Labor Market Changes and Their Impact on U.S. Employment Relations

Origins of the American Labor Movement

The origins of the labor movement lay in the formative years of the American nation, when a free wage-labor market emerged in the artisan trades late in the colonial period. The earliest recorded strike occurred in 1768, when New York journeymen tailors protested a wage reduction. The formation of the Federal Society of Journeymen (shoemakers) in Philadelphia in 1794 marks the beginning of sustained trade union organization among American workers. From that time on, local craft unions proliferated in the cities, publishing lists of prices for their work, defending their trades against diluted and cheap labor, and increasingly demanding a shorter workday. A job-conscious orientation was quick to emerge, and in its wake followed the key structural elements characterizing American trade unionism (LABOR, 1991).

The early labor movement was, however, inspired by more than the immediate job interests of its craft members. It harbored a conception of the just society, deriving from the Ricardian labor theory of value and from the republican ideals of the American Revolution, which fostered social equality, celebrated honest labor, and relied on an independent, virtuous citizenry. The transforming economic changes of industrial capitalism ran counter to labor's vision. The result, as early labor leaders saw it, was to raise up "two distinct classes, the rich and the poor." Beginning with the workingmen's parties of the 1830s, advocates of equal rights mounted a series of reform efforts that spanned the nineteenth century. Most notable were the National Labor Union, launched in 1866, and the Knights of Labor, which reached its zenith in the mid-1880s (LABOR, 1991).

The idea of the working-class consumer citizen constituted a direct response to the cultural and political power of the prewar American labor movement, as business leaders drew upon and reoriented understandings of working-class solidarity and commitment to social progress, linking blue-collar working men to their families, their jobs, and the nation. Although business interests attempted to shape American consumer culture into a unified commitment to national economic progress during the early postwar period, the economic and cultural contradictions of their vision subsequently undermined that project. Collapsing blue-collar labor markets and the perception that consumer citizenship threatened patriarchal relations within the working-class home shattered the dream of working-class consumer citizenship by the early 1970s (Sheehan, 2003).

Employment-at-Will and Labor Market Flexibility

The United States is widely recognized as having the most flexible labor market in the industrialized world. At the heart of this reputation lies the historic employment-at-will default rule for indefinite-term employment contracts. This common law rule was first recognized in the middle of the nineteenth century and was adopted in every state by the early twentieth century. Employment at will, in its classic formulation, holds that, absent a written contract stating otherwise, an employee can quit or be fired for "a good reason, a bad reason, or no reason at all."

Despite America's reputation for employment flexibility, substantial limitations to the employment-at-will rule have been introduced over time. Foremost among the statutory limitations are prohibitions on the "bad reasons" for which an employee may be fired. The National Labor Relations Act (1935) forbids discriminatory employment practices based on a worker's participation in collective action (Schanzenbach, 2003).

The effects that the labor market has on employee relations can be viewed in two ways: through the perspective of employees themselves, and through the perspective of the market. In 1991, Bridges and Villemez conducted research attempting to understand this process from the market's viewpoint. Their analyses of economic transactions show that most exchanges are shaped by both market and non-market considerations. In the 1970s, interest grew regarding employment relationships and the labor market, and researchers began attempting to define internal labor markets (ILMs) in relation to employment and other domestic settings. A significant development came when ILMs were recognized in conjunction with bureaucratic employment structures — that is, personnel departments, job classifications, and pay systems — which led to ILMs being placed under governance structures.

Internal Labor Markets and Employment Relations

Employee relations is a term often used interchangeably with industrial relations and human resource management (HRM) to describe particular HRM or industrial relations (IR) philosophies and approaches. The debate over whether to use "ER," "HRM," or "IR" is rooted in continuing discussions about the nature and direction of workplace change, even though there is considerable disagreement about what all three terms mean (Employee relations (ER), 2005).

Some researchers have described trends in local public sector pay systems in terms of the traditional competitive model associated with ILMs, while others have stressed the influence of unions and the unique institutional aspects of local government wage determination. Systematic empirical investigations have dealt primarily with the effect of unions on wages within specific occupations. Both academics and the general public have grown increasingly interested in public sector wage determination, which has itself been closely associated with the labor market (Bridges & Villemez, 1991; Tsuru & Rebitzer, 1995). Academic interest has grown as this sector's economic influence has increased and as the budget problems facing many local governments have become apparently insurmountable. Civic awareness intensified with the rapid growth of unions and subsequent work stoppages in the public sector, especially in urban areas.

Open labor markets essentially held that a worker's previous experience is of little to no value to new employers. This perspective had a direct impact not only on how employees perceived their work, but also added the stress of knowing that their experience might not carry over into another profession with much advantage — making flexibility within the labor market difficult to nearly nonexistent. Researchers reported that stipulations emerged whereby, depending on the specific assets involved in workers' training investment, employment relationships would either be absorbed into the governance structure or subjected to external market mechanisms. Local governments are subject to supply and demand forces in the geographic labor market in which they operate. Increased wage demands from private industries in an area, for instance, compel public sector employers to match those increases in order to retain qualified personnel. Furthermore, like other buyers of labor services, local government units that expand their workforces often must raise wages to attract workers (Tsuru & Rebitzer, 1995).

Researchers believe that ILMs can be understood as a smaller component of employment bureaucracy (Bridges & Villemez, 1991). ILMs may take the form of job posting and bidding systems or job ladders. There is a marked contrast between studies concerned with external labor markets (ELMs) and those concerned with ILMs. Even outside economics, most external market studies tend to assume a fully competitive structure, or variation along relatively narrow grounds such as the degree of monopoly in the market for a particular occupation. Few studies have aimed to capture variation in the basic structural components that allow labor markets to function with varying degrees of efficacy. An important aspect of examining municipal wages is assessing the influence of both market forces and unionism on public sector compensation. At an aggregate wage level, the forces affecting individual groups of workers can be placed in the perspective of the entire payroll, providing valuable insights into wage-induced budget pressures (Tsuru & Rebitzer, 1995).

Conclusion

It is evident that all aspects of the workplace have a direct correlation with employee relations. The research has shown that the labor market affects one's ability to earn based on area of expertise, that the worth of job experience is determined not by the employee or even by one's supervisor but by governance structures, and that the labor market even influences one's decision of whether or not to file a grievance when unhappy at work. The research also indicates that this is not a new issue — it can be traced back for decades. There has long been a strong need to understand the labor market and all it entails, as well as to justify the effects that labor market determination has on employee relationships to one another and to the organization as a whole.