Trade Union is an association of workers formed for the purpose of
improving the welfare of their members by negotiations.
There
are different measures which improve
the welfare of members of trade unions.
(1)
Improving the pay
(2)
Improving the working conditions.
(3)
Protections from unfair dismissals
(4)
right to compensation for injuries at
work.
(5)
Right to redundancy pay (payment
for being out of job)
(6)
Other social benefits
Trade
union represents the member workers claims for negotiations. Negotiation (compromise) is done
through process of collective bargaining. The collective bargaining power is based on the ability to influence
the supply of labour. Trade unions achieve their claim by restricting the
supply of labour.
Trade
unions have strong relationship with the wage in the industry, and
employment. Assuming that there is no increase in productivity, trade
unions will always try to enforce a minimum
wage higher than the free market wage rate. That
is, if there is no trade union, the free market low wage would
employ more workers. In case, if most workers belong to a trade union, and they
are able to restrict the supply of labour, they can succeed in enforcing a
higher wage.
The
major grounds for claim for a higher
pay are
(1)
An increase in the cost of living.
(2)
An increase in the productivity of the
firm or the industry.
(3)
An increase in the profit of the firm
or the industry.
(4)
Comparing the wages given in the other
industries.
Trade
union influence the supply of labour
by the following methods
(1)
By restricting the entry to
those who have apprenticeship
(2)
By insisting that certain types of work
can be done only by members.
(3)
By operating a closed-shop protest
(4)
By calling strike (unions
generally obtain the majority members opinion before strike)
There
are different types of trade unions
they are
(1)
Crafts union (such as electricians, painters, carpenters etc.)
(2)
General union (which include all unskilled and semi-skilled workers)
(3)
Industrial union (all workers of a particular industry such as transport,
construction. etc.)
(4)
White collar union (workers in service industries such as health, education, tourism
etc.)
Effects of Trade Union
Calling a strike will have certain adverse consequences to firm, industry
and to the whole economy.
Strike
of workers (like transport, communication etc.) disrupt the whole economic activities individuals and firms of
other industries.
Delay in production will affect the delivery of goods to export which will
badly affect the balance of payment position of the economy.
The
consequence of restricting the supply
of labour is that, the members of the union who get the high wage,
benefits at the cost of those who are
unemployed because of restricting supply. At the same time
demand for labour may not fall if there in an increase in productivity or the
union is able to increase the wage from the expense of firm’s profit.
There
are also some possible reasons for
unemployment due to trade unions; Trade Union may raise wage costs for employers.
This higher wage costs may in turn encourage firms to use more capital intensive methods. This may lead firms to lose revenue through industrial
action (lost production/sales).
On
the other hand trade union may cause to raise
labour productivity through promoting training. Trade union may
reduce labour costs through collective bargaining and reducing conflicts. Moreover trade unions may put pressure on the government to keep
unemployment low.
Since
government is the largest employer, the approach to pay of its own workers has
a significant impact on wage determination. Government can also influence pay
in both the private and public sectors by passing legislation and by income
policies. Government measures on trade unions reform will affect the bargaining
power of the workers and thereby influence the wage rates. Similarly
government policy on education, training, housing and unemployment benefits
will affect the mobility and supply of labour. Changes in government
policies such as public spending, taxation, rate of interest will alter the
level of aggregate demand and there by the demand for labour.
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