Labor-Management Relations

What It Means

The term “labor-management relations” refers to interactions between employees, as represented by labor unions, and their employers. Labor unions are organizations of employees in particular industries, companies, or groups of industries or companies, who join together in order to further workers’ individual interests.

Unions came into being as a result of the increasing industrialization of Europe and North America in the nineteenth century, which led to enormous increases in the number of people who worked in factories and other facilities for mass production. Unions gained power in the United States after the Great Depression, the severe economic crisis that impoverished many ordinary Americans, and they were most powerful in the mid-twentieth century, when the economy was relatively stable and heavy manufacturing industries such as steel, automotive, and mining were prominent. In the latter part of the twentieth century, however, the U.S. economy began to be dominated by service industries (such as banking, insurance, and health care) whose employees have rarely unionized, and the rapid pace of technological progress eroded the stable relationships between labor and management that had been characteristic of American industry in the past. By the beginning of the twenty-first century, the future of unions in the United States was uncertain.

The range of interactions between unions and employers has varied from adversarial to accommodating at different times and places, depending on a number of factors. Some of the most important of these factors are the government’s attitude toward unions, the nature of the industries involved, and the degree of prosperity in society. Negotiation between labor and management has been instrumental, in many cases, in determining such issues as wage and salary levels, working hours, working conditions, hiring procedures, training programs, and benefits such as health insurance and retirement plans. Traditionally, unionized workers have negotiated with their employers based on collective bargaining agreements, which set out the rules according to which union representatives and management must deal with one another. In cases when labor and management cannot come to an agreement, arbitration (resolving of the dispute by a third party) may be necessary. When all else fails, unions sometimes use strikes (a collective refusal of employees to report for work until their demands are met) to force management to yield.

When Did It Begin

The economies of Europe and North America underwent drastic change beginning in the nineteenth century as a result of the increased ability of businesses to produce goods on a mass scale thanks to technological innovations, such as the invention of the steam engine and new techniques for manufacturing textiles and iron. The Industrial Revolution, as this set of economic and cultural changes was called, resulted in a dramatic increase of people employed in factories, mines, and other large-scale operations. Employers no longer had personal relationships with workers, and there were no laws regulating employer-employee relationships. In the nineteenth century it was common for men, women, and children as young as six or eight to work in factories and mines for as long as 16 hours a day. Such intolerable conditions became cause for public concern, and gradually governments began intervening to establish laws regarding employees’ treatment of their workers.

Even as labor laws began to be passed regulating working conditions and outlawing such practices as child labor, the right of workers to organize into unions was generally denied in both Europe and the United States. Members of unions such as the American Federation of Labor (AFL), which was established in 1881, were routinely fired or blacklisted (added to lists of people whom employers agreed not to hire), and strikes were suppressed by people paid by management as well as by the government, which frequently contributed federal troops to guard management’s interests.

This began to change at the beginning of the twentieth century in Europe, but in the United States the government continued to side with employers until the Great Depression, when public dissatisfaction with economic conditions became extreme. American workers won the right to organize under the National Labor Relations Act of 1935, also known as the Wagner Act. In the decades that followed, employers were required to recognize the right of unions to exist, and to address their concerns under collective bargaining agreements.

More Detailed Information

Labor-management relations in the United States have varied greatly since workers first won the legal right to organize. During and after the Great Depression, there was widespread skepticism about allowing business owners to seek profits without any government or other forms of intervention. Unions represented a balancing of the interests of workers with the interests of management, and the American population generally supported the right to organize and engage in collective bargaining. Unions also became an important political force in the 1930s, putting pressure on politicians to pass legislation favorable to workers. Organized labor thus became a very powerful force in national life, and the number of Americans who belonged to unions grew dramatically.

When the United States entered World War II in 1941, labor leaders promised the government that they would not engage in strikes that might hamper the defense industry. After the war, however, unions agitated for higher wages, and numerous strikes resulted. The tide of public opinion turned partially against unions at this time, and Congress passed a law in 1947, the Taft-Hartley Act, restricting the power of unions. Among other measures, Taft-Hartley made it possible for management to hire non-union workers and to postpone strikes.

Though some amount of anti-union sentiment persisted between the 1940s and 1960s, in general unions remained a very powerful force in American business and politics at this time. Their power was partly a function of the economy’s stability. World War II had ended the Depression, and the boom in industry sparked by the need for war materials continued in the decades that followed. America was the world’s leading industrial power, and the skills required in the workplace, like the products generated by U.S. industry, changed very little. Workers, in part thanks to unions and their stable relations with management, could count on wages that would allow them to pay for their basic needs, stable long-term employment, and generous health-care and retirement benefits.

In the 1960s and 1970s, though, the United States fell behind other countries in industrial productivity. Other countries could provide high-quality products at cheaper prices than American companies could, and U.S. businesses had to change their strategies to compete. One of the reasons that other countries had an advantage over the United States when it came to manufacturing was that the higher wages paid to U.S. workers resulted in higher prices for the final manufactured products. As management began trying to cut costs and find new ways of doing business, their relations with labor grew strained. Business owners began reducing wages and trying to increase efficiency through measures that cut into the gains unions had made over the preceding decades.

The 1980s and 1990s saw unions struggle to maintain their strength, as changes in laws pertaining to taxes and international trade made it easier for business owners to move manufacturing facilities to foreign countries where workers could be paid less. These decades also saw the U.S. economy shift from a focus on manufacturing to a focus on service, that range of industries whose common denominator is that people are employed to interact with other people, rather than to make physical objects. The financial, insurance, health-care, legal, retail, real estate, and utilities industries are included in this designation. Unions had always been strongest in the area of manufacturing, and they had never succeeded in taking hold among service workers. Additionally, unions were not equipped to deal with the rapidly changing realities of American economic life. Service jobs paid unskilled workers less than manufacturing jobs, and management in these industries usually provided little in the way of benefits. Workers could no longer depend on management for long-term employment, health care, or retirement planning. Even though many working Americans were unsatisfied with these realities, unions did not appear to have solutions, since the ground rules of labor-management relations had shifted.

Recent Trends

At the height of union influence in the 1940s, more than one-third of employed Americans were union members. By the early 1980s, this figure had dropped to around 20 percent, and by the early twenty-first century, only about 12 percent of the U.S. labor force was unionized. In addition to the structural changes in the economy described above, unions in the late twentieth and early twenty-first centuries had to grapple with government opposition under conservative Presidents such as Ronald Reagan (1980-1988), George H. W. Bush (1988-1992), and George W. Bush (2000-2008), each of whom consistently took a pro-management stance in economic matters. The most heavily unionized industries, as of 2006, were those dominated by local, state, or federal government entities and therefore not subject to the rapidly changing economic realities that shaped other industries. While only 7 percent of workers in the private (non-government) sector belonged to unions, more than 36 percent of government workers were union members. The most powerful unions in the United States were typically those of public-school teachers, policemen, and firefighters. Unions had been instrumental in shaping the U.S. economy in the twentieth century, but workers at the beginning of the twenty-first century were largely in the position of fending for themselves in their relations with management. It was unclear whether organized labor would be able to answer the challenges facing workers of the future.