4.5 trade unions

a trade union is

a group of workers who join together to maintain and improve their conditions of employment, including their pay

trade unions aim is to

protect workers, secure jobs, improve working conditions, try and achieve higher wages, better job security, better pensions

collective bargaining is

a process by which wage rates and other conditions of work are negotiated and agreed upon by a union or unions with an employer or employers, it can be used in labour markets where trade unions are strong and possess significant bargaining power

collective bargaining’s impact has diminished since

employers are reluctant to recognise and bargain with the unions, there has been a shift in power balance from unions to employers due to series of employment acts restricting legal rights of trade unions, and globalisation and international competition on labour markers

UK trade unions remain powerful in industries

which are protected from international competition such as transport, rail industry, other areas of public sector employment

the ability of a trade union to influence wages and levels of employment are decreased if

they try and increase wage rates too much as firms may not be able to afford to employ workers, causing them to close down or reduce workers they employ, some workers may prefer a low paid job over no job

the introduction of a trade union into a perfectly competitive labour market is

likely to increase wages but increase unemployment, with the exception of closed shops or operation in an expanding goods market

keynesians argue the introduction of trade union in competitive market may not increase unemployment since

it is unrealistic to assume the conditions of demand do not change, unions can ensure the MRP of labour shifts tot he right, increasing productivity which creates scope for both increased employment and wages

unions could help increase MRP of labour by

accepting technical progress, working with new capital equipment, new methods of organising work, increasing the skill of its labour, however alternatively some unions could resist the changes in working practices that lead to increased productivity

the introduction of a trade union in an expanding goods market can increase both wages and employment since

increased demand for output creates increased demand for labour to produce the product, rising real wages will increase the AD for the output of all firms producing consumer goods because wages are an important source of consumption expenditure

introduction of a trade union in the form a closed shop can increase wages since

the closed shop keeps non union workers out of the labour market, union controlled entry barriers shifts supply leftward and makes more inelastic, employment falls from L1 to L2 but there is no excess supply of labour- no workers would be willing to work for lower wages

the graph for closed shops can also be seen similarly when

professional associations insist on long periods of training before the worker is formally qualified, during which time only very low wages are paid

in perfectly competitive labour markets, closed shops can increase wage and employment as

it keeps non unions workers out of the labour market, the union controlled barrier to entry shifts the supply curve of labour leftward and makes it more inelastic. similar effect seen in professional associations who insist on long periods of training with relative low wages

the introduction of a trade union on a monopsony market

is likely to increase both wages and employment