THE SIZE OF THE WORK UNIT AND LABOUR MARKET BEHAVIOUR*
| DOI | http://doi.org/10.1111/j.1467-8543.1977.tb00088.x |
| Author | K. D. GEORGE,John Shorey,R. McNabb |
| Published date | 01 July 1977 |
| Date | 01 July 1977 |
British
Journal
of
Industrial Relations
Vol.
XV
No.
2
THE
SIZE
OF THE WORK UNIT
AND
LABOUR
MARKET
BEHAVIOTJR*
K.
D.
GEORGE,t
R.
MCNABBS
AND
JOHN
SHOREYS
I.
INTRODUCTION
The literature dealing with labour economics and industrial relations now con-
tains many diverse references to the effects of industrial structure upon labour
market behaviour. This paper concentrates upon one aspect of industrial structure,
the size of the work unit, and brings together various hypotheses from economics
and industrial relations which relate size
to
the operation of the labour market
within the work unit.
The size of the work unit can have
at
least three identifiable effects upon labour.
First, it can affect the worker’s individual welfare through his job satisfaction,
his attitude to work, and
so
on. Second, it can affect social relationships, social
behaviour, and negotiating processes within the unit. Third, it can affect costs
of
production, both directly and indirectly. The size of the work unit affects costs
directly through its consequence for wages, the deployment and co-ordination of
the work force, training and hiring costs, and
so
on. The indirect effect is due to the
consequences of size for individual welfare and for social relationships. If, there-
fore, one could isolate the technological relationship between size and costs arising
from economies of scale one would expect to find that average costs of production
would, after a point, increase significantly with size
as
a result of higher labour
costs. If a strong relationship between size and various dimensions of labour
market activities were found to exist it would have important policy implications.
It would suggest, for instance, that, when planning capacity extensions, decision
makers should balance the cost reductions likely
to
be realised from economies of
scale, against the cost increases brought about by the adverse effect of size upon
labour-related costs.
The economist is primarily interested in the direct and indirect consequences of
size for unit production costs. In Section I1 we develop some theoretical propositions
concerning the size effect. This is followed in Section I11 by an analysis of the
operational relationships that economists would expect
to
find between size and
certain observable labour market variables. Section IV discusses the conceptual
and empirical problems of testing for such relationships and surveys some of the
existing empirical evidence.
11.
THE
THEORY
OF
THE
SIZE
EFFECT
Before proceeding
to
the main theoretical propositions relating to the size-effect
three preliminary points need to be made. First, there is the question of how to
measure size. In this instance the dimension of size which seems to be most
relevant is that of employment. In general, however, though there must certainly
be some important exceptions, it would not make much difference whether we
measured size in terms of employment, capital, or output, since these various
dimensions of size are quite closely correlated. Second, some of the theoretical
propositions that have been advanced relate mainly to the size of plant whereas
*
The authors are grateful for the help given
by
the editors
of
this special issue
of
the
Journal.
7
Professor of Economics, Cardiff University.
t
Research Fellow, Cardiff University.
9:
Lecturer in Economics, Cardiff University.
265
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