IMPACT OF LABOR UNIONS ON LABOR MARKETS:

Trade Union:

A trade union is an organization made up of members and its membership must be made up mainly of workers. One of a trade union’s main aims is to protect and advance the interests of its members in the workplace Most trade unions are independent of any employer.

Role of Trade Unions:

1. To improve the working conditions

2. To improve the wages

3. Improving the employment levels

4. To reduce the discrimination at work

5. To provide support and work

Impacts of Unions:

1. The demand for the product is inelastic – this means firms are more likely to meet wage demands. 

2. The product or service is a strategic one – such as power worker’s unions, or the union of transport workers.

3. Labor represents a small share of total cost – such as airline pilots (in relation to total costs).

Unions often represent workers in negotiations with employers. Collective bargaining is common in many industries, including motor vehicles, transport (rail, bus and tube) and public services, such as the police service, the Post Office, and fire and ambulance services. Acts of Parliament during the 1980’s – which were designed to reduce their power and influence, such as legislation 1.Forcing unions to have secret ballots prior to striking

2. Banning practice memes like the ‘closed shop’, ‘secondary picketing’ and ‘wildcat’ strikes

3. Declining membership

In 1980 there were just over 100 unions, with a combined membership of approximately 12m.

By 2008 there were less than 70 unions and membership had fallen to less than 8m and by 2018 membership had fallen to 6.23 million.

There are several possible consequences of the decline in membership, including:

The perceived lack of influence as a result of legislation controlling union powers.

Increasing female participation in the labor market – statistically, females are less likely to be union members. Increasing part-time relative to full-time employment.

Privatization of public utilities – when industries are State owned, there is a greater tendency for the employers to accept the demands of unions (a government can simply raise taxes to pay for higher wages if needed) –privatization reduced union powers, and hence reduced the desire to be a union member. The consequences of the decline in power

There are a number of possible consequences of the decline in union power, including:

A more efficient labor markets, a result of the removal of rigidities caused by unionization of labor. A more flexible economy and one that is more competitive in the global economy.

Increased inward investment – strong unions may deter inward investment from abroad.

Multi-nationals often seek to locate in countries with less unionization (e.g. Japanese firms often avoid locating in countries with strong unions). On the ‘cost’ side the decline in union power is likely to reduce ‘equity’ because unions have generally helped the lower paid more than the higher paid, through collective bargaining to increase wages. Also on the cost side, unions may act as a counter-weight to powerful monophonies – hence the erosion of power of unions may increase the power of monopolists to reduce wages and employment.

Bilateral Monopoly

If a union is introduced into a labor market which has a monopolistic buyer of labor the wage rate is likely to be determined through collective bargaining, with representatives of the monopolistic firm bargaining with representatives of the monopolistic union. This situation is referred to as a bi-lateral monopoly.

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