Trade unions are associations formed by workers and aim to increase their wages and working conditions by using collective bargaining.
Types of trade unions
| Craft | Include workers with particular skills |
| General | Include workers with range of kills from range of industries |
| Industrial | Include workers from a particular industry |
| White collar | Include workers with particular professions |
Trade unions are generally belonging to a national union organisation like in India the unions belong to AITUC and in Singapore the trade unions belong to SNTUC.
Functions of trade unions
Negotiate on behalf of their members for wages, job security and working conditions. ( wage and non wage factors )
Protecting and improving their members’ rights
Provide information on issues for their members
Education and training schemes for productivity
Involve with government to pass a legislation which benefits their members
Collective Bargaining
An individual worker may not have enough bargaining power and may not be able to negotiate with its employer regarding wage and non wage factors. Trade unions on the other hand press their claims through trade unions through collective bargaining.
Collective bargaining includes negotiations between the union’s officials, representatives of the group of workers and representatives of the employers.
The arguments made by the representatives:
- Workers deserve to be paid more because they have been working hard and their productivity has increased
- Workers deserve to paid more because the industry has been earning a lot of profit and can afford to pay more
Workers deserve to be paid more because their pay should be kept in line with similar workers and to maintain their wage differential ( this is known as a comparability argument )
Workers deserve to be paid more because the cost of living has increased due to inflation so if the price has increased by 8% the wage also needs to be increased by 8% in order for workers to maintain their real income ( income adjusted for inflation )
Factors affecting strength of a union’s bargaining power
A high level of economic activity is there then the output will increase and so will the income leading to economic growth and most of the workers should be employed and the wage rate should also increase. When output reaches high level, the firms compete for workers and are wanting to enlist more workers in order to maintain this output thus they will make agreements and they will be willing to agree with trade unions for better working conditions etc, this will increase the bargaining power of trade unions,
A high number of members will make the demand for the particular group of workers inelastic as they will be hard to replace this union labour and thus the trade union association will gain bargaining power. A high number of members will allow more funds to finance the union’s activities.
A high level of skill will make the demand for the union labour to be inelastic as they will be hard to replace and also it is expensive to train the unskilled workers.
A consistent demand for the product produced by workers allow the demand for the product the workers make to be inelastic and thus they will have high bargaining power
Favourable government legislation allows the union to be in a stronger position and have high bargaining power if the law permits the unions to take industrial action
Industrial action
If the negotiations are broken on wage claims or other problems occur, there can be an industrial action initiated by a union in support of its claim. The workers will refuse to work more than contracted hours and there may be an overtime ban. The workers disrupt the production and put pressure on employers to agree to their demands.
Workers do strikes which includes withdrawing the labour. Official strikes are strikes which are approved and organised by the union .
Government prevents strikes by encouraging both unions and employers to go to arbitration which includes third parties seeking to reach an agreement. An arbitrator should be a government body or a party agreed by both sides.
Besides taking industrial action and negotiating, trade unions can seek to raise the wages of its members by blocking the entry of new workers into the industry, occupation or craft. They may increase the qualifications and experience to join the union,
Advantages and disadvantages of a trade union
The actions taken by trade unions will damage the firms as the revenue lost due to workers working less and the loss in reputation will cause the firm to be more inefficient and also it will be less flexible.
Trade unions can also cause benefits to firms like it will be less time consuming, stressful and cheaper to negotiate with a union rather than individual workers. Unions are also a form of communication between the workers and employers while trade unions provide education and training which boosts the workers’ productivity
