The Role of Trade Unions (CIE IGCSE Economics)

• Workers pay a monthly fee to join a trade union
  • The fee is called a subscription
  • Their membership ends when they stop paying this fee
    
    
• Benefits of union membership include
  • Collective bargaining
  • Job-specific training
  • Legal representation in disputes
  • Discounts on a wide range of goods/services
     
• When collective bargaining fails & discussions break down, trade unions have several methods of forcing employers/governments to continue engaging with them
  • These methods are collectively referred to as industrial action & include
    • Strikes
    • Overtime bans
    • Work to rule
    • Go-slows
       

The Focus of Trade Union Efforts
 

1. Collective bargaining on wages, working conditions & contractual terms
Negotiates for acceptable wage levels - often well above the minimum wage	Negotiates for increased wages when comparative industries receive pay increases
Negotiates for inflation-linked pay rises	Negotiates for higher wages when firms are making higher profits
Negotiates standard weekly working hours & any overtime payments	Negotiates for improvements to working conditions & equipment

 

 

2. Protecting the employment of their workers
Negotiates for the retention & redeployment of workers when machinery (capital) replaces labour	Negotiates resettlement packages when firms relocate from one region to another & redundancy terms for those unable to relocate
Negotiates to minimise job losses when machinery (capital) replaces labour	Negotiates on a fair termination process when firms are struggling in an economic downturn

 

 

3. Influencing government policy
Negotiates with government on the creation/maintenance of minimum wage levels	Aims to influence policy through member action such as strikes
Negotiates to minimise job losses when machinery (capital) replaces labour	Negotiates on a fair termination process when firms are struggling in an economic downturn

 

• The higher the percentage of workers from a firm that belong to a trade union, the greater the collective bargaining power of that union with the employer
  
  
• The higher the percentage of workers from an economy that belong to trade unions, the greater the collective bargaining power of the unions with the government
  
  
• There are numerous other factors which influence the collective bargaining power of specific unions at different periods of time
  
  

Factors which influence the collective bargaining power of trade unions

1. The unemployment level - the higher the unemployment level the weaker the bargaining power as firms can more easily replace existing workers
2. Wage levels as proportion of total costs - the lower the percentage of total costs that a firms's wages represent, the higher the bargaining power
3. Swapping labour for capital - the nearer the replacement cost of capital for labour to meeting the increased costs demanded by the union, the weaker the bargaining power
4. The level of profits - higher profits strengthen the unions demands for higher wages
5. State of the economy - less bargaining power in a recession & more when the economy is booming
6. Overall size of the trade union - the larger the union the stronger their bargaining power
7. The productivity of labour - if the workers are extremely productive, generating high levels of output from low levels of input, they are more valuable to the firm & the union has stronger bargaining power