Uncertainty in wage increase negotiation and decisions; An approach from flexible fuzzy inference system (FIS)

Abstract

Wage negotiation has always caused persistent problems in different organisations and on many occasions, there have been cases in which the entire workforce of countries embarked on industrial strikes that resulted from wage increase negotiation disputes. The root causes of wage negotiation disputes, in most cases, are often connected to the inability of either of the two parties involved (employers and employees' unions) to sustain or maintain the status quo contained in their earlier agreement on wage increase. With the aid of fuzzy inference system and concepts of game theory, this chapter proposes a flexible scheme for wage increase negotiation and decision problems. For example, rather than specifying rigid 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. The proposed approach is illustrated with a case study and the procedure and methodology may be easily implemented by business organisations in their wage bargaining and decision processes.