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Trade Unions

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Economics

How many people do you think to have a work-life balance? Does every job get what it deserves? A staggering 95% of SMEs in the UK are unaware of the legal rights of disabled employees.4 Many working mothers and fathers in the UK have the right to flexible working hours, but they are not informed of these rights, which ultimately leads to exhaustion and imbalance in their personal lives. However, workers can obtain the legal rights and benefits they are entitled to through trade unions. What are trade unions, and what is their function? This article will present you with a definition of trade unions and examples.

Definition of Trade Unions and Examples

Trade unions are organisations of workers that help their members represent themselves and negotiate with their employers to obtain better benefits for affiliated workers. In some countries, it is also called a labour union.

Trade unions are groups of people (employees or workers) who join together to represent the interests of workers.

The functions of unions include the following:

  1. Worker representation, i.e. negotiating wages and reasonable working conditions
  2. Collective bargaining, i.e. demanding higher wages under threat of strike action
  3. Coordination with employers regarding work procedures and practices.

A recent example of a union and its ongoing strike is of the refuse workers striking for higher wages from employers (the government) since Covid-19. Although they have received an increase in the payment, it does not meet their conditions. The union ‘GMB Union’ tries to solve the problem by mediating between refuse workers and the management to bring a solution.3

Characteristics of Trade Unions

What are the effects of trade unions on wages and employment? Unions bargain effectively for workers’ rights and fairness in wages, working conditions, and other benefits. The characteristics of labour unions are as follows.

Employees Association

The first and most crucial characteristic of trade unions is the association of many workers. It is an association of workers to improve individual workers or a group of workers in a particular industry or segment.

Unity in Bargaining

As mentioned earlier, unions are nothing more than a group of people who come together to fight for their common interests. The employer may overlook when an individual makes a demand. However, when the union bargains collectively for the exact cause, management is forced to address it.

Communal Interest

Unions fight for the common interest of their members. The interest can be monetary, i.e., wage increases, or non-monetary such as holidays, job security, health care, etc. Unions usually fight to improve the situation of several workers in an industry.

Legal Bodies

Unions are usually legally registered with government bodies. Different countries have different legal acts related to trade unions.

The Trade Union Act 2016 (c. 15) is a UK labour law David Cameron’s administration of the UK Conservative Party passed.1 It amended the Trade Union and Labour Relations (Consolidation) Act 1992.2

Permanent Body

A trade union is usually a permanent body, although its affiliated members may not be permanent, as they may come and go. Members may not remain permanently because they decide to leave the workplace or no longer work in the same industry. It may also happen that some members leave the country, resulting in them no longer belonging to the union.

Types of Trade Union Bargaining Powers

Trade unions are said to have a huge impact on the bargaining process. Also, how and for whom and what for they bargain determines the type of their bargaining power. Explained below are the types of bargaining powers of trade unions.

Collective Bargaining

Collective bargaining is when the trade union demands something on a larger scale or for all company employees. It can even be on a national level rather than an individual level.

Since Brexit, there has been a huge demand for truck drivers in the UK, which has led to trade unions demanding better salaries, better facilities such as the provision of rest areas, toilets, and adequate rest periods. This example illustrates collective bargaining, as unions are campaigning for the interests of truck drivers across the country.

Productivity Bargaining

Productivity bargaining is usually based on worker productivity. Here, unions agree to improve worker productivity in exchange for higher wages or other benefits such as pension, holidays or paid leave, etc. Productivity can take the form of improved sales output, increased production, better service to clients, etc.

Let us take the example of a real estate sales team. The union believes that the sales team is paid less for the hard work and time. The employers, however, think they are paid fairly, which is where the productivity bargaining power comes to the sales team’s rescue, as the union agrees to increase sales performance. In return, the team or individual receives an agreed-upon commission.

Advantages of Trade Unions

As explained above, unions have bargaining power with the following advantages.

Right Pay Demands

Unions have the power to demand the right pay because it is an association of a group of workers. In economics, the higher the demand, the greater the supply chance. The same is true for trade unions: the more employees demand their rights, the greater the chances of being enforced.

Improved Working Conditions

The strong bargaining power of unions ensures a lot of leeways to demand better working conditions for employees. In addition, workers can demand a certain wage rate, a safe work environment, a pension plan, bonus schedules, holidays, etc., so unions play a crucial role in obtaining other benefits.

Guaranteed Job Security

Unions can also help guarantee job security. It is unethical and illegal for an employer to terminate an employee who is a union member and has contacted their union with such issues until the matter is resolved.

Grievance Handling

Normally, it can be difficult for a person to bring their grievance because of the risk that it will lose merit. However, if the union brings the same complaint to the employer, it cannot ignore it. Also, unions can raise the same complaint on a larger scale than an individual.

A pregnant woman working for the company has every right to refuse specific work that might affect her health. However, when she raised the issue with management, she was ignored and told to continue working or leave. However, when she approached management through a union, they had to find a way for her to continue working while accommodating her condition.

Reduced Economic Inequality

Trade unions benefit the economy. As unions fight for wage rates and better working conditions, raising workers’ living standards usually helps reduce economic inequality.

Disadvantages of Trade Unions

As every coin has two sides, trade unions have several disadvantages, which we explain in more detail below.

Unemployment

As explained above, unions can help raise wages. However, raising wages sometimes results in unemployment. Let us try to understand this with an example.We all know that the equilibrium determines the wages, as represented by point ‘e’ in Figure 1 below.

Trade Unions Labour market with trade union equilibrium StudySmarterFigure 1. Labour market with trade union equilibrium - StudySmarter

However, unions can negotiate higher wages at W1, represented by point ‘a’ in Figure 2. Higher wages attract more workers – Q2 – and increase the supply of labour in the market, represented by point ‘b’ in Figure 2. Employers may be unwilling to increase the number of workers at higher wages, resulting in a larger gap between the demand and supply curves, hence unemployment of (Q2 - Q1).

Trade Unions Labour market with trade union unemployment StudySmarterFigure 2. Labour Market with trade union Unemployment - StudySmarter

Productive time can be lost

Unions repeatedly resort to employees going on strikes, rallies and meetings to press their demands, which can happen during working hours when workers are not working, leading to a loss of productive time.

Creates lethargic attitude in employees

Sometimes unions can lead to a lethargic attitude among workers. Unions can negotiate higher wages and better working conditions, but at the same time, workers are expected to increase productivity and improve output. Nevertheless, workers are aware of the power of a union and expect employers not to push them to work. Therefore, they take advantage of the situation and become less productive.

Impact of trade unions on labour market flexibility

Trade unions have the power to go on strikes and can pressure employers to increase wages and fulfil their demands.

Also, it can force employers to avoid redundancies. However, if the labour market flexibility is improved, trade union power may be impacted.

Impact of trade unions on labour market flexibility

It is rightly believed that trade unions greatly impact the labour market. The trade union and the labour market flexibility are inversely related. The higher the power of trade unions, the lesser the labour market flexibility. The lower the power of trade unions, the more flexibility there is in the labour market.

The trade union's power to go on strike and/or demand certain conditions from the employers, thereby limiting their ability to create more flexibility in the labour market.

Labour market flexibility can be increased by:

  1. Reducing minimum wages
  2. Better training and development of employees
  3. Reducing trade union's powers
  4. Reducing unemployment benefits, etc.

Employer Organisations

Generally, unions are assumed to be an association of workers. However, employers can also establish organisations that function similarly to unions, namely employers’ associations. The only difference is that the purpose of the employer organisation is different from that of the employee trade union.

In general, an employers’ organisation groups industrialists from the same segment who join together to represent their interests and negotiate with the government and trade unions.

The employers’ association, a business or industry union, negotiates with governments on policy reform, tax reform, etc.

Trade Unions - Key Takeaways

  • Unions are groups of people (employees or workers) who join together to represent the interests of workers.
  • Trade unions are associations of workers – legal and permanent entities that work for the community’s interests and have bargaining power.
  • Unions have the power to bargain collectively and productively.
  • Unions have the advantage of demanding high wages, better working conditions, job security, and addressing the grievances of their affiliated workers.
  • However, unions also have disadvantages, such as creating unemployment and being lethargic. In addition, unions can lead to a waste of productive time during strikes.
  • The flip side of the union is the employers’ side, which is more of a business union to bargain with the government on policy reforms, tax reforms, etc.

1. UK Government, The Trade Union Act 2016 (c. 15)

2. UK Government, Trade Union and Labour Relations (Consolidation) Act, 1992

3. Harvey Thompson, Robert Stevens, ICFI, 2021

4. BoltBurdonKemp, Lack of knowledge within SMEs is slowing down progress in disability employment

Trade Unions

Trade unions are groups of people (employees or workers) coming together to represent the interests of the workers.

The functions of unions include the following:


  1. Worker representation, i.e. negotiating wages and reasonable working conditions
  2. Collective bargaining, i.e. demanding higher wages under threat of strike action
  3. Coordination with employers regarding work procedures and practices.

  • Right pay demands
  • Improved working conditions
  • Guaranteed job security 
  • Grievance handling 
  • Reduced economic inequality

  • Unemployment
  • Productive time can be lost
  • Creates lethargic attitude in employees

A trade union or the labour union have the same meaning and the terms are used interchangeably.

Final Trade Unions Quiz

Question

 What is the definition of trade unions?

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Answer

Trade unions are groups of people (employees/workers) coming together to fight in the best interest of the workers.

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Question

What are the characteristics of trade unions in brief?

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Answer

The following are the characteristics of trade unions:

  • Employees association

  • Unity in bargaining

  • Reduced economic inequality 

  • Communal interest 

  • Legal and permanent bodies

Show question

Question

What are the two types of bargaining power of trade unions?

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Answer

Collective bargaining and productivity bargaining.

Show question

Question

What are the advantages of trade unions?

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Answer

The following are the advantages of trade unions:

  • Right pay demands
  • Improved working conditions
  • Guaranteed job security
  • Grievance handling
  • Reduced economic inequality

Show question

Question

What are the disadvantages of trade unions?

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Answer

The following are the disadvantages of trade unions:

  • Unemployment

  • Creates lethargic attitude in employees 

  • Productive hours may be lost

Show question

Question

Can trade unions lead to unemployment situations?

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Answer

Sometimes demanding higher wages leads to a higher supply of labour, creating a wider gap between demand and supply, which can lead to unemployment.

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Question

Is a trade union a legal body?

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Answer

Yes, trade unions are legal bodies.

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Is a trade union an individual entity or group of people?

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Answer

Group of people.

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Question

Name a few non-monetary benefits trade unions can demand for.

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Answer

Better working conditions, holiday, pension plan and insurance policies, etc.

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Question

What are trade unions associations of?

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Answer

Usually, trade unions are associations of workers.

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What does collective bargaining power refer to?

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Answer

Collective bargaining means the power of trade unions to come together and demand for the rights of workers.

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What does the productivity bargaining power of a trade union mean?

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Answer

Productivity bargaining is when a trade union bargains on behalf of its members in return to improve productivity for the employer.

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What can employers lose during trade union strikes or rallies?

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Answer

Employers can lose the productive time of employees during trade union strikes.

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Do trade unions demand for pay below equilibrium or above equilibrium?

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Answer

Trade unions demand pay above equilibrium.

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Question

What is the flip side of a trade union apart from employees’ trade unions?

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Answer

The flip side is the industrialist side that works for the betterment of their industrial segment with the government for various reforms.

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Question

The functions of trade unions include: 

  1. ___________      
  2. ___________      
  3. Coordination with employers regarding work procedures and practices.


Show answer

Answer

  1. Worker representation 
  2. Collective bargaining

Show question

Question

Unions bargain effectively for workers’ ___________ in wages, working conditions, and other benefits. 

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Answer

rights and fairness 

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Question

Trade union is an association of workers to improve individual workers or a group of workers in a particular industry or segment. 

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Answer

True

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Question

The common interest that trade unions fight for can be ___________ .


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Answer

monetary

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Question

Holidays, job security, health care are example of ___________  .


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Answer

monetary interests of workers

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Unions are not usually legally registered with government bodies. 

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True

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A trade union and its affiliated members are always permanent. 


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Answer

True

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Question

Two common types of bargaining powers of trade unions are ___________  and Productivity Bargaining.

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Answer

Collective Bargaining 

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Which type of trade union bargaining is usually based on worker productivity?

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Answer

Collective Bargaining 

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One of the main benefits of trade unions is to demand the right pay for its members. 

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Answer

True

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Question

By fighting for higher wage rates and better working conditions, trade unions help to reduce ___________ .

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Answer

economic inequality 

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What are not the benefits of trade unions?

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Answer

Unemployment 

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Question

Trade unions do not have the power to go on strikes and pressure employers to fulfil their demands.  


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Answer

True

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