Trade

Unions
In 2016, 82% of
workers in Iceland
belonged to a trade
union, while only 10% of
workers in the USA
were trade union
members. What is a
trade union? How do
they affect the
economy? Would you
have the opportunity to
join a trade union in
your country? If so,
would you choose to
join?
Functions of trade unions

• Negotiating better wage and non-wage benefits.

• Better working conditions
• Defending employees' rights and job, support those employees fired.
• Encourage worker participation.
• Influence govt. Policy
• Train workers, provide recreational facilities.
 Types of trade unions
• General unions. These unions include workers with a range of skills and
from a range of industries. E.g. Unite in UK.
• Industrial unions. These seek to represent all the workers in a particular
industry, for example, those in the rail industry.
• Craft unions. These represent workers with particular skills, for example
plumbers and weavers. These workers may be employed in a number of
industries.
• White collar unions. These unions represent particular professions,
including pilots and teachers.
 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.
• They ask for higher wages if:
• Workers are working harder and have increased productivity.
• industry whose profits have risen can pay higher wages.
• A union may argue that the workers it represents, should receive a pay
rise to keep their pay in line with similar workers. E.g. doctors get a raise,
nurses also ask for one.
• workers need a wage rise to meet the increased cost of living.
 Factors influencing the strength of trade unions
• Trade unions will have a high degree of power when:
• They have a large membership covering almost all worker in that industry.
• The union members provide essential services with no close substitutes.
• Union members can support their families if they call for strike action.
• When output increases, most people are employed, firms will be competing
for workers. To retain their existing workers, recruit more workers, firms are
likely to be more willing to agree to union requests.
• Favourable government legislation. A union will be in a stronger position if
laws allow trade unions to take industrial action.
Industrial disputes

• Industrial action refers to measures taken by trade union members

as a result of major disagreements or disputes with their employers,
e.g. strike action.
• Official action – industrial action is done with support of the trade
union.
• Unofficial action – no trade union support.
Arbitration – both the parties agree to appoint an independent referee to settle the dispute.
 Reasons for declining trade union membership
• government legislation to reduce trade union influence
• decline in manufacturing jobs as manufacturing is traditionally unionised
• growth in part-time employment and part-time workers are less likely to join
a trade union
• firms independently agreeing to fairer terms and conditions of employment
• increase in unemployment
• increase in the number of self-employed people
 Advantages of trade union membership
• channel of communication between employers and solve disputes and settle
pay claims harmoniously and efficiently.
• They negotiate with employers on behalf of their members for better pay
and working conditions.
• They negotiate with the government for the introduction of or an increase in
the minimum wage,
• Unions can help to reduce conflict and develop improved industrial relations
• They offer legal support and advice to workers who may have lost their jobs
or be facing the threat of redundancies (job losses).
 Disadvantages of trade union membership
• Trade unions take industrial action which may result in lost productivity.
Strikes are the most extreme form of industrial action and can cause
serious disruption to fi rms 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 revenues
will also fall.
• May cause inflation if wages rise without improvement in productivity.
• Demand for labour may fall if wages rise too much, causing government
to spend more on unemployment benefits.
Disadvantages of trade union membership

• May lead to inflation if the wage increases are not followed by

increase in productivity.
• Detrimental to economic growth when industrial action
impacts production adversely.
Practice Question

• Some economists criticise high government spending and trade

unions for creating market disequilibrium. However, trade unions may
also play a key role in economic development. There are over 60
trade unions in Singapore, in both labour-intensive and capital-
intensive industries.
• Analyse how trade unions could increase economic development. (6)