Answer & Explanation:Please comment about the article Industrial Relations in the Global Economy by Morley Gunderson and Anil Verma.
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Industrial Relations in the Global Economy
Morley Gunderson and Anil Verma, University of Toronto
New industrial relations issues have arisen with increased international trade and investment, and
professors Morley Gunderson and Anil Verma see labor standards as the most pressing one. Three
mechanisms govern the employment relationship: market forces, employee representation, and laws and
regulations. Market mechanisms rely on demand and supply to determine pay and labor allocation,
ensuring efficient utilization of labor and production of items that consumers want. But markets have
imperfections, and even perfectly functioning ones can lead to efficient outcomes, but not necessarily
what society would consider fair. Employee representation, which includes unions and other devices for
employee voice in the workplace, mitigates market forces by providing a bargaining mechanism and/or
assuring due process to employees. Some argue, however, that unions also reduce the managerial
flexibility and organizational competitiveness needed for joint survival of employers and employees. Laws
regulating the employment relationship are those governing collective bargaining, setting wages and
hours, banning discrimination, fixing health and safety standards, and providing social insurance. By
establishing a floor below which market transactions are not allowed to occur, labor regulations and
legislation provide a safety net when the market mechanism creates disadvantages for workers.
Freer flow of goods, capital, people, and ideas across borders has enhanced the market mechanism role,
with decisions being made on a global basis. Since labor flexibility and adaptability enable employers to
respond quickly to changing circumstances, collective bargaining is put on the defensive. Unions have
been unable to attain any form of transnational collective bargaining and plummeting membership in
many countries means that they are less able to set national standards. Domestic regulative initiatives
also are inhibited by fear of repelling investment.
Gunderson and Verma point out that, from its foundation, IRC was interested in issues of labor standards,
worker voice and fair wages, recognizing that, while such practices may not maximize profits in the short
run, employers who promote good labor standards can benefit in the long run from better relations,
improved productivity, and enhanced quality. There was another rationale for promoting better labor
policy—reducing competition among firms on the basis of lower labor standards. Indeed, Mackenzie King
set forth the “Law of Competing Standards” (based on Gresham’s Law with respect to precious metals),
that, left to market forces, labor standards would decline to their lowest possible denominator. He argued
that progressive employers should undertake to stem this slide because, in doing so, they would secure
their firms’ and indeed capitalism’s future.
Corporate codes of conduct have been adopted among those firms that subcontract production to locally
owned and managed companies in developing countries, but the issue of international labor standards
continues to fester. The authors see the International Labor Organization as the body best structured to
deal with global solutions to labor problems. The ILO follows a voluntary, cooperative approach and
rejects the use of trade sanctions against countries that do not adopt its standards, because labor
standards must reflect the ability of different countries to afford them.
They conclude that globalization has implications for all the stakeholders in the employment relationship.
Individual workers must acquire the human capital (education and training) valued in the market and gear
skills towards flexibility and adaptability. Unions should concentrate on those aspects of their role—
providing voice, articulating employee preferences, insuring due process—that do not imply large cost
increases. Government policy should emphasize adjustment assistance that facilitates labor allocation
geared to market changes, rather than income maintenance that encourages workers to remain in
declining sectors or regions. Employers should build employee commitment and loyalty by providing
workers with skills, decent wages according to the standards of the nation, and a safety net, and they
should make sure that HR strategies are an integral part of the business strategy
…
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