CHAPTER 19-

TRADE UNIONS
What is a Trade union?
 A trade union is an organization which aims to protect the interests of its
worker members, i.e., their terms and conditions of employment, including
pay.
 A worker becomes a member of a trade union by paying a yearly
subscription fee. The membership fees help to pay for the administrative
and legal expenses of operating the trade union.
 Usually, employees and employers have different aims and objectives.
 Employees want to:
 maximize wages/salaries and non-wage benefits (fringe benefits)
 have job security.
 work in a safe and healthy environment.
 Employers want to:
 maximize sales and profits
 maintain a happy and motivated workforce
 minimize costs
 Due to this, trade unions are set up.
 Trade unions act as a means of communication and negotiation between
employers and employees through a process called collective bargaining-
the process of trade union representatives negotiating on behalf of their
worker members with employer representatives for better pay and
conditions.
 Trade unions follow “unionization”: the larger and more united the union,
the better its bargaining position tends to be.

Types of trade unions

 Craft unions: Oldest Types of trade union. This type of trade union is set up
for workers of similar skills/jobs. E.g., engineers and printers formed
different trade unions to carpenters and plasterers
 Industrial unions: This type of trade union is set up for workers in the same
industry, regardless of their skills. E.g., Workers engaged in oil exploration,
extraction, storage, refining, and any other tasks related to the oil business
would be included in an oil workers' union.
  “White collar” unions: This type of trade unions is set up for professional,
administrative, clerical and other non-manual staff (salaried workers, not
ones who receive wages).
 General unions: This type of trade unions is set up to accept anyone,
irrespective of the place they work, the nature of their work, or their
industrial qualifications. It usually has many skilled workers.

The role of Trade unions

 The main role of trade unions is protecting its member’s interests, by:
 Bargaining with employers for pay rises and better terms and
conditions
 Giving members legal advice and legal and financial support when
necessary (members unfairly: treated, disciplined, made redundant
or dismissed)
 Ensuring equipment at work is safe to use (supported by health and
safety legislation) and that workers are given sufficient training to
enable them to perform their role at work safely.
 Persuading the government to pass legislation in favor of workers,
such as legislation covering minimum wages, maximum working
hours, and the retirement age.

Collective bargaining and wages

 Trade unions must have a basis (reasons) before demanding from the
employers to increase wages. These may include:
 a rise in the cost of living due to inflation, which reduces the real
wage of trade union members
 workers in comparable occupations who have received a wage
increase
 increased profits of the firm and industry as a whole, justifying a
higher return for labour services
 an increase in the productivity of labour, further justifying an
increase in wages.
 NOT IN SYLLABUS (use: for internal exams)
Industrial actions
 Industrial action refers to measures taken by trade union members as a
result of major disagreements or disputes with their employers, e.g., strike
action.
 Types of industrial action:

Industrial Definition Impact on Impact on

action employers workers
Strike Trade union members refuse Output of goods and Workers do not get
to work, i.e., they stop services ceases, creating paid when/if they do
working an instant and not work, so lose
negative impact on the wages/salaries.
firm

Work-to-rule Trade union members work Workers are meeting

to fulfil the minimum
requirements of their job,
literally, and do not go
beyond what is written in
their employment contracts
Go-slow Trade union members
complete their work very
slowly
their contractual
responsibilities and
therefore cannot be
disciplined or sacked
Productivity and Morale may drop as a
efficiency fall result of low targets
and productivity

Sit-in Trade union members turn
up to work and occupy the
premises but do not
undertake their normal work
Production of goods and A loss in wages and, if
services ceases sustained, falling
temporarily, and this standards of living
has an immediate
impact on the firm

Note: the difference between STRIKE and SIT-IN is that during strike, workers
don’t go to the place of work. During sit-ins worker do come to the place of work
but don’t work.
Factors influencing the strength of
trade unions
 The two main factors affecting the strength of trade unions are their
number of members and the degree of their unity.
 Possible reasons for a higher level of trade union membership in some
countries are:
 Growth in manufacturing jobs in these countries — manufacturing industry is often
unionized as workers typically receive low pay and have poor working conditions
 A widening wealth gap and higher costs of living which have caused workers to
petition for higher wages and better working conditions.
 Possible reasons for a lower level of trade union membership in some
countries are:
 Government legislation which seeks to reduce trade union influence
 A decline in manufacturing jobs in these countries
 A growing number of fi rms independently agreeing to fairer terms and conditions of
employment, as part of their corporate social responsibility [(CSR) refers to the
ethical approach taken by firms towards their stakeholders (such as employees and
customers) and the environment (such as adopting green technologies)] without
negotiating with trade unions.
 To increase trade union memberships, trade unions provide incentives
(loans, mortgages, insurance, credit cards, discount holiday vouchers and
discount car hire).
Advantages & Disadvantages of trade
unions to the economy
+They act as a channel of
communication between employers
(firms) and employees (workers). So,
through negotiations and collective
bargaining, they help to solve
disputes and settle pay claims
harmoniously and effi ciently.
+They negotiate with the government
for the introduction of or an increase
in the minimum wage, which can also
help to increase standards of living for
the poorest workers. Increased pay
and improvements in working
conditions may lead to a better
motivated workforce and result in an
increase in the profits of firms.
+They negotiate with employers on
behalf of their members for better pay
and working conditions. This benefits
the government as productivity also
improves. Overall, there is a positive
impact on standards of living.
-Trade unions are often portrayed in
the media as having a negative role in
an economy when they take industrial
action which may result in lost
productivity. Strikes are the most
extreme form of industrial action and
can cause serious disruption to firms
and the wider economy.
» From an employer’s point of view, a
trade union’s demands for better pay
and conditions for its members may
increase the firm’s production costs
and therefore reduce its profits. If so,
tax revenues collected by the
government will also fall.
 Past paper questions (Paper 1)

1.

2.

3.
 4.

5.

6.

7.

Answers
Question Answer Marks
 1 D 1
2 C 1
3 D 1
4 C 1
5 B 1
6 A 1
7 D 1

Past Paper questions (Paper 2)

1.

Analyze the impact of strikes on an economy.

…………………………………………………………………………………………..
 …………………………………………………………………………………………..
…………………………………………………………………………………………..
…………………………………………………………………………………………..
…………………………………………………………………………………………..
…………………………………………………………………………………………..
…………………………………………………………………………………………..
…………………………………………………………………………………………..
……………………………………………………………………………………… [6]

2.

Analyze how trade unions could increase economic development.

…………………………………………………………………………………………..
…………………………………………………………………………………………..
…………………………………………………………………………………………..
…………………………………………………………………………………………..
…………………………………………………………………………………………..
…………………………………………………………………………………………..
…………………………………………………………………………………………..
……………………………………………………………………………………… [6]

Answers
Question Answer Marks
1 Disrupted production (1) loss of output (1) decreased 6
productivity
(1) less economic growth (1) increased cost of firms (1)
 reduced profits (1) rising prices / inflation (1)
unemployment (1).
Better working conditions of the workers (1) higher
wages (1).
Exports decreasing (1) increase current account deficit /
decrease current account surplus (1).
Less investment by MNCs (1).
There may be capital investment to replace workers (1).
2 Coherent analysis which might include: 6

Trade unions could help engage in collective bargaining

on wages (1)
higher wages (1) leads to higher purchasing power of
workers (1).
May increase motivation of workers (1) increase output
(1).
Better working hours (1) improved working conditions (1)
protect
workers’ rights (1) better health and safety (1) more job
security (1)
leads to higher standards of living (1) higher life
expectancy (1).
Increased productivity / efficiency of workers (1)
decreases cost of
production (1) decrease final price of goods and services
produced in
the country (1) increase competitiveness (1) higher
output / economic
growth (1).
May help with training (1) raise quality of output (1).

Topic Notes and Guidance R Y G

Definition of a trade union
The role of Trade unions in Including engaging in collective bargaining on wages,
the economy working hours and working conditions; protecting
employment; and influencing government policy.
Factors influencing the strength of trade unions.

The advantages and From the viewpoint of workers, firms and the
disadvantages of trade government.
union activity