TRADE UNIONS
■ Definition of a trade union
■ Role of trade unions in the economy
■ Factors that influence the strength of trade unions
■ Advantages and disadvantages of trade union membership for workers, firms and the
government
Definition of trade union
Trade unions are associations of workers formed to represent their interests and improve
their pay and working conditions.
Types of trade unions
There are four main types of trade unions. These are:
• Craft unions. These represent workers with particular skills, for example plumbers and
weavers. These workers may be employed in a number of industries.
• General unions. These unions include workers with a range of skills and from a range of
industries.
• Industrial unions. These seek to represent all the workers in a particular industry, for
example, those in the rail industry.
• White collar unions. These unions represent particular professions, including pilots and
teacher.
Functions of trade unions
1) They negotiate on behalf of their members on wages, job security, working hours and
working conditions. These areas can include basic pay, overtime payments, holidays, health
and safety, promotion prospects, maternity and paternity rights, and job security.
2)They also provide information on a range of issues for their members, for example on
pensions.
3)They help with education and training schemes, and may also participate in measures
designed to increase demand for the product produced and hence for labour.
4) Some trade unions also provide a range of benefits to their members including strike pay,
legal advice and sickness pay.
5)In addition, many get involved in pressurising their governments to adopt legislation that
will benefit their members or workers in general, such as fixing a national minimum wage.
Collective bargaining
Trade unions enable workers to press their claims through collective bargaining. This process
involves negotiations between union officials, representing a group of workers, and
representatives of employers.
There are a number of arguments a trade union can put forward while asking for a wage rise.
• One is that the workers deserve to be paid more because they have been working
harder and have increased productivity.
• Another argument is that an industry whose profits have risen can afford to pay higher
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wages to its workers.
• A third argument is known as the comparability argument. A union may argue that the
workers it represents, should receive a pay rise to keep their pay in line with similar
workers. For example, a union representing nurses may press for a wage rise if doctors are
awarded higher pay. The nurses’ union is unlikely to ask for the same pay as doctors. What
is more likely is that they will seek to maintain their wage differential. So, if before the rise
of doctors’ pay, nurses received a wage that was 60% of the doctors’ earnings, they are
likely to demand a rise that will restore this differential.
• A fourth argument that is often put forward is that workers need a wage rise to meet the
increased cost of living. If the price level is rising by 6%, workers will need a wage rise of
at least 6% to maintain their wage’s purchasing power. This is sometimes referred to as
maintaining their real income (income adjusted for inflation).
Factors affecting the strength of a trade union
Among the factors which empower a trade union are:
• A high level of economic activity and low unemployment If output and income in a
country are increasing, most industries are likely to be doing well, and so should be able to
improve the pay and conditions of workers. When output reaches high levels and most people
who want to work are employed, firms will be competing for workers. To retain their existing
workers and to recruit more workers, firms are likely to be more willing to agree to union
requests for higher pay and better working conditions.
• A high number of members. The more members a union has, the more funds it is likely
to have to finance its activities. Also, the employers will find it difficult to replace union
labour by non-union labour in such a scenario.
• A high level of skill. Unions representing skilled workers are in a relatively strong
position, as it can be difficult to replace their workers with other skilled workers and
expensive to train unskilled workers.
• A consistent demand for the product produced by the workers. Unions that
represent workers making goods and services that are essential to consumers are in a
strong position to bargain.
• Favourable government legislation. A union will be in a stronger position if laws allow
trade unions to take industrial action.
Industrial action
If negotiations break down on wage claims, or disputes occur over working conditions, there
is a range of industrial actions that can be initiated by a union in support of its claim. There
could be a
1)an overtime ban, with workers refusing to work longer than their contracted hours.
2)Workers may also ‘work to rule’. This involves workers undertaking the tasks required by
their contracts only.
3) The most well-known form of industrial action, however, is a strike. This involves
workers withdrawing their labour. A strike can be official or unofficial. An official strike is
one which is approved and organised by the union. In contrast, an unofficial strike is one
which has not been approved by the union. This can occur when the strike is called by local
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union representatives and is over before the union has the time to approve it, or in the cases
when the union does not agree with the action.
Influence on the supply of labour
Besides negotiating and taking industrial action, trade unions can seek to raise the wages
of its members by restricting the entry of new workers into the industry, occupation or craft .
Unions may seek to do this by insisting that new recruits have high qualifications or may
operate a closed shop. The latter occurs when employers can only employ those workers
who are members of the union or who agree to join the union. (In contrast, an open shop
occurs when an employer is free to employ members or non-members of the union.)
Advantages and disadvantages of trade union membership
Trade unions often play a positive role in an economy for several reasons:
» 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 members for better pay and working
conditions. This benefits the government as productivity also improves. Overall, there is a
positive impact on standards of living.
» They negotiate with the government for the introduction of or an increase in the minimum
wage, which can also help to increase standards of living for the poorest workers. Increased
pay and improvements in working conditions may lead to a better motivated workforce and
result in an increase in the profits of firms.
»They often encourage workers to engage in education and training which raises productivity
and promotes improved health and safety.
» Unions can help to reduce conflict and develop improved industrial relations, which
ultimately benefits fi rms through improved labour productivity and higher employee
motivation and loyalty.
» They offer legal support and advice to workers who may have lost their jobs or be facing
the threat of redundancies (job losses).
The potential negative impacts of trade unions on an economy include the following:
» Trade unions are often portrayed in the media as having a negative role in an economy
when they take industrial action which may result in lost productivity. Strikes are the most
extreme form of industrial action and can cause serious disruption to firms and the wider
economy. The amount of revenue lost and damage done to the reputation of a particular firm
by a strike will be influenced by the effect on rival firms and the length of the strike. A firm’s
costs and flexibility will also be adversely affected by overtime bans and ‘work to rule’
action.
» 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 revenues will also fall.
