The role and purposes of trade unions

Trade unions are organisations that workers join to strengthen their position when dealing with employers. By uniting, employees gain more influence than they would have individually, which helps them negotiate better terms.

Key functions of trade unions

• Representation of workers' interests - Trade unions act on behalf of groups of employees to secure advantages such as higher pay.
• Increased bargaining power - Workers collectively have greater leverage than individuals, making it easier to push for changes.
• Negotiating improvements - Unions focus on achieving better salaries, safer working environments, and greater job protection.

Types of bargaining used by trade unions

Collective bargaining involves discussions with employers to agree on terms:

• At a national level, such as pushing for salary increases across an entire sector.
• At a workplace level, like arranging better facilities for staff in a specific factory.

Other bargaining approaches:

• Productivity bargaining - Unions accept adjustments that boost output in exchange for rewards like raised pay or extra perks.
• Performance-related pay deals - These tie wage rises to factors such as output quality and efficiency levels.

Additional protections provided by trade unions

• Ensuring workplace safety - Unions monitor compliance with regulations on rest periods, health standards, and overall conditions.
• Guarding against discrimination - They support members facing unfair treatment based on protected characteristics.

Historical trends in trade union membership and power

Trade union membership in the UK has varied over time, influenced by economic shifts and government policies. High membership numbers enhance a union's ability to influence employers.

Changes in membership over time

• Peak in the late 1970s - Membership reached about 13 million, giving unions significant strength.
• Decline in the 1980s and 1990s - Numbers dropped sharply due to several factors:
  • Government measures under the Conservatives made industrial action harder, aiming to make the economy more adaptable and competitive as a supply-side approach.
  • De-industrialisation shifted jobs from manufacturing to services, where unions were less common.
• Impact of modern work patterns - Flexible and part-time roles have contributed to lower membership.
• Stability since the mid-1990s - Membership has held steady at around 6 to 7 million.

How trade unions can cause labour market failure

Trade unions can disrupt the balance in labour markets by pushing for wage levels above what the market would naturally set, leading to inefficiencies like excess unemployment.

Effects on wages and employment

• In a balanced labour market without unions, companies pay the equilibrium wage (We), resulting in employment at level Lc.
• When unions demand a higher wage (Wu), firms must pay at least this amount, creating a labour surplus where more people want jobs than are available, causing unemployment.
• The extent of this unemployment varies with the elasticity of labour demand.

Trade unions in monopsonistic labour markets

In markets where one employer dominates as the main buyer of labour (monopsony), unions can play a positive role by balancing power and improving outcomes for workers.

Characteristics of monopsonistic markets

• A monopsonist pays wages below the marginal revenue product (MRP) of workers.
• This creates a bilateral monopoly when a union acts as the sole seller of labour, facing the single buyer.

Positive effects of unions in monopsony

• Unions can alter the labour supply curve and marginal cost curve, pushing wages and employment closer to competitive market levels.
• This counters the monopsonist's power, potentially raising both pay and job numbers without causing market failure.
• Government rules limiting union strength have made such failures less common overall.

Benefits of trade unions through productivity improvements

Trade unions can contribute positively by encouraging better efficiency, which supports higher wages without negative effects on employment.

How productivity enhancements help

• Unions can negotiate wage increases tied to productivity gains, avoiding unemployment by boosting demand for labour.
• Improved practices raise worker output, potentially increasing company profits and benefiting everyone involved.
• Higher productivity shifts the MRP curve rightward, allowing justified pay rises.

Greater efficiency can lead to more demand for workers, helping to lower unemployment rates.