Advantages of Trade Unions.

1. Increase wages for its members. 

Industries with trade unions tend to have higher wages than non-unionised industries.

2. Counterbalance Monopsonies.

In the face of Monopsony employers, Trades Unions can increase wages and increase
employment. Monopsony employers are those who have market power in setting wages and
employing workers. Traditionally, monopsonies occur when there is only 1 firm in a town, or
type of employment. However, in modern economies, many employers have a degree of
market power (monopsony).

3. Represent Workers

Trades Unions can also protect workers from exploitation, and help to uphold health and
safety legislation. Trades unions can give representation to workers facing legal action.

4. Productivity deals.

Trades Unions can help to negotiate productivity deals. This means they help the firm to
increase output; this enables the firm to be able to afford higher wages. Trades unions can be
important for implementing new working practices which improve productivity.

5. Important for Service Sector.

Modern economies have seen a fall in trade union power. This is because of a decline in
manufacturing and rise in service sector employment. Service sector jobs tend to more likely
to be part time and temporary; unions are needed to protect workers in these kind of jobs.

Problems of Trades Unions.

1. Create Unemployment. 

If labour markets are competitive, higher wages will cause unemployment. Trades unions
can cause wages to go above equilibrium through the threat of strikes e.t.c. However when
the wage is above the equilibrium it will cause a fall in employment.

2. Ignore non Members

Trades unions only consider the needs of its members, they often ignore the plight of those
excluded from the labour markets, e.g. the unemployed.

3. Lost Productivity.

If unions go on strike and work unproductively (work to rule) it can lead to lost sales and
output. Therefore their company may go out of business and be unable to employ workers at
all.

4. Wage Inflation.

If unions become too powerful they can bargain for higher wages, above the rate of inflation.
If this occurs it may contribute to general inflation. Powerful trades unions were a significant
cause of the UK's inflation rate of 27% in 1979.

The benefits of trades unions depends on their circumstances. If they face a monopsony
employer they can help counterbalance the employers market power. They can increase
wages without causing unemployment.

If unions become too powerful and they force wages to be too high, then they may cause
unemployment and inflation

It also depends on whether they cooperate with firm or not on increasing productivity.