Trade Unions




    Trade Unions: An organization of workers that have banded together to achieve common

    goals, promote and protect the interests of their member.


    Collective bargaining: a process of negotiations between employers and a group of employees

    aimed at reaching agreements that regulate working conditions and pay.


    Open shop : A firm that can employ unionized and non-unionized labour


    Closed shop : All workers in a place of work have to be union members. The closed shop is

    outlawed in some countries because it gave unions too much power to dictate

    who a firm could employ


    Shop Steward:  One of the firm’s employees who is granted time off, during working hours,

    to deal with trade union matters.  In some larger companies, a shop steward

    may be employed full-time on industrial relations.  His or her


    Wage Councils: These organisations set minimum wages (not National) for their relevant

    industries. Wage councils have declined dramatically in numbers since 1979.


    Employment Laws: Laws passed by the government or the European Union that set out rules of

    behaviour for workers, employers and trade unions with regard to employment


    Single union agreement: An agreement between an employer and a union such that the union will

    represent all the workers at a particular workplace. This means that one

    union can represent all the workers, whatever their occupation, in the

    same workplace.


    Industrial relations: The relationships between employees and employers

    Trade Unions Past and Present – The change of trade unions


    Since their establishment, the membership and influence of trade unions continued to grow until the early 1980s.  The Conservative government at that time responded to public anger over strikes by introducing laws that restricted the unions’ activities.  In addition, rising unemployment and the decline in the manufacturing industries (that formed the traditional base of the unions) have reduced union membership.


    The increase in part-time jobs and the increased number of women working have also had an impact on union membership.  In the past, neither of these groups have been strong supporters of trade unions.  In addition, the 1980s and 1990s have seen a dramatic increase in the number of self-employed people – who are not usually unionized.


    In response, unions have tried to improve their image by making their services more appealing and relevant to today’s world – e.g. the ATL union (Association of Teachers and Lecturers) has a “no strike” policy.  Many unions now offer their members loans, mortgages, insurance, credit cards, discount holiday vouchers and discount car hire.


    Today, some trade unions also provide grants for college courses, or arrange retraining programmes (the process of developing new skills), for their members who have been made redundant.  In addition, they also provide representatives for members in cases of redundancy, grievance, disciplinary hearings and legal action (e.g. on equal pay).

    Trade Union Membership Around the World


    According to the International Labour Organisation, only 25% of the world’s 1.3bn workers were members of trade unions in November 1997.  However, since the ILO also concluded that trade unions are adjusting to the realities of today, it is likely that trade union membership will increase over the next ten years.


    In a recent ILO survey of 92 countries, only 14 had a unionised workforce of over 50% (and 48 countries had less than 20%).  Results of selected countries are shown below


    Trade Union Density in selected countries (ILO):




    1995 density % change since 1985
    Sweden 91.1 +8.7
    Italy 44.4 -7.4
    South Africa 40.9 +130.8
    Australia 35.2 -29.6
    UK 32.9 -27.7
    Germany 28.9 -17.6
    New Zealand 24.3 -55.1
    Japan 24.0 -16.7
    USA 14.2 -21.1
    South Korea 12.7 +2.4
    France 9.1 -37.2


    Source: adapted from ILO Labour Report 1997


    Types of Trade Unions


    Although the number of trade unions and the number of members in unions have declined steadily since 1979, we can still distinguish between four different types of trade unions:


    1. Craft Unions

    These are the oldest type of unions, which were formed originally to organize workers according to their particular skill.  For example, engineers and printers formed their own respective unions.  Today, the GPMU (Graphical, Paper and Media Union) has members working in the printing, paper, publishing and media industries.  The decline in the demand for some particular crafts has led to many of the older unions to recruit semi-skilled and unskilled workers.


    1. Industrial Unions

    These unions attempt to organise all workers in their industry, irrespective of their skills or the type of work done.  The National Union of Mineworkers (NUM) is an example. National Union of Teachers (NUT), Trade Union Congress (TUC)


    1. General Unions

    These unions are usually prepared to accept anyone into membership – regardless of the place they work, the nature of work, or industrial qualifications.  These unions have a very large membership of unskilled workers.  The TGWU (Transport and General Workers Union) is a very large General Union in the UK.  Their members include drivers, warehouse workers, hotel employees and shop workers.


    1. ‘White Collar’ Unions

    Also called non-manual unions and professional associations, these recruit professional, administrative and clerical staff (salaried workers) and other non-manual workers.  They are very strong in teaching, banking, the civil service and local government.


    The Role/Functions/Aims of Trade Unions


    The primary role of Trade Unions is to protect the workers’ interests.  Examples include:


    • Collective pay bargaining – trade unions are able to operate openly and are recognized by employers, they may negotiate with employers over wages and working conditions.
    • Subscription – Early trade unions, like Friendly Societies, often provided a range of benefits to insure members against unemployment, ill health, old age and funeral expenses. In many developed countries, these functions have been assumed by the state; however, the provision of professional training, legal advice, support for members that are mad redundant and representation for members is still an important benefit of trade union membership.
    • Political activity – Trade unions may promote legislation favorable to the interests of their members or workers as a whole. To this end they may pursue campaigns, undertake lobbying, or financially support individual candidates or parties (such as the Labour Party in Britain) for public office.
    • Industrial action Trade unions may enforce strikes or resistance to lockouts in furtherance of particular goals.

    Aims of the Trade Union


    • Defending their employee rights and jobs
    • Securing improvements in their working condictions, including hours of work and health and safety of work
    • Improving their pay and other benefits, including holiday entitlements
    • Improving sick pay pensions and industrial injury benefits
    • Encouraging firms to increase worker participation in business decision making
    • Developing and protecting the skills of Union members.

    Aims of the workers:

     Workers will aim to maximize:


    • Higher Wages – matching inflation (index-link salaries to CPI)
    • Job security – no sacking without notice or reasons
    • Working conditions – Health & Safety; working hours
    • Career progression opportunities: Training and up-to-date information
    • Health and Safety at work
    • Perks, Health insurance, pensions, car, education allowance

    Aims of the employers

    For the employer, targets to maximise may include:

    • Profits
    • Sales
    • Lower costs

    Industrial disputes


    Definition:  Disputes with the workforce and/or their representatives – and any resulting industrial action – are costly and damaging to both the business and workers.



    1. Economic Cause
    • Demand for increase in wages on account of increase in all-India Consumer Price Index for Industrial Workers.
    • Demand for higher gratuity and other retirement benefits.
    • Demand for certain allowances such as: House rent allowance, medical allowance, demand for paid holidays and reduction of working hours, Better working conditions, etc.


    1. Personnel Causes. Sometimes, industrial disputes arise because of personnel problems like dismissal, retrenchment, layoff, transfer, promotion, and more vacations etc.
    2. Industrial disputes also take place because of indiscipline and violence on the part of the workforce. The managements to curb indiscipline and violence resort to lock-outs
    3. causes. Some of the other causes of industrial disputes can be workers’ resistance to rationalization, introduction of new machinery and change of place, non-recognition of trade union, rumors spread out by undesirable elements, working conditions and working methods, lack of proper communication behaviour of supervisors to inter-trade union rivalry.

    How collective bargaining is organized

    Definition: the process whereby representatives of the workers (in a particular industry) negotiate

    say pay settlements – with representatives of the employers (in that industry).


    Generally, an individual worker is in a weak bargaining position – the main purpose of a trade union is to remove this weakness by “forcing” the employer to negotiate with the representatives of his/her work force.


    Trade unions are autonomous bodies – they have complete freedom to act in their own interests.  Most unions, however, are affiliated to the Trade Union Congress (TUC), which is the largest trade union.  It has an important role in bringing trade unions’ points of views on a national scale, possibly affecting government decisions – e.g. the TUC have been at the forefront of the National Minimum Wage negotiations.


    If the more powerful unions make full use of their bargaining strength, they could succeed in getting larger and/or more frequent wage increases than the weaker unions.  This highlights the importance of “unionisation” within trade unions – the larger and more united the union, the better the bargaining position, ceteris paribus.

    How is it organized

    Collective bargaining is organized depending on the relationship between a union  and firms that employ unionized labor.

    • In a open shop, a firm can employ unionized and non-unionized labor
    • In a closed shop all workers in a place of work have to be union members. The closed shop is outlawed in some countries because it gave unions too much power to dictate who a firm could employ. A union could also call the entire workforce in a firm/industry out on strike. In these ways, a union may act like a monopoly and restrict the supply of labour so as to force up the market wage for a job/occupation.
    • A single union agreement allows a union to represent all the workers, whatever their occupation, in the same workplace. This is usually in return for certain commitments from the union on pay or production levels, and for agreeing not to take strike action. Negotiating with a single union rather than several at a time is much easier for a firm.

    The Challenges facing Trade Unions


    • Decline of manufacturing industries
    • Growth in part-time employment
    • Switch from male to female employment (in terms of percentage increases.
    • Co-operation with management
    • Government legislation (which seeks to reduce union influence)


    The Basis for Wage Claims


    Trade union demands for higher wages are normally based on one or more of the following:


    1. A rise in the cost of living (e.g. due to inflation) has reduced the real income of their members.
    2. Workers in comparable occupations have received a wage increase.
    3. The increased profits in the industry justify a higher return to labour.
    4. The productivity of labour has increase


    How can Trade Unions raise wages?


    1. Restricting the Supply of Labour

    Unions can restrict the supply of labour in an industry, for instance, by pushing for longer apprenticeships or tough examination (entry) requirements.  This increases the wage rate in the industry from W1 to W2 in the diagram below.

    1. Increasing the Demand for Labour

    Unions can influence the demand for labour by use of productivity deals.  They try to persuade workers to increase productivity (which in turn helps to increase the Marginal Revenue Product of Labour – recall that the MRPL is the demand for labour).  In return, trade unions negotiate wage increases for their members, justified by their increased productivity.


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