A Relational Exchange Perspective on the Employment Relationship

Abstract

A considerable amount of private sector employment is concentrated in large multi-plant firms with layers of management administering an industrial relations system featuring internal job ladders, elaborate governance procedures, and complex compensation packages. The determinants of the features of employment relationships (wages versus piece rates, job security, layoff policy, etc.) and their implications (for example, the effects of wage stickiness on the level of unemployment) are currently hot research areas. My contention in this chapter is that much of the recent theorizing has been misdirected. There has been an over-emphasis on the concepts of human capital in general and specific human capital in particular.[1] There has also been an unnecessary reliance on the assumption of worker risk aversion, particularly in the principal-agent and implicit contract literature.[2] In addition, concentration on the hypothesised behaviour of utility maximizing individual workers has diverted attention from the collective action of workers.