MHR522 Week 1 Note 1

Chapter 3: Economic, Social, and Political Environments GOAL: The environment of industrial relations helps shape the labour-management relationship and such system outcomes as wages, benefits, work rules, and conflict. In this chapter we examine how the labour market, social conditions, and the political environment affect industrial relations. Learning Objectives: understand how the government's macroeconomic policy influences industrial relations and describe the impact of free trade, deregulation, and privatisation on unions; describe the elasticity of supply and demand and its impact on labour power; discuss the importance of work-leisure decisions and identify the institutional and noncompetitive factors that affect labour supply; describe social conditions in Canada that test the effects of globalisation and are part of the environment of industrial relations; describe the impact of compositional changes on unions; identify how societal changes impact work-life balance; understand why new forms of work structures pose challenges for labour and employment relations; describe the structural elements of the Canadian political system that help labour; understand the relationship of globalisation and politics. The Economic Context Macroeconomic Policy: ● Arguably the most important single influence on industrial relations has been the federal government's macroeconomic policy with respect to the liberalisation (the loosening of government controls) of markets ○ Almost all industries have been affected: ■ Directly through deregulation ● Deregulation: a policy designed to create more competition in an industry by allowing prices to be determined by market forces ■ Indirectly through policies that promote free trade in goods and services ● For example: Canada-United States-Mexico Agreement ○ Canada-United States-Mexico agreement (CUSMA): a trade agreement among Canada, the United States, and Mexico that was signed on November 30, 2018, but not yet ratified by any of the three countries (called USMCA by the US

■ industrial relations : The term that encompasses all aspects of the employment relationship between employers and its unionised employees. ● Although the latter term could signify relationships between an employer and its non-unionized employees The Labour Market: ● For non-union firms , labor market forces will determine employee compensation and conditions ● When the growth of the supply of labor through population growth and immigration is insufficient to meet the future labor demand, lower economic growth will result ● The main implication of this is that our current high standard of living will be difficult to maintain unless the demand for labour is matched by supply. Supply and Demand Framework ● In Figure 3.1, we show a typical labor market equilibrium in which the supply (SS) and demand (DD) curves for labor determine the quantity of labor supplied at the competitive wage (We) and employment level (Ne). If the demand for labor shifts to 0101 due to external factors such as the Oil Sands boom, we can predict some outcomes. The new equilibrium shows higher wages (Wcl) and a higher employment level (Ncl)

Elasticity of supply and demand ● The effect of the demand shift will depend on the slope of the supply curve (SS) ○ The steeper the supply curve, the greater is the increase in wages caused by a shift in demand. ● Inelastic supply/demand of labor: Steep supply/demand curve ● Elasticity of supply/demand for labor: Flat supply/demand curve ● Elasticity of supply (demand): the labor responsiveness of supply (demand) caused by a change in the wage rate; ○ for example, if a small increase in wages causes a large increase in the supply of labor, the supply curve is said to be elastic Labour power and marshall's conditions . (Marshall (1920) describes four theoretical conditions that determine the wage elasticity of labour as we have defined it) Questions: What factors determine the shape of the demand curve for labor? How does the shape of the demand curve affect labor power? ● Marshall (1920) describes four theoretical conditions that determine the wage elasticity of labor as we have defined it ○ Product market ■ Wage-employment tradeoff: The more competitive the product market, the greater the employment impact of a wage increase and the elasticity of demand for labor. ● When a union increases wages, the higher costs may be reflected in reduced sales. ● Unions will tend to have more power when there is less competition in the firm's product market. ○ Substitution effect ■ The easier it is to substitute capital (machines, new technology, etc) for labor, the less power labor will have to raise wages ● The firm that can easily substitute other factors of production for labor will possess more bargaining power. ● A longer term phenomenon ● Certain jobs are more essential to the production process than others and hence harder to substitute ○ For example: Airlines cannot function without pilots,and buildings cannot be constructed without electricians ○ Labor intensity