The influence of trade unions

• What is the primary aim of trade unions?

  To protect workers and secure jobs
• What do trade unions try to achieve regarding wages?

  They aim for higher wages for workers
• How can excessive wage increases by trade unions affect firms?

  Firms may close down or reduce employment
• Why might some workers prefer low-paid jobs?

  To avoid being without employment
• How does a trade union affect wages in a perfectly competitive labour market?

  It can increase wages to the level of MRP
• What is the wage level in a monopsony market where the employer has power?

  Workers are paid W2
• What is the employment level in a monopsony market?

  Only Q2 number of workers is employed
• What does a trade union aim to achieve regarding marginal revenue product?

  To increase marginal revenue product in the market
• What wage level does a trade union aim for in a monopsony market?

  To increase wages to the level of MRP (W3)
• What is the perfectly competitive level of employment and wage rate?

  W1, Q1
• What are the main functions of trade unions?

  • Protect workers
  • Secure jobs
  • Improve working conditions
  • Achieve higher wages
• How do trade unions influence wages and employment in different markets?

  • In monopsony: Aim to increase wages to MRP
  • In perfect competition: Maintain wages at market level
  • Excessive wage demands can lead to job losses according to free market economists
• What is a trade union?

  A group of workers who form an organisation to protect the interests of workers.
• Example of a trade union

  NUT (National Union of Teachers)
• A trade union's primary aim is to improve the standard of living of the people in the industry they represent.
• Since their aim is to improve standard of living, their target is to protect the wages that workers receive (i.e. protect workers from exploitation through lower wages) and to ensure that wages continue to increase (inflation?).
• Trade unions can also aim to achieve:

  1. better working conditions
  2. job security
  3. pensions
• Trade unions negotiate with employers through collective bargaining.
• Collective bargaining


  Gives workers more power when negotiating wages and breaks.
• Trade unions exist because markets are not perfectly competitive.
• Trade unions exist to ensure that workers are paid a wage equal or more than their MRP.
• With trade unions, workers are not forced to accept low wages.
• Trade unions can represent workers legally.
• Employers often will demand better performance in return, so trade unions make productivity bargains.
• Trade unions were the most powerful in the 1970s in the secondary sector; de-industrialisation in the 80s was responsible for their weakening.
• Trade unions cause labour market failure.
• With a trade union, workers have more power to increase wages in the market to a level higher than the market equilibrium.
• If a trade union is big and powerful = monopoly seller
• Trade unions increasing wages can result in unemployment.
• If trade unions negotiate performance-related pay rises, which is part of a firm's demand, employers are likely to be willing to pay and employ more workers and therefore NOT cause unemployment.
• Without trade unions, monopsony employers have greater power, which is also a market failure.
• trade union + monopsony employer = bilateral monopoly
• Government legislation has decreased the power trade unions have.
• A monopsony wants to pay workers as little as possible.