Trade unions-Economics chapter 19

• A trade union is an organisation which aims to protect the interests of its worker members (their terms and conditions of employment, including pay)
• In addition to maintaining a happy and well motivated workforce, employers may want to:

  • Maximise profits
  • Minimise costs
  • Maximise sales
• Employees may want to:

  • Maximise wages/ salaries
  • Work in a safe and healthy environment
  • Have good terms and conditions at work
  • Maximise their non-wage benefits
  • Have job security at work
• There is often a conflict between the aims of employees and employers. For example, an increase in wages along with a decrease in working hours will increase costs to employers but improve the terms of employment for workers
• Types of trade unions:

  • Craft unions -Oldest type of trade union and were formed originally to organise workers according to their particular skill (or craft). (Engineers)
  • Industrial unions- Represent all workers in their industry, irrespective of their skills or the type of work done
  • White collar unions- Recruit professional, administrative and clerical staff (salaried workers) and other non-manual workers. (banking)
  • General unions- Prepared to accept anyone, regardless of the place, nature of their work, or their industrial qualifications. Have a large membership of unskilled workers
• The role of trade unions in the economy:

  Primary role: to protect the interests of its members.

  • Bargaining with employers for pay rises, better terms and conditions
  • Ensuring equipment at work is safe to use and that workers are given sufficient training to enable them to perform their role at work safely
  • Ensuring members are given legal advice when necessary
  • Giving support to members when they are made redundant
  • Providing financial and legal support to workers who may have been unfairly dismissed or disciplined
  • Persuading the government to pass legislation in favour of workers
• Trade unions act as a means of communication and negotiation between employers and employees through a process called collective bargaining.

  • Collective bargaining is the process of trade union representatives negotiating on behalf of their worker members with employer representatives for better pay and conditions of work.
  • A collective voice is more powerful than each worker negotiating individually with the employer
• Trade unions with high membership tend to be more powerful than unions with a small number of members.

  If strong trade unions make full use of their bargaining power, they may succeed in getting larger and/or more frequent wage increases than weaker unions.

  This highlights the importance of unionisation within trade unions- that is, the larger and more united the union, the better its bargaining position tends to be.
• Collective bargaining and wage claims:

  The claim for higher wages in the collective bargaining process is normally based on one or more of the following:

  • A rise in the cost of living due to inflation, which reduces the real wage of trade union members
  • Workers in comparable occupations who have received a wage increase
  • Increased profits of the firm and industry as a whole, justifying a higher return for labour services
  • An increase in the productivity of labour, further justifying an increase in wages
• As part of the collective bargaining process, especially if there are disputes with employer representatives, trade unions can call upon their members to take industrial action. This refers to measures taken by trade union members as a result of major disagreements or disputes with their employers (eg: strike action)
• Factors influencing the strength of trade unions:

  • Number of members
  • Degree of their unity
• Reasons for higher level of trade union memberships:

  • Growth in manufacturing jobs in countries- manufacturing industry is often unionised as workers typically receive low pay and have poor working conditions
  • A widening wealth gap and higher costs of living which have caused workers to petition for higher wages and better working conditions
• Reasons for declining trade union membership:

  • Government legislation which seeks to reduce trade union influence
  • A decline in manufacturing jobs in countries, as manufacturing is traditionally unionised
  • Growth in part time employment, as part time workers are less likely to join a trade union
• Advantages of trade union membership:

  • They act as a channel of communication between employers (firms) and employees (workers). Through negotiations and collective bargaining, they help to solve disputes and settle pay claims harmoniously and efficiently
  • They negotiate with employers on behalf of their embers for better pay and working conditions. This benefits the government as productivity also improves
• Advantages of trade union membership:

  • They negotiate with government for the introduction or an increase in the minimum wage, which help increase standards of living for the poorest workers. Increased pay and improvements in working conditions lead to a better motivated workforce and increase the profits of firms
  • Unions help to reduce conflict and develop improved industrial relations, which benefits firms through improved labour productivity, higher employee motivation and loyalty.
  • They offer legal support, advice to workers who may have lost their jobs or face the threat of redundancies
• Disadvantages of trade union membership:

  • When trade unions take industrial action, it results in lost productivity. Strikes are the most extreme form of industrial action and can cause serious disruption to firms and the wider economy
  • From an employer's point of view, a trade union's demands for better pay and conditions for its members may increase the firm's production costs and therefore reduce its profits. If so, government tax revenue will also fall.