industrial relations

Relations between the management of an industrial enterprise and its employees.

Dealings of a company with others, particularly employees. The Japanese are noted for good industrial relations due to the teamwork among workers, government, and employers.

Interaction between employers, employees, and the government; and the institutions and associations through which such interactions are mediated. Government has a direct involvement in industrial relations, through its role as an employer; one that is particularly prominent in states where there are high levels of nationalization. Indirectly, government has a major role through the regulation of the economy and the relationship between employers and trade unions. (See corporatism.)

— Alistair McMillan

The term "industrial relations" has developed both a broad and a narrow meaning. Originally, industrial relations was broadly defined to include the totality of relationships and interactions between employers and employees. From this perspective, industrial relations covers all aspects of the employment relationship, including human resource (or personnel) management, employee relations, and union-management (or labor) relations. Since the mid-twentieth century, however, the term has increasingly taken on a narrower, more restricted interpretation that largely equates it with unionized employment relationships. In this view, industrial relations pertains to the study and practice of collective bargaining, trade unionism, and labor-management relations, while human resource management is a separate, largely distinct field that deals with nonunion employment relationships and the personnel practices and policies of employers. Both meanings of the term coexist in the twenty-first century, although the latter is the more common.

Origins

The term "industrial relations" came into common usage in the 1910s, particularly in 1912 upon the appointment by President William Taft of an investigative committee titled the Commission on Industrial Relations. The commission's charge was to investigate the causes of widespread, often violent labor conflict and make recommendations regarding methods to promote greater cooperation and harmony among employers and employees. Shortly thereafter, the term gained even greater saliency in the public mind due to the wave of strikes, labor unrest, and agitation for "industrial democracy" that accompanied the economic and political disturbances associated with World War I. As a result, by the beginning of the 1920s universities began to establish industrial relations centers and programs to conduct research and train students in employer-employee relations, while progressive business firms established the first "industrial relations" or "personnel" departments to formalize and professionalize the management of labor.

Although the term "industrial relations" came into prominent usage in the 1910s, its roots extend back at least three decades into the nineteenth century. It was during this period, beginning in the 1870s, that the process of industrialization began in earnest in the United States, leading to the emergence of a growing urban-based wage-earning labor force working in large-scale factories, mills, and mines. Conditions growing out of the industrialization process—twelve-hour work days, tens of thousands of work-related fatalities, low wages, extremely high rates of labor turnover, and poor employee work effort and attitudes—led to growing numbers of strikes, revolutionary economic and political movements, and demands for social and economic reform. These maladjustments and frictions between employers and employees, and the conflict they precipitated, came to be known as "the Labor Problem."

The emergence of industrial relations in the 1910s as an academic field of study and area of business practice was thus intimately associated with the rise and growing seriousness of the Labor Problem, and industrial relations came to be widely defined during this period as the study of labor problems and alternative methods to resolve such problems. Social scientists identified three major types of solutions: the "employer's solution" of personnel management, the "workers' solution" of trade unionism and collective bargaining, and the "community's solution" of government-enacted protective labor legislation and social insurance programs (for example, minimum wages and unemployment insurance). In its early years, therefore, industrial relations was broadly conceived because it subsumed all three types of solutions to labor problems, while in terms of ideology and approach to social policy industrial relations tended to be reformist, progressive, and critical of laissez-faire.

Historical Development

During the prosperous and politically conservative 1920s, the American labor movement suffered a significant loss in membership, influence, and public approval, while restrictive court rulings and conservative political opposition hobbled the extension of labor legislation. In this period the major line of advance in industrial relations was the employer's solution of personnel management. Numerous firms established personnel departments and in various ways tried to reduce the most serious causes of labor unrest and turnover. The apogee of this effort was among several hundred liberal/progressive employers who adopted the new model of welfare capitalism. Intended to promote greater employee morale, cooperation, and productivity—as well as to undercut the threat of unions and government intervention—this employment strategy entailed many new employee welfare benefits (paid vacations and company doctors, for example), promises of employment security, curbs on the right of foremen to hire and fire, payment of fair wages, and the introduction of employee representation plans to promote resolution of grievances and employee participation and voice in the enterprise.

The decade of the 1930s saw a near-revolution in American industrial relations practices and policies. The Great Depression, beginning in late 1929 and extending to 1939, caused widespread suffering and hardship among the industrial workforce, leading to the re-emergence of numerous labor problems, such as low wages, long hours, and mass unemployment. Many workers became disillusioned with employers when firms succumbed to economic pressures and cut wages and other labor conditions, while some became embittered when they perceived that companies took advantage of labor in a harsh and opportunistic way. As the employer's solution lost credibility and effectiveness, focus turned toward other solutions. This shift gained speed when the new administration of Franklin D. Roosevelt was elected in late 1932 and soon thereafter Roosevelt instituted his New Deal economic recovery measures. Under Roosevelt's leadership, public policy turned favorable to labor unions and government labor legislation as a way to promote economic recovery, protect the underdog in the employment relationship, and establish greater industrial democracy. The three major initiatives were the National Labor Relations Act (encouraging and protecting the right to join a union and bargain collectively), the Social Security Act (establishing old age and unemployment insurance), and the Fair Labor Standards Act (setting minimum wages and maximum hours).

The labor movement also transformed itself in the 1930s. More dynamic, aggressive union leaders came to the fore, such as John L. Lewis, Sidney Hillman, and Philip Murray. A more effective method of organizing and representing workers was emphasized ("industrial" unions that organize all workers in an industry, rather than the traditional "craft" union model that includes only workers of a particular occupation or skill). And a new federation of industrial unions, called the Congress of Industrial Organizations (CIO), was established to rival the traditional federation of craft unions, the American Federation of Labor (AFL).

As a result of these events and developments in the economic, legislative, and trade union worlds, a great shift in industrial relations practices and policies occurred in the 1930s. Union membership mushroomed from only 10 percent of the workforce in the early 1930s to 27 percent a decade later. The American laissez-faire approach to employer-employee relations was reversed and the beginnings of both greater government regulation of employment and the development of a social welfare state were initiated. Finally, employers emerged from the 1930s with much-reduced power in industrial relations, while personnel management came to be regarded in many quarters as largely ineffective and often an overt or covert union-avoidance device.

The decade of the 1940s saw a consolidation of the trends unleashed a decade earlier. As a result of World War II, industrial employment boomed and the federal government instituted a system of wage-price controls on the economy. The net effect of these developments was to further spread collective bargaining and government regulation of the labor market, in the case of the former due in part to government pressure on employers to accede to union organizing efforts and bargaining demands in order to prevent strikes and interruptions to war production. With the end of the war, wage-price controls were lifted and a strike wave erupted in 1946 as employers sought to recoup some of their lost prerogatives while unions fought to maintain their gains. The result was largely to leave intact the industrial relations system that had evolved out of the war, but with a discernible spread of opinion among the public that union power needed to be reined in and made more responsible. The result was the passage in 1947 of the Taft-Hartley amendments to the National Labor Relations Act. The law prohibited certain practices of unions, such as the closed shop, and gave the government the ability to temporarily end strikes that cause national emergencies.

Adverse changes in federal law notwithstanding, for roughly another decade organized labor continued to expand its membership and influence. Unity was also restored in the labor movement through the creation of a single labor federation in 1955, the AFL-CIO, under the leadership of George Meany. Although not discernible at the time, the high water mark for the labor movement came in the mid-1950s when the union share of the non-agricultural workforce peaked at slightly above one-third. Hidden in this number is the remarkable fact that over a twenty-year period unions had succeeded in organizing most of the medium-large firms in the manufacturing, mining, and transportation sectors of the economy. Also of significance, unions were seen as the primary innovators in employment practices, using collective bargaining to win formal grievance systems, wage classification systems, cost-of-living wage adjustment clauses, and a plethora of new employee benefits.

Starting in the early 1960s, the New Deal industrial relations system, with its emphasis on collective bargaining as the major institution for determining wages and labor conditions in the economy, began to erode and be replaced by a new system. The new system that emerged, and then became consolidated in the 1980s and 1990s, featured a much smaller role for collective bargaining with a much-expanded role for personnel management—now called human resource management—and direct government regulation of employment conditions.

Several trends and developments were responsible for this shift. One was a slow but cumulatively significant shrinkage in the size and influence of the union sector of the economy. In the private (non-government) sector, the unionized share of the workforce began to contract in the 1960s and continued to do so until the end of the century. While 32 percent of private sector workers were covered by collective bargaining contracts in 1960, in the year 2000 this proportion had shrunk to 9 percent—a level roughly equal to that in the early 1930s. A number of factors were responsible for the union decline. Unions gradually increased wage and benefits for their members up through the mid-1980s, but in so doing the production costs at organized firms also became increasingly higher than at nonunion firms. The result was a slow loss of competitiveness and jobs in the union sector in the 1960s and 1970s, followed in the 1980s by a hemorrhaging of jobs due to widespread plant closings and layoffs. Another complementary factor was the intensification of competition in product and financial markets. Due to globalization and domestic deregulation of industries, American firms experienced a gradual increase in competitive pressure, leading them to more aggressively resist union organizing drives and downsize and eliminate existing unionized plants. This trend was also complemented by greater pressure from financial markets (Wall Street) for higher earnings and short-run profit performance. Finally, during the presidency of Ronald Reagan in the 1980s government policy toward organized labor turned more hostile, as reflected in the firing of the striking air traffic controllers and the pro-management rulings of the National Labor Relations Board.

The situation for unions from the 1960s to the 1990s was not entirely negative, however. The most positive development was the spread of collective bargaining to the public sector. Due to a liberalization of state and federal laws in the 1960s and 1970s, union coverage in the public (government) sector greatly expanded, from 11 percent in 1960 to 37 percent in 2000. As a result of the shrinkage of private sector unionism and the expansion of unionism in the public sector, the latter accounts for nearly 40 percent of total union members in the United States. (However, even in the private sector unions continue to represent over 9 million workers [and 7 million in the public sector] and, encouragingly for organized labor, surveys indicate that one-third of American workers would vote to have a union if given the opportunity.)

A second development that undermined the New Deal system of industrial relations was the re-emergence and revitalization of the employer's solution of labor problems in the form of human resource management. The decline of the unionized sector of the economy opened the door for personnel/human resource management to reassert itself as a leading force in industrial relations, and new ideas and practices in human resource management allowed companies, in turn, to effectively take advantage of this opportunity. Through the 1960s, personnel management had a reputation as a largely low-level, heavily administrative, and nonstrategic business function. Starting in the 1960s, however, academic research in the behavioral and organizational sciences led to a flowering of new ideas and theories about how to better motivate people at work, structure jobs for increased productivity and job satisfaction, and organize and operate business firms for competitive advantage. These new insights were gradually incorporated into personnel management, leading to a shift in both its name—to human resource management—and its approach to managing employees (from viewing employees as a short-run expense to a long-term asset). As a result, human resource management gradually replaced labor-management relations (increasingly thought of as synonymous with industrial relations) in the eyes of academics and practitioners as the locus of new and exciting workplace developments.

In the 1970s American companies started to introduce these new employment practices into selected plants and facilities, culminating in the development of what is often called a "high-performance" work system. Since the 1970s this system, and individual parts of it, have spread widely. A high-performance work system is a package of employment practices that include self-managed work teams, gainsharing forms of compensation, promises of employment security, formal dispute resolution systems, and an egalitarian organizational culture. These work systems not only boost productivity but also typically increase employee job satisfaction, leading to reduced interest in union representation. Companies have also become much more adept at keeping out unions, not only through progressive human resource management methods but also through more aggressive and sophisticated union-avoidance practices.

The third major force undermining the New Deal industrial relations system has been the spread of greater government regulation of employment conditions. After the passage of the Social Security and Fair Labor Standards Acts in the 1930s, the federal and state governments enacted little new employment legislation until the mid-1960s. Starting with the Civil Rights Act of 1964, however, government has become increasingly active in the employment sphere. In addition to a host of laws and regulations pertaining to discrimination (racial, gender, age, physical disability, sexual orientation), federal and/or state governments have passed numerous laws relating to other employment areas, such as pension plans, family and medical leave, and the portability of health insurance. It is widely considered that these laws and attendant agencies, courts, and attorneys have to some degree served as a substitute for unions, thus also explaining a portion of the union decline in the late twentieth century.

Conclusion

The field and practice of industrial relations began in the early years of the twentieth century and evolved in numerous ways in reaction to a host of far-reaching changes in the economic, political, and social realm. It began with a broad emphasis on the employment relationship and the labor problems that grow out of this relationship. As a result of the rise of mass unionism between 1935 and 1955, the field became identified in the academic and practitioner worlds with, first and foremost, the study and practice of collective bargaining and labor-management relations. Since then the unionized sector of the economy has shrunk considerably, while a rival field of human resource management has grown and spread—a product of both new ideas and practices and the opening up of a much-expanded unorganized sector in the labor market. Thus the term "industrial relations" is increasingly associated with the unionized sector of the labor market. But a minority of participants continue to view industrial relations as pertaining to the entire world of work and, in particular, the three solutions to labor problems: personnel/human resource management, trade unionism and collective bargaining, and government legislation.

Bibliography

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———. "Human Resources and Industrial Relations: Commonalities and Differences." Human Resource Management Review 11, no. 4 (2001): 339–374.

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Nelson, Daniel. Shifting Fortunes: The Rise and Decline of American Labor from the 1820s to the Present. Chicago: Ivan Doe, 1997.

Relations between management and labor unions or between management and individual workers. Sometimes called labor relations.