Labor NegotiationsLabor Negotiations

Labor NegotiationsLabor Negotiations• Contract expires this year.Contract expires this year.

• LaborLabor will produce a set of demands. will produce a set of demands.

– 10% above current contract.10% above current contract.

• ManagementManagement will establish negotiation will establish negotiation range based on current contract .range based on current contract .

– Current Wages 80% <x<150%Current Wages 80% <x<150%

– Benefits, Profit Sharing and Annual Benefits, Profit Sharing and Annual Raises 0% <x<150%Raises 0% <x<150%

Labor PositionLabor Position

• Labor demands 10% over current contract.Labor demands 10% over current contract.

$11.00$11.00$10.00$10.00

Current Contract

Current Contract

Management PositionManagement Position• Enter Starting position with one bids (wages, benefits, profit Enter Starting position with one bids (wages, benefits, profit

sharing, and annual wage increase) to Labor:sharing, and annual wage increase) to Labor:– First bid has to be within the parameters (wages 80% and First bid has to be within the parameters (wages 80% and

150%, other between 0% and 150%)150%, other between 0% and 150%)– Negotiation ceiling is automatically 10% higher than Negotiation ceiling is automatically 10% higher than

starting position.starting position.

$11.00$11.00

Firm 1Firm 1Firm 1Firm 1 Firm 2Firm 2Firm 2Firm 2 Firm 3Firm 3Firm 3Firm 3$8.00$8.00$8.00$8.00 $11.50$11.50$11.50$11.50 $12.00$12.00$12.00$12.00

LaborLaborLaborLabor

$11.00$11.00$11.00$11.00First BidFirst BidFirst BidFirst Bid

$10.00$10.00$8.00$8.00 $12.00$12.00$11.50$11.50

NegotiationNegotiation• Labor looks at only the first bid made by Labor looks at only the first bid made by

management and selects the best bid over 10% of management and selects the best bid over 10% of current contract current contract this becomes labor’s new demandthis becomes labor’s new demand ..

Firm 1Firm 1Firm 1Firm 1 Firm 2Firm 2Firm 2Firm 2 Firm 3Firm 3Firm 3Firm 3

$8.00$8.00$8.00$8.00 $11.50$11.50$11.50$11.50 $12.00$12.00$12.00$12.00LaborLaborLaborLabor

$12.00$12.00$12.00$12.00First BidFirst BidFirst BidFirst Bid

$10.00$10.00$8.00$8.00 $12.00$12.00$12.00$12.00$11.50$11.50

LaborLabor

Settle Settle Firm 3Firm 3

Settle Settle Firm 3Firm 3

NegotiationNegotiation

• Labor looks at the remaining negotiating ceilings Labor looks at the remaining negotiating ceilings by the firms not offering the best first bid.by the firms not offering the best first bid.

$8.00$8.00$8.00$8.00 $11.50$11.50$11.50$11.50$12.00$12.00$12.00$12.00

$8.80$8.80$8.80$8.80 $12.50$12.50$12.50$12.50First BidFirst BidFirst BidFirst Bid

Second BidSecond BidSecond BidSecond Bid

$10.00$10.00$8.00$8.00 $12.00$12.00$11.50$11.50

LaborLabor

$8.80$8.80 $12.50$12.50

Firm 1Firm 1Firm 1Firm 1 Firm 2Firm 2Firm 2Firm 2LaborLaborLaborLabor

NegotiationNegotiation• If the negotiating ceiling is higher than labor’s demand, If the negotiating ceiling is higher than labor’s demand,

labor will settle for half the difference between first bid labor will settle for half the difference between first bid and labor’s demand. No strike will occur.and labor’s demand. No strike will occur.

$8.00$8.00$8.00$8.00 $11.50$11.50$11.50$11.50$12.00$12.00$12.00$12.00

$8.80$8.80$8.80$8.80 $12.50$12.50$12.50$12.50First BidFirst BidFirst BidFirst Bid

Second BidSecond BidSecond BidSecond Bid

SettleSettleSettleSettle $11.75$11.75$11.75$11.75

$10.00$10.00$8.00$8.00 $12.00$12.00$11.50$11.50

LaborLabor

Settle Firm 2

Settle Firm 2

$12.50$12.50

Firm 1Firm 1Firm 1Firm 1 Firm 2Firm 2Firm 2Firm 2LaborLaborLaborLabor

$8.80$8.80

NegotiationNegotiation• If the negotiating ceiling is lower than the labor’s If the negotiating ceiling is lower than the labor’s

demand. Settlement is half way between labor’s demand. Settlement is half way between labor’s demand and the negotiating ceiling, resulting in a demand and the negotiating ceiling, resulting in a strike.strike.

STRIKESTRIKE

$10.00$10.00$8.00$8.00 $12.00$12.00

LaborLabor

Settle Firm 1

Settle Firm 1

$8.00$8.00$8.00$8.00$12.00$12.00$12.00$12.00

$8.80$8.80$8.80$8.80First BidFirst BidFirst BidFirst Bid

Second BidSecond BidSecond BidSecond Bid

SettleSettleSettleSettle $10.40$10.40$10.40$10.40

Firm 1Firm 1Firm 1Firm 1LaborLaborLaborLabor

$8.80$8.80

Length of StrikeLength of Strike

• For every $1 difference in wages, 1 week For every $1 difference in wages, 1 week strike.strike.

• For every $300 difference in benefits, 1 For every $300 difference in benefits, 1 week strike.week strike.

• Each % difference in profit sharing and Each % difference in profit sharing and annual wage increase, 1 week strike.annual wage increase, 1 week strike.

• Max length of strike 12 weeks.Max length of strike 12 weeks.

Strikes always occur at the end of the year.

If a strike is 21 days long, workers would picket during the last three weeks in December.

If you have inventory on hand during the

strike, sales continue. R&D projects also continue.

TacticsTactics

• Your company will need to determine which negotiation tactics best serves your purposes.

• Companies with low automation will want to control labor costs. They would offer the lowest acceptable wage, which is 80% of the current contract and eliminate all benefits.

• Companies with high automation might choose to be extremely generous with their workers, which will impose higher costs on their competitors (Remember, Labor looks at all offers and makes the highest offer part of their demand).