Industrial Relations


Industrial Relations, broadly, all dealings, transactions, and activities affecting the determination and enforcement of the terms and conditions of employment. The main parties involved typically trade unions and their employers (or collective representatives), although government also plays an important role via labour legislation.


In the early 19th century, before the growth of the factory system, wages and hours of labour were usually arranged in direct dealings between employers and individual employees, replacing the traditional craft-based arrangement whereby guilds had set the terms of labour. The prevailing legal, social, and economic climate did not favour the development of workers’ organizations. Because the disparity in bargaining power between employers and employees caused many cases of abuse, however, the workers in various industries began to organize trade unions, which demanded better terms of employment. A key to their power was that as a disciplined and unified force they could use threats of mass action such as strikes, or other forms of industrial action, to press their demands. They were helped by the eventual enactment of laws governing conditions of employment, conditions in the workplace, and industrial relations practices such as collective bargaining.

The relationship between employers and employees developed differently in various parts of the world. In particular, the goals and activities of European trade unions differed considerably from those of trade unions in the United States. European trade unions were primarily national organizations traditionally espousing socialism and allied closely with political movements and parties. The typical US trade union evolved as primarily a local organization devoted to the advancement and protection of the economic interests of its members, with national and statewide affiliations but no loyalty to a particular political ideology.

The protective legislation, the earliest type of employment regulation, was enacted principally during the early 20th century. Such legislation regulated areas such as the maximum hours of work and minimum wages of women and children, and hazardous practices affecting them as employees. Under another type of protective legislation, industrial employees became entitled to benefits such as compensation for industrial accidents and income support in the event of illness, disability, or unemployment, and pensions for their old age. In more recent years, many countries have also introduced legislation in favour of equal pay for women and men, and in favour of equal opportunity in the job market by forbidding discrimination by employers on the basis of such criteria as race, gender, and in some cases age.


The larger employers of labour now usually have departments dealing with the negotiation and administration of industrial relations agreements. Such departments are responsible for day-to-day administration of matters relating to employee’s contracts and procedures governing layoffs, promotions, discipline, grievances, and arbitration. Many unions have specialists trained and assigned to deal with management specialists in negotiations and other matters. Collective bargaining can be at a variety of different levels, from an entire industry to a single plant. Recently, however, collective bargaining has become increasingly localized in some countries (such as the United Kingdom), with wages and other terms of employment such as working hours and holidays tending to reflect more closely the performance of particular companies or even plants within companies.

When the employees in a plant are not represented by a union or equivalent association, the terms and conditions of employment are usually determined by direct arrangements between plant management and employee. A union seeking to deal with an employer as the exclusive bargaining representative of its employees may try to persuade the employer to recognize it and institute a closed-shop agreement, whereby only members of that particular union may be employed by the employer, though such arrangements are now illegal in many countries.

Most countries have arrangements, sometimes statutory, for arbitration of industrial disputes by neutral conciliation bodies such as the Advisory, Conciliation and Arbitration Service (ACAS) in Britain. A popular form of arbitration in the United States is pendulum arbitration, where the arbitrator listens to both parties then decides in favour of one or the other, with no compromise allowed. Arbitrators of labour-management disputes are impartial, disinterested professionals. In some instances, arbitration is conducted by a board of arbitrators of which all members except a neutral chair with the deciding vote are interested individuals. Arbitration is conducted either by an arbitrator selected especially for a case or by an umpire, referee, or chair designated for the duration of the collective agreement. Dealings between most modern-day representatives of management and unions have been characterized by mutual respect (however grudging in some cases), the product of years of negotiation and joint administration of agreements. This attitude of mutual confidence has fostered more cooperative labour relations than formerly prevailed. Labour-management arbitration has also contributed to industrial peace because it substituted the binding award of a respected neutral for the exertion of economic force during the term of a collective agreement. Although labour and management continue to differ on various economic problems, they generally realize that neither group can reach its goals without the assistance of the other. Relations between labour and the government can be more contentious, especially with the government as the employer in the public sector or where the government is operating an incomes policy as part of an overall economic policy.

By the mid-1990s the power of organized labour had decreased markedly. Union activists are still faced with jail in China and other newly industrializing authoritarian states when they attempt to form unions outside the state apparatus. Many countries followed the example of Britain by weakening the powers of trade unions through, for example, making secondary picketing (picketing of places other than one’s workplace) illegal, prohibiting the closed shop, and making ballots on strike action compulsory. The result was a remarkable fall in the number of strikes. With more and more people employed in service occupations rather than in manufacturing, union membership declined—and so did union strength in labour negotiations. This process was exacerbated by other economic and political factors held to signal the end of Fordism, the system supposed by some economists to constitute the characteristic form of high capitalism for most of the 20th century.

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