Chapter 4 – The Role of the Environment

True/False

[QUESTION]
1. Though the three-tiered model shows that the external environment influences the power of the bargaining parties, it is also true that the bargaining parties can affect the external environment.
Ans: True
Page: 77-78
Difficulty: Medium

[QUESTION]
2. Bargaining power is defined as the ability of one party to achieve its goals in bargaining in the presence of opposition by another party to the process.
Ans: True
Page: 79
Difficulty: Hard

[QUESTION]
3. Strike leverage refers only to the relative degree to which workers are willing to sustain income losses if they choose to strike.
Ans: False
Page: 79
Difficulty: Medium

[QUESTION]
4. If an employer’s total bargaining power increases, both management and labor benefit.
Ans: True
Page: 79
Difficulty: Medium

[QUESTION]
5. Although both management and labor’s total power suffers during an economic downturn, labor’s relative power and strike leverage usually declines as well.
Ans: True
Page: 79
Difficulty: Hard

[QUESTION]
6. The wage-employment trade-off recognizes that as unions raise the wages of their members, they will attract more employment to the workplace.
Ans: False
Page: 81
Difficulty: Medium

[QUESTION]
7. Alfred Marshall argued that unions are most powerful when the demand for their labor is highly elastic.
Ans: False
Page: 82
Difficulty: Easy

[QUESTION]
8. By raising the costs of other factors of production (e.g., technology), unions would limit the long-run potential for wage increases.
Ans: False
Page: 82
Difficulty: Medium

[QUESTION]
9. Declines in product demand have been shown to have a weaker downward effect on wages in non union sectors than in union sectors.
Ans: False
Page: 85
Difficulty: Medium

[QUESTION]
10. Wage and price controls can limit a union's bargaining power.
Ans: True
Page: 85
Difficulty: Medium

[QUESTION]
11. The union-nonunion relative wage differential widened dramatically during the early 1980's, lending support to the idea that unions indeed cause inflation to rise.
Ans: False
Page: 85 & 87
Difficulty: Easy

[QUESTION]
12. Union support for full-employment policies, minimum-wage legislation, workers' compensation, and social security programs might lead to inflationary pressures in the economy.
Ans: True
Page: 87
Difficulty: Easy

[QUESTION]
13. In certain industries, one factor that has reduced the union's ability to keep wages out of competition is deregulation.
Ans: True
Page: 89
Difficulty: Easy

[QUESTION]
14. Today, over half of the labor force is now classified as white-collar workers.
Ans: True
Page: 94
Difficulty: Easy

[QUESTION]
15. Barry Bluestone and Bennett Harrison claim that the growth in the number of service and part-time jobs is a sign that the economy is healthy.
Ans: False
Page: 95
Difficulty: Medium

[QUESTION]
16. Robert Lawrence first argued that the United States is undergoing deindustrialization and a dramatic change from a service industry to a manufacturing industry.
Ans: False
Page: 95
Difficulty: Medium

[QUESTION]
17. The Internet has generally facilitated organizing by increasing a union’s communication with home-based employees.
Ans: False
Page: 95
Difficulty: Easy

[QUESTION]
18. Recent opinion polls reveal an improvement in the public's image of unions and union leaders.
Ans: True
Page: 97
Difficulty: Easy

[QUESTION]
19. The dual image of trade unions concerns the American public's view of unions as big and powerful and, at the same time, beneficial to society.
Ans: False
Page: 98
Difficulty: Medium

[QUESTION]
20. One reason why there has been increasing pressure on the union sector from nonunion competition is because employers have been able more easily to shift production to nonunion sites.
Ans: True
Page: 101
Difficulty: Easy

[QUESTION]
21. During the 1980s some unions were able to broaden the bargaining agenda and become more involved in managerial decision making.
Ans: True
Page: 101
Difficulty: Medium

Multiple Choice

[QUESTION]
22. Management's strike leverage is affected by
A. the firm's ability to withstand a strike.
B. worker's ability to harm production.
C. worker's ability to affect sales and profits.
D. management's ability to find alternative ways to maintain production, sales, and profits.
E. all of the above.
Ans: E
Page: 80
Difficulty: Easy

[QUESTION]
23. Management can have higher strike leverage
A. if they have low ongoing capital expenses.
B. if they have ready access to automated equipment.
C. if they have a high stock of inventories.
D. if other firms' operations have also been shut down.
E. all of the above.
Ans: E
Page: 80-81
Difficulty: Medium

[QUESTION]
24. One way unions can make the demand for the final product more price inelastic is by
A. substituting other factors of production.
B. influencing consumer action through "Buy Union" campaigns.
C. by increasing the availability of other inputs used in the production process.
D. by organizing in large industries.
Ans: B
Page: 82
Difficulty: Easy

[QUESTION]
25. According to Alfred Marshall, the demand for labor is highly elastic
A. when labor cannot be easily replaced by substitute workers.
B. when the demand for the final product is price inelastic.
C. when the supply of nonlabor factors of production is price elastic.
D. when the ratio of labor costs to total costs is high.
E. c and d.
Ans: E
Page: 82-83
Difficulty: Hard

[QUESTION]
26. Unions will have more strike leverage
A. if the unemployment rate is high.
B. during the upswing of a business cycle.
C. during times of falling product demand.
D. if their family members are unemployed.
E. c and d.
Ans: B
Page: 85
Difficulty: Medium

[QUESTION]
27. Which of the following factors decreases a union's strike leverage?
A. If the union has large strike funds.
B. When workers have accumulated savings.
C. A high unemployment rate in the local labor market.
D. When workers hold strong, negative attitudes towards management.
Ans: C
Page: 85
Difficulty: Medium

[QUESTION]
28. Which of the following reasons support the view that unions cause inflation?
A. Unions represent 16 percent of the labor force.
B. Evidence that wage increases in the union sector lead to lower wages in the non-union sector.
C. Evidence which shows that union wages respond less to changing economic conditions.
D. Union contracts are often multiyear.
E. c and d.
Ans: E
Page: 85
Difficulty: Hard

[QUESTION]
29. Why do some labor leaders want to abandon the NLRA?
A. Increased use of employer tactics such as the ability to file numerous challenges and requests for postponements during the election period.
B. Enormous delays in the decisions and representation elections that are caused in part by a lack of commitment to the NLRA.
C. Frustrations with the current labor board administration.
D. Increased union-avoidance tactics by management.
E. all of the above.
Ans: E
Page: 90-91
Difficulty: Medium

[QUESTION]
30. What are some of the labor force trend(s) in the American economy?
A. The labor force is expected to increase during the first decade of the twenty-first century.
B. In recent years more women have entered the labor force, including working mothers.
C. The median age of the workforce will be increasing in the near future.
D. More educated women will be entering the work force.
E. all of the above.
Ans: E
Page: 92-93
Difficulty: Medium

[QUESTION]
31. As a result of the changing labor force trends in the economy, it can be expected that
A. workplace conflict will decrease due to the result of less competition for high paying jobs.
B. demand for union representation could increase as a result of increased conflict in the workplace as workers become frustrated by a lack of upward mobility.
C. women may represent a formidable force that can pressure both employers and unions to meet their social needs.
D. women may become less of a focal point for union organizing campaigns.
E. b and c.
Ans: E
Page: 93
Difficulty: Hard

[QUESTION]
32. Changing labor force supply characteristics may force firms in the future to
A. reduce firm level educational programs for both blue and white collar workers given declines in the educational achievement of many school graduates.
B. develop remedial programs for the educationally disadvantaged while providing more career development opportunities for the growing number of highly educated workers in the labor force.
C. place skilled workers in unskilled jobs due to the abundance of skilled workers.
D. none of the above.
Ans: B
Page: 94
Difficulty: Easy

[QUESTION]
33. Which of the following is true about recent occupational and industry trends?
A. The percentage of the labor force employed in service sector is now 20 percent.
B. The portion of the labor force employed in the manufacturing sector is now 31 percent.
C. Manufacturing industries have been migrating from the southeast and south to the north and northwest.
D. There is a growing trend towards part-time jobs and home-based occupations.
Ans: D
Page: 95
Difficulty: Easy

[QUESTION]
34. What is a likely consequence of recent industrial and occupational trends?
A. As more workers reenter the manufacturing sector because of high wages, union membership will undoubtedly increase.
B. As more workers become part time employees, unions will find it difficult to organize them.
C. As more workers enter the service sector, union strike leverage will likely increase due to the
fact that service sector workers are more easily replaceable.
D. As more workers enter the manufacturing sector, employers will find it more likely to lay off workers because of the wage-employment trade-off.
Ans: B
Page: 95
Difficulty: medium

[QUESTION]
35. One of the main challenges that unions will face as a result of ongoing demographic changes is that
A. it will be much more difficult for unions to maintain internal solidarity because of the increasing diversity of the work force.
B. unions will have to limit their membership to the traditional blue collar workers to increase membership.
C. unions will have to prevent their new younger workers from developing a political base in unions so that conflict can be minimized at the workplace.
D. unions must prevent part time employees from gaining membership status so that internal union conflict can be prevented.
E. all of the above.
Ans: A
Page: 96-97
Difficulty: Hard

[QUESTION]
36. Analysis of a wide range of poll data shows that
A. Americans holds union leaders in high esteem.
B. Americans strongly disapprove of the functions unions perform in representing worker interests.
C. Americans approve of unions in general and also believe in the right of workers to join unions of their own choosing.
D. Americans do not accept the legitimacy of unions as a means for protecting the economic and job related interests of workers.
Ans: C
Page: 97
Difficulty: Medium

[QUESTION]
37. The argument that industrialization and not capitalism per se caused changes in the relationship between workers and employers, which in turn, led to unionization is most closely associated with
A. John Commons.
B. Karl Marx.
C. Kerr, Dunlop, Harbison, and Myers.
D. Samuel Gompers.
Ans: C
Page: 99
Difficulty: Easy

[QUESTION]
38. The high-tech paradox states that
A. in order for firms to be highly successful, they must have less technology and more labor.
B. in order for firms to be highly successful, they must have more technology so that firms in the future will be free of labor problems.
C. American plants with the most advanced technology are often the best in productivity. The dilemma lies in the fact that to obtain such technology, companies must spend a fortune.
D. American plants with the most advanced technology are not always the most productive.
Ans: D
Page: 100
Difficulty: Medium

[QUESTION]

39. What environmental factor(s) reduced union bargaining power during the 1980s?
A. High unemployment.
B. Pressure from nonunion competition.
C. Heightened international competition.
D. A liberal swing in political ideology.
E. a, b, and c.
Ans: E
Page: 100-101
Difficulty: Medium

[QUESTION]
40. In 1995 John Sweeney won the election for presidency of the AFL-CIO. He ran on the platform that
A. sought to shift focus in union activities and expenditures toward union organizing.
B. sought to reform the NLRA in favor of union organizing.
C. sought to reduce Clinton’s free trade movement in order to strengthen strike leverage.
D. sought to reduce Clinton’s free trade movement in order to strengthen bargaining leverage.
Ans: A
Page: 101
Difficulty: Easy

Short Questions and Answer Key

[QUESTION]
41. Why might unionized older workers engaged in bargaining a labor contract not restrain their wage demands even though the demand for their labor is very elastic?
Ans:
Unionized older workers may have high seniority and thus not face any layoffs that would follow from a wage increase. Or, these workers may not believe that the demand for their labor is in fact elastic. They may not believe management’s threats. Or, the demand curve for labor may be shifting out over time due to overall growth in the economy or growth in product demand so an elastic demand for labor only leads to a slowdown in the growth in employment and not a decline in employment which leads workers to be unconcerned about these effects.
Page: 82-83
Difficulty: Medium

Essay Exam Questions and Answer Key

[QUESTION]
42. Suppose someone said to you that most bargaining theories are wrong because they assume that the elasticity of demand for labor influences bargaining power.  This person claims that the elasticity of demand for labor has no effect on contract outcomes because, in practice, unions ignore the tradeoff between wages and employment.  What do you think -- does the elasticity of demand for labor matter?  Cite empirical evidence that supports your viewpoint.
Suggested Answer:
Student answers may vary.
Elasticity of demand for labor does affect contract outcomes. Higher wages often bring cuts in employment, and thus unions may, in some cases, choose not to raise wages as much as they could. This is called the wage-employment trade-off. Unions sometimes moderate their wage demands given these employment effects. Unionized apparel workers received only modest wage increases in their collective bargaining agreements in recent years, in part because they feared that any higher wage payments would cause apparel firms to more aggressively shift production offshore or to outsource production domestically to nonunion plants or firms than they would otherwise. This trade-off between wages and employment is therefore an important microeconomic influence on bargaining power and outcomes. Ignoring the employment effects from wage does have a long-term effect on employment opportunities for workers and unions. An example that can be cited to support this viewpoint is the case of United Mine Workers of America (UMW) in the 1940s.
Page: 82-84
Difficulty: Medium

[QUESTION]
43. In recent years in some firms and industries unions have agreed to pay cuts and other concessions while in some other firms and industries collective bargaining has continued as usual and produced an extension of traditional outcomes.  Some of the concessionary agreements include only pay cuts or freezes while some others include union gains ("quid pro quos").  What factors explain the diverse form and scope of concession bargaining?  Give examples where applicable.
Suggested Answer:
Concession bargaining depends on several factors, which include bargaining power of unions, the economic context, the union’s strike leverage, and very significantly, the demand for labor.
Unions may agree to pay cuts and other concessions if the employment effects of higher wages, may have an effect of workers losing their jobs due to the firm’s non-sustenance of increased wages. Similarly if union’s strike leverage cannot hold for a long period, and may result in loss of employment, concession bargaining maybe applicable. 
To quote the text, “Concessionary bargaining from the 1980s on offered evidence that unions and workers do consider the employment effects of higher wages, particularly when they might lead to a plant closing. Yet, as Ross asserted, political factors played an important role in shaping whether and to what extent employment was a concern in wage bargaining. Workers’ willingness to accept concessions and what they won in exchange for those concessions was affected by a host of factors, including business and union strategies.”
Pages: 78-84
Difficulty: Medium

[QUESTION]
44. Suppose you were called in to act as a consultant to a union that had just won representation rights in a manufacturing plant.  The workers in that union were contemplating going out on strike to press for a substantial wage increase.  You were asked to advise the union as to whether or not you thought their strike would be successful.  What would you consider and like to know when assessing the likelihood that the strike would succeed?
Suggested answer:
Student answers may vary. Following are some of the aspects that may be discussed. The more an employer is willing and able to sustain a strike, the more likely the work force will be to settle a strike before attaining all the union’s goals. One should consider the effects of a strike on production, sales, and profits. The greater the profits lost by the firm, the more ready the firm will be to give in to labor’s demands. The ability and willingness of the work force to stay out on strike is another major determinant. The components of bargaining power, strike leverage, and elasticity of demand for labor emerge as the critical determinants of how such conflicts are resolved.
It should be noted that unions are most powerful when the demand for labor is highly inelastic. The difficulty of replacing workers, the demand for the product, the supply of nonlabor factors of production, and labor’s share of total costs affect the elasticity of demand for labor. Attention should also be given to the prevailing wage level in the local labor market as well as the employer’s ability to pay alternative wage increases, and the strength of the newly elected union. Based on all of these, one must decide if the wage increase demand is realistic and whether it has a good chance of succeeding.
Page: 80-82
Difficulty: Hard