3.4 Trade unions

Question 1

Trade Union definition

Answer 1

Trade Unions are organizations of workers that aim at promoting and protecting the interest of their members (workers). They aim on improving wages, working conditions, and other job-related aspects.

Question 2

Functions of Trade Unions

Answer 2

1. Negotiating improvements in wage and non-wage benefits with employers.
2. Defending employees’ rights and jobs.
3. Improving working conditions, such as better working hours and better health and safety measures.
4. Improving pay and other benefits, including holiday entitlement, sick pay, and pensions.
5. Supporting workers who have been unfairly dismissed or discriminated against, or who are taking industrial action
6. Developing the skills of members, by providing training and education.
7. Providing recreational activities for the members.
8. Taking industrial actions (strikes, overtime ban, etc.) when employers don’t satisfy their needs.
9. Encouraging firms to increase workers’ participation in business decision making
10. Influencing government policy and employment legislation to protect jobs, the rights of workers, and their wages and working conditions

Question 3

Collective Bargaining

Answer 3

The process of negotiating over pay and working conditions between trade unions and employers. These negotiations can take place in events such as increased productivity of the members of the trade union, so they may negotiate for improved wages.

Question 4

Trade unions will often argue for improved wages and other working conditions if

Answer 4

• Price inflation is high and rising (the cost of living increases when prices increase and workers will want higher wages to consume products and raise their families.)
• Other groups of workers have received pay raises
• new machinery or working practices have been introduced in the workplace
• the labor productivity of their members has increased
• the profits of the employing organization have increased

Question 5

Closed shop

Answer 5

Trade union membership is made a compulsory condition of taking a job in an organization. The closed shop is outlawed in many countries because it gives a union too much power to dictate who a firm should employ and to call all the workers in that firm out on strike.

Question 6

Open shop

Answer 6

A firm can employ both unionized and non-unionized labor

Question 7

Single union agreement

Answer 7

An employer agrees to a single union representing all its employees

Question 8

Single union agreements are popular because they offer these employer advantages:

Answer 8

• Time is saved by negotiating with only one union
• It avoids disagreements arising between different unions
• It is easier to implement changes in working practices through one union
• A closer working relationship with the union should develop and help to reduce industrial disputes

Question 9

Main problem with a single union agreement in a workplace

Answer 9

Gives the trade union significant bargaining power, so most firms only agree to single union representation if the trade union agrees to commitments on improved levels of productivity, maintaining skill levels in the workforce, and not take strike action.

Question 10

Bargaining power of a trade union to secure improved pay and other working conditions from employers is stronger when

Answer 10

• the union represents most or all of the workers in that firm or industry
• union members provide products and public services consumers need and for which there are few close substitutes, such as electricity, public transport, healthcare, and education
• the union is able to support its members financially during strike action to compensate them for their loss of earnings

Question 11

Industrial disputes

Answer 11

Collective bargaining can fail to reach an agreement’ e.g. if a union demands a wage increase for its members that don’t match their productivity, production costs will rise, so the firm will have to raise prices or reduce profits. When negotiations between employers and unions fail to end in agreement, workers may take disruptive industrial action.

Question 12

Industrial action

Answer 12

When negotiations between employers and unions fail to end in agreement, workers may take disruptive industrial action to put pressure on their employers to address their demands. or grievances.

Question 13

Official action

Answer 13

This means that the industrial action has the backing of their trade union, and other unions may also take action in support

Question 14

Unofficial action

Answer 14

Workers taking the industrial action do not have the support of their union

Question 15

Forms of industrial action

Answer 15

1. Overtime ban
2. Work to rule
3. Go-slow
4. Strike

Question 16

Overtime ban

Answer 16

Workers refuse to work more than their normal hours

Question 17

Work to rule

Answer 17

Workers deliberately slow down production by complying rigidly with every rule and regulation

Question 18

Go-slow

Answer 18

Workers carry out tasks deliberately slowly to reduce production, so the firm’s will be inconvenienced and sales and profits can go down.

Question 19

Strike

Answer 19

Workers refuse to work and may also protest, or picket, outside their workplace to stop deliveries and prevent non-unionized workers from entering

Question 20

Implications of industrial action

Answer 20

• Businesses suffer higher costs and lose output, revenues, and profits during industrial action; if it goes on for a long time it may also lose important customers to rival firms
• Union members will not be paid their wages or salaries during a strike although some may receive income support from their union’s strike fund. Some may also lose their jobs if employers need to cut back demand for labor due to loss of customers and profits.
• Consumers may be unable to obtain the goods and services they need and may also have to pay higher prices if firms pass on their increased costs
• The reputation of an economy as a good place for business may be damaged by frequent and widespread industrial action. Firms may decide to invest and set up businesses elsewhere, increasing unemployment and lower incomes.

Question 21

Arbitration

Answer 21

This may be necessary to settle industrial disputes. It involves employers and unions agreeing to let an independent referee, often a senior official or lawyer help them reach an agreement. This normally means both sides in the dispute accepting a compromise.

Question 22

Advantages of trade union representation for workers

Answer 22

• Workers benefit from collective bargaining power by being able to establish better terms of labor.
• Trade unions represent their views and fight to maintain their jobs and working conditions
• They protect their wages and other benefits
• They prevent discrimination and exploitation at work
• They can provide training and educational courses

Question 23

Advantages of trade union representation for firms including public sector organizations

Answer 23

• Trade unions protect and maintain the skill levels of their members
• They provide a single point of contact. Having a single body for negotiating terms and conditions for workers is simpler than dealing with workers individually
• They can help to improve labor productivity. Improvements in working conditions and wages can create an incentive for workers to be more productive. Unions may also agree to pay or profit-sharing deals linked to higher levels of productivity.

Question 24

Advantages of trade union representation for the government

Answer 24

• the trade union movement in an economy provides a single point of contact and source of information to inform and discuss economic issues and government policy measures including employment laws
• they can help reduce inequality in society by raising the wages of low paid workers
• to the extend they can raise productivity within firms, they will help to boost output and economic growth in the economy
• improving and maintaining workforce skills increases the mobility of labor in the economy.

Question 25

Disadvantages of trade union representation for workers

Answer 25

• belonging to a trade union requires the payment of weekly or monthly membership fees
• individual workers who are more productive and have more experience and skills than their workplace colleagues will be unable to negotiate higher wages separately with their employers
• in some workplaces with closed shops or single union agreements, employees have no other choice but to join a union and to follow union rules

Question 26

Disadvantages of trade union representation for firms

Answer 26

• wages and other working conditions may be better, more productive, and working hours lower than they might otherwise be if there was no union representation in workplaces
• they will have less control over who they can hire and dismiss, and may face more challenges and legal actions from trade unions if they do not agree with the reasons for certain dismissals and the procedures used
• they are normally required to collect trade union membership fees from the pay of their workers and then pay over these fees to their unions. This increases administrative and accounting costs.
• trade unions may organize workers to participate in disruptive industrial actions including strikes, to increase their bargaining strength in negotiations over jobs, workers’ rights, pay, and working conditions.

Question 27

Disadvantages of trade union representation for the government

Answer 27

• the demand for labor in the economy may be lower and unemployment higher if trade unions push up wages. In turn, a government may have to spend more of unemployment benefits or welfare payments and raise taxes to pay for them
• trade unions may contribute to rising wage inflation if they are successful at raising the wages of their members without improving their productivity at the same time
• industrial disputes and actions can result in lost production and may reduce economic growth