Discuss the following:
Suppose that you offered labour the minimum – 80% of the current wage, no benefits, no profit sharing, no wage escalator. After a three month strike you could expect to settle half way between their demands and your offer, at least 10% below your competitors. How much money is that per year?
How much would you save over the next five years?
Assume that a strike would hurt your productivity gains by cutting them half. If your productivity index is now 1.12, and it dropped to 1.06, you would have to hire additional workers. Estimate what this would cost you. (Tip. Look at last year’s total Labor Cost on the Annual Report Income Statement. This was your cost at your current productivity level. If productivity falls, you labor cost would go up. For example, if the productivity level fell by .06, you would need 1-1/(1.06) = 5.7% more workers. Your labor costs would increase by 5.7%.)
Given these tradeoffs, what do you want your company to offer in the labor negotiation this round?