Models for use in Negotiations on Pay and Working Conditions

In this paper we develop three inter-related models, based on value added concepts, that can form the starting point for discussions on pay and working conditions at the plant level. The first model considers the factors that contribute to an increase in the added value (such as prices, sales volume and material productivity) and provides a relationship between relative changes in the values of these factors and the resulting relative change in the added value. In the second model the increase in the added value is assumed to be shared between the labourforce (through increased wages) and the management (who require funds to cover all other costs and make provision for profit); the relative change in wages is decomposed further to take into consideration the effect on the average employee's pay of possible changes in the labour productivity and/or the size of the workforce. The two models are then combined to produce the third model with a view to rewarding labour and management in proportion to each one's contribution towards improving the operational efficiency of the plant.All three models are simple and versatile enough to allow:

1. a)
   The use of alternative assumptions and functional relationships to reflect differing views of the negotiators;
    
2. b)
   sensitivity analyses to identify the most crucial assumptions and estimates that are likely to affect the results; and
    
3. c)
   further disaggregation to incorporate additional variables and a more detailed breakdown of the added value, wage rates or working hours, if this is thought to be desirable.
    

It is recommended that such models be developed, discussed and analysed by the negotiators themselves in an attempt to make them highlight the issues, arguments and important characteristics pertaining in each individual case. The models could then provide the basis of a common communication language leading to a better understanding of each other's position and, hopefully, to less conflict.