18 THE CHANGING WORKPLACE TWO RAIDS TBUS 102

18. THE CHANGING WORKPLACE; TWO RAIDS TBUS 102 AB: BUSINESS AND SOCIETY SHALINI SARIN JAIN M IL A G U A T R U D M S N C 2 H 0 O 1 5 O L O F B U S IN E S S

COURSE STRUCTURE Business Environment Pink: complete Royal Blue: current Role of Business in Society MNCs and Globalization Stakeholder: Natural Environment Social Contract of Business Impact of Business on Society Stakeholder: Consumers Stakeholder: Employees Business Interdependent System State Society Government: Impact of Society on Business Laws Society: Ethics & Corporate Social Responsibility 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 2

AGENDA § § Chapter 16: The Changing Workplace Break Grading Case Discussion: A Tale of Two Raids 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 3

CASE DISCUSSION: FORD MOTOR COMPANY (P. 549) §Henry Ford §Personality §Organization culture §Competition §Crippling problems 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 4

HENRY FORD Brilliant inventor (1863 -1947) § Founded Ford in 1903 Designed many cars § Naming each chassis after letter in the alphabet § 1908: began selling Model T @ $850 § 1924: priced ↓$290 after introducing assembly line § 1927: sold 15. 5 million and ended production Failed to anticipate market change § Spartan Model T instead of closed body design § Stopped production for 7 months, 100, 000 idle workers, till Model A designed 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 5

HENRY FORD: PERSONALITY § Obstinate, iron-willed, dictatorial, cynical § Spied on employees at home § Motivated employees with fear whimsical layoffs § Chopped desks § “Business is really too big to be human!” 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 6

HENRY FORD: ORGANIZATIONAL CULTURE Authoritarianism embedded in culture § Managers left, surrounded by “yes men” § Ruthless with subordinates § Hired thugs to intimidate the union cause § 1935: National Labor Relations Act passed § 9 plants founded guilty of unfair labor practices § 1941: Ford unionized with a vote of 97 to 3 § 1945: Ousted by his grandson Henry Ford II 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 7

HENRY FORD: COMPETITION § Suffered disastrous losses due to strong competition from Japanese automakers § Captured 20% of US market § Ford tried to change corporate culture to teams/TQM 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 8

FORD’S: CRIPPLING PROBLEMS § 1985: Taurus rejuvenates profits $5. 3 billion § Best selling car in America § 1994: Chair Trotman instituted a radical change program to prepare for more global competition § 1999: New CEO Nasser attempts to remake Ford’s culture yet again § 2000: Ford Explorer tire failures cause disaster § 2001: Henry Clay Ford, Jr. restructures § 2006: New CEO Mulally one more reorg § Reduced brands from 97 to 25 § Closed 8 plants § Borrowed $23. 5 billion 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 9

FORD’S: CRIPPLING PROBLEMS (2) § Poisoned relations with union § Negotiated high wages, benefits, rigid work rules § Jobs Bank – laid off workers paid full salary/2 years § Competitors paying half the wage § 2007: lost $5, 200/vehicle but increased salary by $13, 000/worker § Prohibited from closing more plants § 2009: made concessions, ended Job Banks, salaries at market rates, health benefits in trust 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 10

FORD’S CRIPPLING PROBLEMS (3) § Corporate culture resistant to innovation § Vehicle quality deteriorated § Rebates to push sales, cheapened brand § Focused on SUV production, faulty strategy § Collapsed when gas prices ↑ § Sales declined from 17 to 11 million/year § 2008: $27 billion debt, 1, 400 laid-off workers receiving $130, 000/year § Today 71, 000 employees, down from 179, 000 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 11

EXTERNAL FORCES SHAPING THE WORKPLACE Turbulence created by 6 external forces: 1. Demographic change 2. Technological change 3. Structural change 4. Competitive pressures 5. Reorganization of work 6. Government intervention 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 12

I. DEMOGRAPHIC CHANGE § Population dynamics slowly but continuously alter labor forces § US population 310 million, 154 million (50%) make up the civilian labor force (2010) § 3 rd largest in the world § China 814 million, India 467 million 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 13

I. DEMOGRAPHIC CHANGE (2) § Three long term trends in US labor force 1. Growth is slowing § 1970 s: 2. 6%; 2008: 1. 1%; 2018: 0. 8%; 2050: 0. 6% § Fertility rate (↓)in US women § Mortality rate (↓) and international immigration rate (↑) 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 14

I. DEMOGRAPHIC CHANGE (3) 2. Population more diverse in gender, race, ethnicity § All increasing but at different rates § Changes in race, ethnicity will be dramatic, gender less § 2050: Whites ↓ 6. 9%; men ↓ 1% § Largest ↑ Hispanics 16. 1%; Asians will double to 3. 9% § Blacks ↑ 0. 9%; women ↑ 1. 1% § Proportion of sexes will change very little § US: influx of immigrants accelerates growth/diversity § Immigration gives long run competitive advantage in labor costs § Younger, less costly, more adaptable workers 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 15

I. DEMOGRAPHIC CHANGE (4) 3. Workforce is aging § Fertility declining § Birthrate (2. 09) below replacement rate (2. 1) § Life expectancy increasing § 47 years (1900) to 79 years (2010) § Generational cohorts of workers are smaller § Shortage of skilled and experienced workers may rise § Similar to with other developed nations § Developing countries have explosive growing young populations 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 16

II. TECHNOLOGICAL CHANGE § Automation had a turbulent impact on labor § Affects the number and type of jobs available § Compared to effect of hydrogen bomb § Displaces jobs in traditional occupations § Large shift from agriculture to industrial § Causes significant job loss § In less-skilled manufacturing/service occupations § Coal mining 88% jobs eliminated, output ↑ 404% § Assembly line robots (1980 s) eliminated 66% jobs (1990) § Automated calling (87 -98) 20% ↓, conversations ↑ 600% 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 17

III. STRUCTURAL CHANGE § Process of job creation and job destruction that alter the mix of productive work in the economy § Three long-term structural trends: 1. Agriculture: predominance to insignificance § 1800 s: farming 90% ; 2008: 1. 4% 2. Manufacturing: is now in long-term decline § 1950: 34%; 2008: 14. 2% § Productivity ↑ with automation/shift to low-wage nations 3. Services: explosive growth § 1950: 40%; 2008: 77% § Shift from factory to service sector a critical factor in the decline of labor unions § 1930: 5%; 1940: 15%; 1950: 25%; 2009: 7. 2% 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 18

HISTORICAL TRENDS FOR EMPLOYMENT BY MAJOR INDUSTRY SECTOR: 1800– 2018 Figure 16. 1 ; p. 556 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 19

COMPARATIVE EMPLOYMENT STRUCTURES IN NATIONS AT VARYING STAGES OF DEVELOPMENT 1 02 1 2 8/ 1 2/ Figure 16. 2; p. 558 TBUS 102 AB-AUTUMN 2015 -18 JAIN 20

IV. COMPETITIVE PRESSURES Recent trends have intensified competition § Customer demand § Deregulation of large industries § Global competition § Foreign trade: 1960: 9%; 2008: 29% of US economy § By global standards, US workers are expensive § Outsourcing manufacturing to developing countries § Labor costs very low § Replace employees with technology to ↑ productivity § Trend extending to service industry as well 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 21

INTERNATIONAL WAGE COMPARISON: $/HOUR Figure 16. 3; p. 559 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 22

V. REORGANIZATION OF WORK § Firms ∆ business process to adjust to competition § Change in relationship with time and space § Digitized communication and transportation § Cheaper and faster § Both cause firms to reorganize § Cut costs, speed product cycles, ↑ productivity § Firms separate production from consumption § Send manufacturing to low-cost countries § Ship products back to customers § Salt Lake City Public library § 2000 panels built in Mexico and shipped $1 million saving § Tropicana Casino, Las Vegas § Designed by Indian architects making $15, 000/year 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 23

V. REORGANIZATION OF WORK (2) § Trade between nations is growing § Creating fears about job loss from outsourcing § Outsourcing: transfer of work from within the company to an outside supplier § To cut labor costs, achieve economies of scale § Can move work to domestic/foreign supplier § Offshoring: transfer of work from a domestic to a foreign location/supplier § Because US salaries, workers compensation, taxes high § Fuels attack on firms for destroying jobs § Between 2004 and 2009 less than 0. 7% § Trickle may change to a flood 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 24

VI. GOVERNMENT INTERVENTION Historically § Laissez-faire philosophy (letting people do as the wish) § Made government reluctant to interfere with the employment Today § Government intervention is extensive and growing Unique model § Outgrowth of historical circumstance/social values § Evolved out of employee/employer hostility § Shaped by militant union movement 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 25

LIBERTY OF CONTRACT Before 1930 s § Government intervention on behalf of workers was very limited § As Supreme Court upheld the liberty of contract doctrine Flaw (Henry Ford case) § Assumed equal bargaining power for all parties § Whereas employers dominated § Liberty to exploit § Fired at will § Employees had to accept any working conditions § Fueled labor union movement 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 26

WAVES OF REGULATION First wave (1930 s) § Federal regulation established union rights Second wave (1963 -1974) § Federal law entered new areas § Protecting civil rights, worker health/safety, pension Third wave (1986 – 1996) § Addressed additional, narrower issues § Americans with Disabilities Act (1990) § Health care coverage, equal treatment, warnings before layoffs, unpaid family leave Occupational Health & Safety Administration § Federal agency § Charged with ensuring reduction in workplace fatalities/injuries 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 27

EROSION OF EMPLOYMENT-AT-WILL § Employment contract that could be ended by either party without notice for any reason (or no reason) § Now State laws supplement federal laws that take away the right to fire employees § Union activity, pregnancy, physical disability, race, sex, national origin, and religious belief § AR: room for breast-feeding § NM: leave for domestic violence § OR: prohibits religious/political activity 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 28

EROSION OF EMPLOYMENT-AT-WILL (2) § State courts have introduced three common-law exceptions to firing at will: 1. Employees cannot be fired for complying with public policy § Refuse to do something illegal 2. Employees cannot be fired where an implied contract exists § Verbal indications of satisfactory performance 3. Employees cannot be fired when good faith is breached § Unfair and malicious § 3 states do not take up any; 6 states embrace all three; balance one or two 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 29

WORKER PROTECTION IN JAPAN § Workers enjoy greater welfare guarantees than in the U. S. § Paternalistic government provides citizen welfare § Tradition of harmony in relationships prevents labormanagement conflict § Unions never strong and unified § Males enjoy lifetime employment – salary men § In return trained, pushed to enhance performance § Receive salary increases in many small steps § Employees very committed § Sometimes work themselves to illness/death 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 30

WORKER PROTECTION IN EUROPE After WWII governments adopted a social welfare model § To protect populations from depression and unemployment § Took over industries to ensure full employment § Lavish benefits § Supported creation of powerful unions Global competition has strained this social welfare model § Result - high unemployment, slow economic growth 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 31

WORKER PROTECTION IN EUROPE Germany § 35 vacation days; US 16; sick leave 4 weeks § 6 month notice before firing; 60% of salary for 70 weeks § Mercedes put employees on 3 -day weeks; government paid 2/3 rd salary France • 35 hour week to create more jobs • Rail driver salary $90, 000/year; 25 hours/week; retire @ 50 • Employers pay 47% wages in benefits (Belgium 55%; US 8%) • Laid off workers paid for 8 months by former employers 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 32

NEWS FLASH! § $7. 25/hour 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 33

NEWS FLASH! § $8/hour 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 34

PRESIDENT’S: STATE OF THE UNION (2014) Executive decision to increase federal minimum wage to $10. 10 § $7. 25/hour since 2009 § Original $0. 25/hour started in 1938 § Because Congress will not pass a law Minimum Wages • Tennis ball boy in India: $0. 37 • Cambodian shoe industry: $0. 49 • Puerto Rico: $5. 08 Starbucks Caramel Frappuccino Venti: $ 5. 93 Republicans: raising wage a job killer What do you think? 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 35

LABOR REGULATION IN PERSPECTIVE Bare minimum is compliance with four core labor standards set forth in international labor conventions 1. Eliminate all forced or compulsory labor 2. Abolish child labor 3. Eliminate employment discrimination 4. Guarantee the right of collective bargaining 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 36

TRADEOFFS: LABOR REGULATION 21 1 0 /2 8 1 2/ Figure 16. 5; p. 573 TBUS 102 AB-AUTUMN 2015 -18 JAIN 37

CONCLUDING OBSERVATIONS Six forces are changing the workplace § Demographic, technological, structural, competitive, reorganization of work, and government regulation § Creates both uncertainty and opportunity Demographic and structural changes § Creating more diverse, less discriminatory workplaces § Moving more workers into service occupations § Are uncontrollable but also slow and predictable 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 38

CONCLUDING OBSERVATIONS (2) Technological change § Disruptive force that always creates new jobs to replace the ones it destroys Competition and work reorganization § Are reshaping labor markets everywhere § Reduced security of American workers Government regulation § Nations must strike a balance between worker protection & employer flexibility § Trade offs are unavoidable Experience suggests that workers fortunes will be mixed 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 39

EXTRA CREDIT OPPORTUNITIES (20 POINTS) 1. 5 points = DB Post selected for excellent work sample (1 max) 2. 5 points = News Flash related to case/topic in course (2 max) § Current events/newspaper article § Post on discussion group on Canvas § Everyone cannot post the same point/source (check B 4 post) § Professor determines relevance! § Added to Quiz 1 score or future credit when reach max 3. 5 points = If News Flash selected to share in class (1 max) § By invitation only; professor determines relevance 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 40

NEW EXTRA CREDIT OPPORTUNITIES (10 POINTS) 1. 5 points = News Flash related to case/topic in course (2 max) § Current events/newspaper article § Post on discussion group on Canvas § Everyone cannot post the same point/source (check B 4 post) § Professor determines relevance! § Added to Class Participation or DB Post scores; if max 2. DB post best 9 of 13 instead of 10 of 13 § If satisfied with your score no need to post DB# 12 and 13 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 41

A TALE OF TWO RAIDS § Group Breakouts § p. 575 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 42

MIGRANTS § 3% of the world population § US: 8. 1% or 25 million people § Jobs principle motivating factor § Laws make it illegal to hire those without authorization § 12. 6 million – legal permanent residents § 1 million – temporary authorized workers § 11. 6 million – unauthorized entrants § Of these each year § 750, 000 – become US citizens § 1. 2 million – leave voluntarily or are deported 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 43

MIGRANTS (2) § Fill many jobs Americans unwilling to do § Often victims of human trafficking/fraudulent recruiting § Often paid below minimum wage, and work unpaid overtime 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 44

OPERATION WAGON TRAIN § Firm: Swift and Company in six states § Largest beef/pork processing company – assembly line production § Primary stakeholders: employees § Low wage; hard/dangerous work § Primarily immigrants and not wanted by Americans § Secondary stakeholders: government (ICE) § Largest ever coordinated raids at six plants § Hid in lockers, cattle pens § 1, 297 arrested; charged with immigration status/criminal offense § 20% of 7, 000 gone § Families torn apart; children/parents § School attendance dropped; economy slowed § Did not turn to social services for fear; went to churches 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 45

OPERATION WAGON TRAIN (2) § Case about: discrimination – citizenship status; identity fraud; human trafficking § Swift treatment of employees: excellent § Paid more than twice federal minimum wage § Comprehensive health plans - 80% joined § Accident rate lower than industry average § Complied strictly with laws completing Form I-9 for each staff § Conducted self-reviews § Lost $30 million after raid § Made contributions to United Way to help employees/families affected by the raids 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 46

CASE ABOUT § § § Employee discrimination – citizenship status Identity fraud Human trafficking Immigration laws Law enforcement – problems and limitations 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 47

SWIFT AND COMPANY § No American wants to do these jobs § Cannot discriminate job applicants § On basis of ethnicity, race, national origin, immigration status § Cannot ask for citizenship status before hiring (fill I-9) § Cannot decide to only hire citizens – discrimination § Cannot treat applicants differently because they sound “foreign” § Obtained government permission to conduct selfreview § 400 employees fired, quit, failed to show up 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 48

SWIFT AND COMPANY (2) § Did not knowingly violate immigration law § Exemplified compliance with the law § Completed I-9 form for each employee § Not expected to/cannot detect fraud/find criminals § Pilot participant in government E-Verify § E-Verify best government system to detect fraud § Encourages widespread identity theft § Invested in training, software, record keeping, consultants, attorneys § Result § Largest discrimination fine/raid ever conducted § Penalized for not policing, detecting illegal immigrants/ fraud § Not the function of corporations 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 49

GOVERNMENT Laws and enforcement § Stiff criminal fines for knowingly hiring illegal staff § Problem not addressed as went underground § Who are the real criminals? § Drug lords or drug pushers § How is it treating its citizens? § US born children sent into the foster system § Need to better track identity fraud, illegal labor trafficking § Pass laws that address the current problem 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 50

EMPLOYEES Legal § Most illegal, some criminal offenses § Once in US protected by laws against discrimination, SH, labor § Frequently victimized, paid 38% less § Should be penalized if enter knowingly § Should people be granted residency if they have worked for certain number of years (20 years Gebbers)? 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 51

EMPLOYEES (2) Economic § Companies producing goods/services lost profit § Communities affected economically Ethical (humanitarian) § Some sole earners in their family § Families broken § Had young children no one else could care for § Fired 2 days before Christmas 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 52

GEBBERS FARMS § § § § § Brewster, WA – grow apples and cherries 3 rd largest grower in the country Hand-picked; trees/bushes hand pruned Only immigrants willing to work 90% of students in the school district are Hispanic Audited, 550 employees without documentation No handcuffs; separated families Three month notice to vacate company housing Some had worked for 20 years; owned homes, stable lives Economy slowed; Brewster lost sizeable portion of population 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 53

NEXT CLASS § Thursday, December 3 rd § Team #8 Presentation §Jack Welch at GE (p. 147) § Everyone else DB Post § DVD Viewing: Walmart: The High Cost of Low Price 21 1 0 /2 8 1 2/ TBUS 102 AB-AUTUMN 2015 -18 JAIN 54