UNIT 3

B
TRADE UNION
Trade Unions are organizations of workers that aim at promoting and protecting the
interest of their members (workers). They aim on improving wage rates, working
conditions and other job-related aspects. It is formed, financed and run by its members
who pay an annual subscription fee.

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 teachers.
FUNCTIONS OF TRADE UNION

⮚Negotiating improvements in non-wage benefits with employers.

⮚Defending employees’ rights.
⮚Improving working conditions, such as better working hours and better safety
measures.
⮚Improving govt policy
⮚Improving pay and other benefits.
⮚Supporting workers who have been unfairly dismissed or discriminated against.
⮚Developing the skills of members, by providing training and education.
⮚Providing recreational activities for the members.
⮚Taking industrial actions (strikes, overtime ban etc.) when employers don’t satisfy
their needs. These are explained later in this topic.
AIMS OF A TRADE UNION
Collective bargaining
An individual worker may not have the skill, time or willingness to negotiate with her or his employer. Trade unions
enable workers to press their claims through collective bargaining. This process involves negotiations of pay &
working conditions between union officials, representing a group of workers, and representatives of employers.

When can trade unions argue for higher wages and better working conditions?

● Prices are rising (inflation): the cost-of-living increases when prices increase and workers will want higher wages
to consume products and raise their families.
● The sales and demand of the firm has increased.
● Workers in other firms are getting a higher pay.
● The productivity of the members has increased.

Factors affecting strength of a trade union

✔ A high number of members. The more members a union has, the more funds it is likely to have to finance its
activities.
✔ The propotion of workers in an industry in a particular trade union
✔ High and consistent demand for the goods produced by the TU members
✔ Support by the govt
✔ Ability to get publicity for its views and actions
Industrial disputes
When firms don’t satisfy trade union wants or refuse to agree to their terms, the members of a trade
union can organize industrial disputes. Here are some:

∙ Overtime ban: workers refuse to work more than their normal hours.
∙ Go-slow: workers deliberately slow down production, so the firm’s sales and profits go down.
∙ Work to rule: employees work very strictly with the rules set out in the employment contract
∙ Strike: workers refuse to work and may also protest or picket outside their workplace to stop
deliveries and prevent other non-union members from entering. They don’t receive any wages
during this time. This will halt all production of the firm.
Trade union advantages and disadvantages
Advantages to workers:
∙ Workers benefit from collective bargaining power
∙ Workers feel a sense of unity and feel represented, increasing morale.
∙ Lesser chance of being discriminated and exploited.

Disadvantages to workers:
∙ Workers might get lesser wages or none if they go on strike – as the output and profits of the firm
falls and they refuse to pay.
∙ Some may not even get hired if they do not enroll in a TU

Advantages to firms:
∙ Time is saved in negotiating with a union when compared to negotiating with individual workers.
∙ When making changes in work schedules and practices, a trade union’s cooperation can
help organize workers efficiently.
∙ Mutual respect and good relationships between unions and firms are good for business
Disadvantages to firms:
∙ Decision making may be long as there will be need of lengthy discussions with TU
∙ Trade unions may make demands that the firm may not be able to meet
∙ Higher wages bargained by trade unions will reduce the firm’s profitability.
∙ Businesses will have high costs and low output if unions organize agitations. Their revenue and
profits will go down and they will enter a loss.

Advantages to the economy:

∙ Ensures that the labour force in the economy is not exploited and that their interests are being
represented

Disadvantages to the economy:

∙ Can negatively impact total output of the economy.
∙ Firms may decide to substitute labour for capital if they can’t meet trade unions’ expensive
demands, and so unemployment may rise.
∙ Higher wages resulting from trade union activity can make the nation’s exports expensive and
thus less competitive in the international market
Trade unions and the government
✔ The role and importance of trade unions varies across the world.
✔ In fact, in some countries, including Saudi Arabia, trade unions are illegal.
✔ Industrial workers in Pakistan have the right to form trade unions, but a number of laws restrict their actions and
hence their effectiveness.
✔ The government can, for example, ban any strike that may cause ‘serious hardship for the community, endanger
the national interest or has continued for 30 days or more.
✔ Trade union membership, as a percentage of the labour force, is relatively high in Mauritius.
✔ The rate is, however, lower in the country’s Export Processing Zones (EPZs). In these areas, managers often
make it difficult for workers to join a union by threatening to close down their factories if workers join them.
✔ Trade unions are more powerful in European countries. They are particularly strong in the Nordic countries of
Finland and Sweden, where union membership is high.