COLLECTIVE BARGAINNING

DEFINITION OF COLLECTIVE BARGAINING

The phrase’ Collective Bargaining’ is coined by Sydney and Beatrice Webb.

According to them, collective bargaining is a method by which trade unions protect
and improve the conditions of their member’s working lives.

According to the Encyclopedia of Social sciences, “ collective bargaining is a

process of discussion and negotiation between two parties one or both of whom is a
group of persons acting in consent. The resulting bargain in an understanding as to
the terms and conditions under which a continuing service is to be performed. More
specifically, collective bargaining is a procedure by which employers and a group of
employees agree upon the conditions of work.”

Characteristics of Collective Bargaining

The main characteristics of collective bargaining are:

(i) It is a group action as opposed to individual action and is initiated through

the representatives of workers: On the management side are its delegates at the
bargaining table; on the side of the workers is their trade union, which may represent
the local plant, the city membership or nation – wide membership.

(ii) It is flexible and mobile, and not fixed or static: It has fluidity and scope for
compromise, for a mutual give – and –take before the final agreement is reached or
the final settlement is arrived at. Bakke and Kerr observe: “Essentially, a successful
collective bargaining is an exercise in graceful retreat – retreat without seeming to
retreat. The parties normally ask for more or offer less than they ultimately accept or
give. The “take-it-or-leave it” proposition is not viewed as being within the rules of
the game. One of the most damaging criticisms is that a party is adamant in holding to
its original position. Before retreating with as much elegance as circumstances
permit, each party seeks to withdraw as little as possible. This involves ascertaining
the maximum concession of the opposing negotiator without disclosing one’s own
ultimate concession. In this sense, all negotiations are exploratory until the agreement
is consummated.”
 (iii) It is a two – party process: It is a mutual give – and – take rather than a
take – it or-leave-it method of arriving at the settlement of a dispute. Both parties are
involved in it. In this connection, Clark Kerr observes: “ Collective bargaining can
work only with the acceptance by labour and management of their appropriate
responsibilities. It can succeed only when both labour and management want it to
succeed. It can flourish only in an atmosphere which is free from animosity and
reprisal. There must be a mutual eagerness to develop the collective bargaining
procedure and there must be attitude which will result in harmony and progress.”

Box 27.1 Union – Management Relations through collective Bargaining

Personnel Department Line Managers

 Deal directly with union members.  Provides conditions conducive to a

positive relationship with employees.
 Monitors climate for unionization  Avoid unfair labour practices through
and union relation ship organized efforts.

 Helps negotiable collective  Administer the labour practices

agreements. through organized efforts.
 Provides detailed knowledge of  Resolve grievances and problems
labour legislation as may be between management and employee
necessary and union members.

(Source:Rebert L. Mathis and John H. Jackson, “Personnel”, Tata McGraw Hill,p.555)

(iv) It is a continuous process: Which provides a mechanism for continuing and

organized relationships between the management and trade unions. “The heart of
collective bargaining is the process for a continuing joint consideration and
adjustment of plant problems.” It does not end with negotiation, but as Glen Gardiner
puts it, “it beings and ends with the writing of a contract. Actually, it is only the
beginning of collective bargaining. It goes on 365 days of the year…. The most
important part of collective bargaining – is the bargaining that goes on from day – to –
day under the rules established by labour agreements”.
(v) It is dynamic and not static: Because it is a relatively new concept, and is growing,
expanding, and changing. In the past, it used to be emotional, turbulent and
sentimental; but now it is scientific, factual and systematic. Its coverage and style
have changed. In this connection. J.M. Clark has this to say: “ Collective bargaining
has become, with surprising swiftness, one of the greatest forces in our society. In
anything like its present scale and power, it is a new thing. It is a process which
transforms pleading into negotiation, which permits employee’s dignity as they
participate in the formulation of their terms and conditions of employement, - which
embraces the democratic ideal and applies it correctly and effectively at the place of
work.”

(vi) It is industrial democracy at work: Industrial democracy is the government of

labour with the consent of the governed – the workers. The principle of arbitrary
unilateralism has given way to that of self government in the industry. Collective
bargaining is not a mere signing of an agreement granting seniority, vacations and
wage increases. It is not a mere sitting around a table, discussing grievances.
Basically, it is democratic: It is a joint formulation of company policy on all matters
which directly affect the workers in a plant. It is self – government in action. It is the
projection of a management policy which gives the workers the right to be heard. It is
the establishment of factory law based on common interest.

(vii) Collective bargaining is not a competitive process but it is essentially a

complementary process, i.e.: Each party needs something that the other party has,
namely, labour can make a greater productive effort and management has the capacity
to pay for that effort and to organize and guide it for achieving its objectives. The
behavioural scientists have made a distinction between “distributive bargaining” and
“intergrative bargaining”. The former is the process of dividing the ‘cake’ which
represents the whole which has been produced by the joint efforts of the management
and labour. In this process, if one party wins something, the other party, to continue
the metaphor of the cake, has a reatively smaller size of it. So it is a “win-lose”
relationship. In other words, distributive bargaining deals with issue in which two or
more parties have conflicting or adversary interests. Intergative bargaining’ is a
process where both the parties can win, each contributing something for the benefits
of the other party. Such a process develops common objectives, a better
understanding of each other’s needs and capabilities, a better respect to each other,
and a greater involvement of commitment to the well – being and growth of the
enterprise as a whole.

(viii) “It is an art, an advanced form of human relations: To substantiate this, one need
only witness the bluffing, the oratory, dramatics and coyness mixed in an inexplicable
fashion which may characterize a bargaining session”.

Importance of Collective Bargaining

Collective bargaining plays a vital role in sretting and preventing industrial

disputes. Specifically its importance is evident from the following:

(i) Increase the economics strength of unions and management;

(ii) Establish uniform conditions of employment with a view to avoiding industrial

disputes and maintaining stable peace in the industry;

(iii) Secure a prompt and fair redressal of grievances;

(iv) Avoid interruptions in work which follow strikes, go – slow tactics and similar
coercive activities;

(v) Lay down fair rates of wages and norms of working conditions;

(vi) Achieve an sufficient operation of the plant;

(vii) Promote the stability and prosperty of the industry;

(viii) It provides a method for the regulation of the conditions of employment of

those who are directly concerned about them;

(ix) It provides a solution to the problem of sickness in the industry, and ensure old
- age pension benefits and other fringe benefits.

CONDITIONS FOR THE SUCCESS OF COLLECTIVE BARGAINNING

(i) Constructive consultation between the trade union and the management is
possible only when the bargaining power of two parties is relatively equal and
is exercised with responsibility and discrimination.

(ii) Two parties of collective bargaining accept the principle of ‘free consultation’
and ‘free enterprise’ consistent with the advancement of public interest.

(iii) The willing acceptance by the management to recognize representative union

for this purpose.

(iv) Both the parties must have mutual confidence, good faith and a desire to make
collective bargaining machinery a success

(v) Management should not await the Union to raise problems but should make
every reasonable effort to prevent them from arising and to remove them
promptly when they arise.

(vi) An emphasis upon a problem – solving approach with de – emphasis upon

excessive legalism.

(vii) Dispose off the issues in the same meeting and minimize pending of items.

(viii) Desire of the management to settle the issues to the satisfaction of employees.
This does not mean that the management must relinquish its right to direct the
company or that its must accede to all union demands.

(ix) Unions must understand the economic implications of collective bargaining

and realise that union demands must be met from the income and resources of
the organization.

(x) Both the parties should represent the rights and responsibilities of each other.

(xi) The process of bargaining should be free from unfair practices.

(xii) Unanimity among workers: Before entering into negotiations, there must be
unanimity among workers. At least the representatives of workers should be
able to represent the opinion or demands of majority of workers.
The attitude of the parties(involved) should be positive. Both the parties should reach
the negotiating table with an intention to find better solutions.

(xiv) The parties involved in collective bargaining should be prepared to give away
something in order to gain something.

(xv) Both the parties to collective bargaining should observe and follow the terms
and conditions of previous agreements that are reached. Collective bargaining,
being a continuous process, can be effective only with the successful
implementation of previous agreements. Any lapse on the part of any party
concerned, shows its effect on the present process.

(xvi) The representatives of both the parties should fully understand and be clear
about the problems and their implications.

(xvii) The workers can make effective use of collective bargaining process to achieve
participative management and good working conditions. They should not
confine collective bargaining for mere monetary benefits.

Functions of Collective Bargaining

Collective bargaining plays an important role in preventing industrial disputes,

setting these disputes and maintaining industrial peacs by performing the following
functions:

(i) Increase the economic strength of employees and management.

(ii) Establish uniform conditions of employment.

(iii) Secure a prompt and fair redressal of grievances.

(iv) Lay down fair rates of wages and other norms of working conditions.

(v) Achieve an efficient functioning of the organization.

(vi) Promote the stability and prosperity of the company.

(vii) It provides a method of the regulation of the conditions of employment of those

who are directly concerned about them.
(viii) It provides a solution to the problem of sickness in the industry and ensures old
– age pension benefits and other fringe benefits.

(ix) It creates new and varied procedures for the solution of the problems as and
when they arise – problems which vex industrial relations; and its from can be
adjusted to meet new situations. Since basic standard are laid down, the
employee is assured that he will be required to work under the stipulated
conditions incorporated in the agreement and the employer is protected from
unfair competition by those who are engaged in a similar industry.

(x) It provides a flexible means for the adjustment of wages and employment
conditions to economic and technological changes in the industry, as a result of
which the changes for conflicts are reduced.

(xi) As a vehicle of industrial peace, collective bargaining is the most important and
significant aspect of labour management relations, and extends the democratic
principle from the political to the industrial field.

(xii) It builds up a system of industrial jurisprudence by introducing civil rights in

the industry. In other words, it ensures that the management is conducted by
rules rather than by arbitrary decisions.

Collective Bargaining Process

There are two stages in collective bargaining, viz.,(i) the negotiation stage and
(ii) the stage of contract administration.

………… of the NCL for Successful Functioning of Collective Bargaining

….. commission of Labour in 1969 made the following recommendations after

considering the problem;

(a) Government intervention in industrial relations particularly in the settlement

of industrial disputes should be reduced gradually to the minimum possible
extent. Compulsory adjudication of disputes should be used only as a last
resort.
(b) Trade unions should be strengthended both organizationally and financially by
amending the Trade Union Act 1926 to make registration of unions
compulsory, enhance the union membership fee, reduce the presence of
outsiders in the union executive and among the office – bearers and increase
the minimum number of members in respect of the union applying for
registration.

(c) Legal provision may be made either by a separate legislation or by amending

an existing enactment for:

- Compulsory recognition of trade unions and certification of unions as

bargaining agents.
- Prohibition and penlisation of unfair labour practices.
- Bargaining in good faith by both employers and unions.
- Conferring legal validity and legitimacy on collective agreements.

QUESTIONS FOR DISCUSSION

1. Define the term collective bargaining. What are the characteristics of

collective bargaining?
2. What is the importance of collective bargaining? What are the essential
conditions for the successful functioning of collective bargaining?
3. Explain the process of collective bargaining.
4. What are the principles of collective bargaining?
5. Assess the success of collective bargaining in India.

CONCEPTS OF HUMAN CAPITAL

Human capital is a collection of resources such as the knowledge,

talents,skills,abilities,experience,intelligence,training, Gary Becker (1964) defined
human capital as “the resources of people,typically skills and knowledge that raise
their state that “human capital deals with are developed through formal and informal
through training, experience and mobility in the labor market.”for Economic Co-
operration and Development (2001),”human capital is referred to as the
knowledge,skills,competencies,and attributes embodied in individuals that facilitate
the creation of personal, social and economic well – being”.

Characteristics of Human Capital

1. Self – generating and Expandable

2. Transportable and Shareable

3. Increases Income and Output

4. Multi – dimensional

5. Influences Economic Growth

2. The Economic Principle of Labour Theory of Value (LTV)

The basic principle of labour theory of value is that the value of a commodity
should be determined on the basis of the average number of labour hours necessary to
produce it. The number of labour hours is exclusive basis for determining the market
price of a commodity. As per this theory, any two goods requiring the same number
of labur hours to produce them should have the same market price. For example, if a
mobile phone and a calculator each require 10 labour hours to complete, both should
have the same price. Adam Smith, David Ricardo and Karl Marx were the advocates
of the labor theory.

The major criticism of labour theory of value is that it is not practical because it
fails to consider materials costs, workers skill levels, capital usage and depreciation
costs while determining the price of a commodity. The theory ignores the effect of
varying consumer demand for different types of goods.

3. Human Resource Development (HRD)

Human Resource Development is a formally organized man making

mechanism in an organization. Whatever be the activities conducted for the
processing of human skills and abilities in an organization, all such activities are
arrayed under the banner HRD. The concept of Human Resource Development was
formally introduced by Leonard Nadler in 1969 in a Conference organized by
American Society for Training and Development. Nadler defines HRD as “those
learning experiences which are organized

4. The trend of Working-age Population in India

The working-age population refers to the portion of the total population in a

country belonging to a certain predetermined age range that is considered to be able
and likely to perform work. It is determined by estimating the number of people in a
country that fall into a specified age range capable of doing work. Different regions
use different range of ages, based on differences in local employment law and other
considerations. Working age typically includes workings people between the ages of
18 to 64. Working-age population is different from working population. The former
includes anyone within the specified age range, but the latter is based on the number
of people who are actually employed regardless of age.

As per the pre-Budget Economic Survey of 2013-14, the proportion of

working-age population in India is likely to increase from around 58 per cent in 2001
to more than 64 per cent by 2021, with a large number of young persons in the age
range of 20-35. The population in the age-group of 15-34 increased from 353 million
in 2001 to 430 million in 2011. India enjoys a large and young population. By 2020,
India is set to become the world’s youngest country with 64 per cent of its population
in the working age group. The average age of the 125 billion strong Indian
population will be 29 years in 2020, which is younger than China and the US.

5. Future Potential of Indian Human Resources in the Global Scenario

India enjoys a competitive advantage over the human resources compared to

other nations. Indian workforce demonstrated their capabilities in various fields
across the world. The talents of Indian manpower continue to increasingly attract the
attention of global Multinational corporations (MNCs). They require employees who
can adapt to different cultures, customs, social practices, values, economic and
political systems and management approaches, who can work with other employees
from differing backgrounds. One of the important qualities of Indian workforce is
their skill to adapt with diversities. This quality helps them to easily move and
migrate to other places.

The population of India is 1.252 billion and more than 50% of country’s
current population is below the age of 25 and over 65% below of the population is of
the age of 35. This makes India one of the ‘Youngest nations’ in the future and hence
gives a competitive advantage over others. Shortly, India would become the largest
supplyer of skilled workforce to the rest of the world.