Abstract
We propose a flexible decision support scheme which could be used in managing the wage negotiation between employers and employees. This scheme uses fuzzy inference systems and game theory concepts in arriving at decisions on future wage increase which could be more mutually agreeable. For example, rather than specifying 5% yearly increase of wages, we propose that the uncertain factors which are mostly difficult to predict and that could affect wage decisions need to be taken into consideration by the wage formula. These include business revenues or (profit), inflation rate, number of competitors, cost of production, and other uncertain factors that may affect business operations. The accuracy of the fuzzy rule base and the game strategies will help to mitigate the adverse effects that a business may suffer from these uncertain factors. Based on our scheme, we propose that employers and employees should calculate their future wage by using a fuzzy rule base and strategies that take into consideration these uncertain variables. The proposed approach is illustrated with a case study and the procedure and methodology may be easily implemented by business organizations in their wage bargaining and decision processes.
Highlights
Wage negotiation has always caused persistent problems in business organisations [1, 2]
Rather than pre-setting a rigid future and yearly percentage increase in wages, we propose a flexible scheme for employers and employees which they can use as a decision support system for their future salary increase
While we are considering only inflationary trends and business revenue as the most important factors in determining wage increase, we are assuming that other factors remain constant and that decision makers are rational in their views
Summary
Wage negotiation has always caused persistent problems in business organisations [1, 2]. There have been cases in which the entire workforce of countries embarked on industrial strikes that resulted from wage negotiation problems. Gielen and VanOurs in [1] investigated what determines quits and layoffs that usually result as problems of poor wage negotiations by using a unique matched worker-firm dataset from the Netherlands. They concluded that in wage negotiation, the wage growth of a worker that stays in the firm is larger if that worker had a high quit probability and smaller when that worker had a high layoff probability. The percentages are mostly based on predictions of future inflation which are often misleading and based on historical data
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