growth of factory employment predicated, hopefully or fearfully that labor would soon dominate the economic and political scene. Karl Marx asserted that workers would in time become so numerous and employers so few that the overthrow of the employers would be almost automatic. The trend projected by Marx, however, has not materialized either in England or elsewhere. In US, the percentage of the employed population engaged in manual labour rose steadily until about 1920. Since that time, however, it has settled down on a plateau of about 45 per cent, tending to rise in booms and fall in depressions, but with no long-run trend.

Marx and his contemporaries failed to foresee events of a century later. There are several reasons why the proportion of manual workers has leveled off and is likely to decline from her on: Manufacturing, the classic employer of urban labor, increases rapidly in importance during the early stages of industrialism but later tapers off to a plateau. Example, In UK, the labour force engaged in manufacturing in 1951 was same as 1872 (39.5 and 36. 8). In US, it slightly increases between 1900 and 1957 (22.8 to 25.5). The composition of manufacturing employment has also shifted substantially over the course of time. Gone are the days when a mill manager and a few foremen supervised hundreds of Hands. Increase in plant size, complexity of production methods, research and development activity, sales effort and record keeping and use of Scientific Management techniques have brought a marked increase in the ration of white-collar to blue collar employees. In a single decade 1947-57, the proportion of nonproduction workers in US manufacturing increased from 16.3 % to 23.1%. In industries with highly automatic production methods and heavy emphasis on research the proportion of nonproduction workers in 1957 was even higher 33.4 % in instruments, 34.5 % in aircraft and parts, 35.5 % in chemicals, and 40.5 % in ordnance. The automation movement now underway in many industries has reduced the importance of manual labour. As a nation improves in productive capacity and living standards, certain white collar activities increase with disproportionate speed: Wholesale and retail trade; health, education, and other profession services; government service; and industries providing personal services of every sort laundry and dry cleaning, beauty care, repair services, travel, entertainment, and recreation. This reflects partly the greater complexity and commercialization of urban life, partly the fact that peoples ca pacity to consume semi luxury services is less limited than their capacity to consume material goods. Employment in these industries consists mainly of professional, executive, technical, and other white collar people. Their expansion thus means a corresponding shrinkage in the relative importance of manual labour.

The U.S. Department of labor has estimated that in 1955 the number of white collar workers in US almost exactly equaled the number of blue collar workers. Projections to 1965 suggest that in that year white collar workers will outnumber blue collar workers by 32 million to 27 million. It raises a basic question of what we mean by labor. Should we count as workers only those who work with their hands? Or should we include also the many millions of white collar workers whose jobs carry no supervisory authority? The two groups occupy a similar status in the productive system as they do not own the tools or control the processes of production & depends on paid employment for their livelihood. The great majority will remain in paid employment throughout their working lives. Moreover, the similarity between white collar and manual workers seems to be increasing with the passage of time: Large numbers of white collar people now earn less than the average factory workers. Thus the income advantage enjoyed by white collar workers in earlier times has been largely disappeared. Paid Vacations, Sick Leave, Pension Funds, and other perquisite that used to distinguish the office worker are now being extended rapidly to manual workers. The working conditions of clerical employees have become less favorable in certain respects with the increasing scale and mechanization of office operations. The degree of skill in their tasks is shrinking they are coming increasingly under impersonal supervision which increases the distance between them and top management and they are even being subjected to such Factory techniques as time study and incentive wage payment. The threat of displacement by automatic machinery is probably as severe in the office as in plant. The education gap is also diminishing as the percentage of young people finishing high school rises. Most white collar people steadfastly refuse to regard themselves as Workers and show a strong psychological attachment to m iddle class values and aspirations. The problem is that they are diversified that it is not really justifiable to lump them all. Labour Problem: The term labor problem is ambiguous, because it can mean two quite different things: the personal problems of the individual worker or the general economic or social problems arising from industrial employment. Most workers by the time they reach 25 or 30 have accepted the probability that they will remain workers and may not rise much above their present occupational level. They usually show a strong desire to stay on with the same employer. The workers primary drive is toward security of employment, of income, and of residence.

He believes that there are always more workers than jobs, that unemployment is lurking around the corner, and that the safe course is to dig in as firmly as possible at his present position.

To a typical worker, progress means an improvement in the conditions of his present job a wage increase, a reduction of hours, a more agreeable foreman, a slower pace of work, better physical conditions, and so on. The main criteria which workers have in mind in appraising a job as good or bad may be grouped in three categories: 1) Relations with ones immediate supervisor, includi ng protection against arbitrary treatment; 2) The nature of the work itself, including the laboriousness and speed of the work, physical working conditions, hours and shift arrangements; 3) The level of wage rates and weekly earnings. The relative importance of these factors varies greatly from one situation to the next. In a particular plant, any one condition may be so unsatisfactory that it assumes very importance in workers mind; in other plants, this factor may be of minor importance. Labour Problem of an Industrial Society: Maintaining adequate Total Demand for labour: This is a chronic problem for economies in the early stages of industrialization, which usually have a surplus of underemployed labour in agriculture. It is recurrent problem for industrialized capitalist economies, whose growth is interrupted occasionally by general depression. Depression cuts national output and reduces the incomes of workers along with those of most other people. It usually means a sharp reduction of new investment, the major source of economic progress and higher living standards. It reduces the opportunity for people to change jobs and make occupational progress. It leads to adoption of unwise government policies, which are presented with plausible arguments as depression remedies. Developing Effective Labour Market: Ours is a market economy. Workers presently market their labor under serious handicaps of ignorance, misinformation, and uncertainty. Employers are not much better off in their effort to locate the best workers available. Job hunting will always be something of a game of blind mans bluff because of the innate complexity of the employment process. It should be possible, however, to enlarge and improve the state of competition in the labour market. A better matching of individual capacities with job requirements would improve productive efficiency and increase national output. Training, Organizing and Motivating the labor force : The labour market is supposed to achieve a distribution of the labour force among industries, plants, and localities which corresponds to the detailed pattern of demand for labour. But this is only a first step. Workers as they come through the hiring office are a conglomerate of isolated individuals, not a working team. They have to be trained, organized, supervised, and motivated to perform efficiently in the production process. They must be subjected to a new network of rules and controls, a new industrial discipline quite unlike that of an agricultural society. Determining Wage Rates and Labour Income: This set of rules has such a venerable tradition in economics that it may be singled out for special mention. The wage problem comprises at least four problems: Determining the general wage level: Within the enterprises, how much of sales revenue can fairly be claimed by labour as against other operating expenses and profits? When should the companys wage level be raised, and on what grounds? Looking at the economy as a whole, what should be the level of money wages and real wages? What is a proper Split -UP between labor and property incomes? How fast should the national wage level be raised over the course of time, and why? Determining relative wage rates for different types of work: How does the national wage total to be divided among the individual comprise the labour force? Within a particular plant or industry, should the most skilled job pay 50 % than the least skilled or 100 % more or 200% more? Should some industries pay higher wages than others, and how much higher? Should workers earn more in some geographical regions than in others, or more in large cities than in small towns? The relationship among wages in different occupations, industries, and areas is commonly termed the problem of Wage Structure or Wage Differentials. Deciding the Method of Wage Payment: The leading issue here is between payments on the basis of hours worked and payment on the basis of output (Piece work or incentive payment). This issue arouses strong feeling among workers and is decided differently in different industries and countries. Deciding the form of workers income receipts: The national wage bill may go almost entirely into direct wage payments, or a substantial share may go into old age pensions, family allowances, medical and hospital services, unemployment compensation, and other indirect benefits. In some European countries these indirect benefits are one-third to one half as large as direct wage payments. In US, where they are less fully developed, the proportion is approaching one-fifth.

Balancing Producer and Consumer Satisfactions: There is an obvious conflict of interest between the workers engaged in producing a particular product and the consumers of the product. It is to the workers interest to work short hours, at a leisurely pace, amid pleasant surroundings, and to receive high wage plus ample allowances for vacations, holidays, pensions, medical care, and the like. These things raise costs, however, and must be paid for by the consumers through higher prices and reduced consumption. How can one strike a proper balance between the interests of the two Groups. Wage earners form close to half of the consuming public and salary earners another quarter. There is a conflict of interest within the wage and salary group. People can work longer and harder as producers in order to enjoy more goods as consumers or they can take things easier and consume less. Two automatic solutions of this problem appear in economic writings. The independent producer consuming his own product can presumably strike a direct balance between effort and consumption. The workers will choose the combination of wages and working conditions that best meets his personal preferences. Protecting against predictable risks: Assuring a minimum level of living: Mechanisms of Adjustment: Institutions and the Market Two Main Mechanisms are available for resolving these issues: The Competitive Labor Market & Institutional rules imposed by business concerns, trade unions, and government. Role of the Labor Market: Elementary economics texts describe the operation of a competitive labor market and the results it might be expected to yield. The broad argument is that, given free and informed competition among workers and employers, each worker must be paid the value of his contribution to production. There is very little scope for controversy or bargaining over the price of labor. This is of course a very simplified and idealized picture. It assumes many small employers competing for labor, no collusion among employers or workers, adequate channels of information, and a number of other things. It is no secret that actual labour markets depart considerably from this competitive ideal. Many employers are large and the workers choice is often restricted to one or a few companies; Employers often get together on wage rates and on policies which make it hard for workers to change employers; channels of information are poor and there is no effective central clearinghouse for labor; the exchange of a machinists labor for a package of wages and working con ditions is a more complicated transaction than setting a price on a loaf of bread; workers dislike changing jobs and, when forced to do so, they hunt new jobs in a haphazard and ill-informed way; during periods of heavy unemployment the workers bargaining pow er which depends basically on his power to change jobs is seriously reduced. Despite these numerous deficiencies, the labour market is a reasonably effective instrument both for determining relative wage rates and for raising the general wage level as national output rises. The great increase in wage levels in United States over the pas century has not been due in any large measure to collective bargaining or government decree. It has occurred mainly because employers were able and impelled to keep raising their wage offers in the market year after year. Able because development of new machinery and production methods was steadily increasing output per man-hour; impelled because the labour market forces each employer to bid against others to hold his share of the labour supply. The labour market is the main mechanism by which increases in productivity have been translated into higher wages and living standards. The Place of Institutional Rules: The main contenders for rule-making authority are the business firm, trade union and the state. Adherents of one of these often regard it as the normal rule making body, entitled in principle to exclusive authority. Many businessmen still regard management as t he proper group to decide on terms of employment and resent outside interference by unions or government. To the trade unionist, it is an article of faith that all important conditions of employment should be regulated by union-management agreement. Socialists tend to regard government as the logical guardian of working conditions and workers welfare. There are seven general systems for distributing the essential power to make rules governing the labour force: 1. The employer may set the rules and may follow a policy of paternalism or a policy of forced worker self dependence. 2. The worker may give the directions. His Union then becomes more or less of a producers cooperative 3. The state may issue the commands 4. The power may be shared primarily by employer and unions, whose relationships may range from reserved tolerance to secret collusion

5. 6. 7.

The Employer and the state may divide the authority between them. The power of the state may ranged alongside that of the employer or the state may vacillate back and forth. The State and the worker may participate jointly in rule making The three contestants may share rule-making power in pluralistic system

The specific function of unionism is to police inplant decisions and actions of management. This means negotiating a general framework of rules within which management action is confined and insuring equitable application of these rules to individual cases. The distinctive function of union is to establish a system of industrial citizenship or industrial jurisprudence, a procedure through which the individual can seek redress from any inequitable or harmful decision by management. Solution or Working Compromises: In a dynamic industrial society workers interests and need are constantly changing, so that our systems of industrial management and government regulation are always in need of repair and improvement. More fundamentally, it is because workers perceived interests conflict at certain points with those of other groups in the economy. In such cases, con troversy is natural and healthy. One can arrive only at working compromises which the parties are willing to accept for the time being, and which are subject to continual renegotiations and revision. The student should learn how to think in relativistic, expedient, historical terms rather than in terms of unchanging rules.