Trade Unions

• Trade Union

  An association of workers that collectively represent their interests regarding wages, working conditions, and job security
• Trade union functions

  • Represent workers regarding to pay and working conditions
  • Bargain for higher wages with possibility of going on strikes
  • Co-ordinate with firms to implement new policies according the working practices
• In a competitive labour market if a trade union rises the wage above the equalibrium the employment will fall, which may lead to a real wage unemployment which will cause inefficiency in the market
• In a monopsonistic market, raising the wage is unlikely to create unemployment as the employment would stay the same. This is because the trade union wage stays at the equilibrium level
• Efficiency wage theory

  Increasing wages will lead to increased productivity because the raise acts as an incentive to workers to work better as they are mottivated by a higher pay
• Determinants of success of trade unions

  • The density (the percentage of workers in the TU)
  • Bargaining power of workers
  • Government legislation e.g. since 1970s, UK has reduced the power of trade unions
  • Nature of labour markets (competitive vs monopsony)
• Decline in the power of trade unions

  • Deindustrialisation (decline of manufacturing sectors e.g. steel and coal)
  • Union legislation (e.g. ending closed shops (the workers had to be an a union to be employed)
  • Growth of gig economy