Union: Do they help or hurt workers?

Employers and workers seem to view employment from very different perspectives. So how can the two parties reach an agreement? The answer lies in the union. For centuries, unions have played a role in the dialogue between workers and employers, but in the past few decades, many aspects of the business environment have changed. With this in mind, it is important to understand how trade unions adapt to the current business environment and the role trade unions play in the modern economy.

Key points

  • A union is an organization that represents union members in negotiations with companies and other entities.
  • The form and scale of unions vary, from unions that focus on specific jobs to industry unions that focus on the entire industry.
  • The goal of the union is to ensure that its members receive fair wages, benefits and better working conditions.
  • Industry deregulation, increased competition and labor mobility have made the operation of traditional trade unions more difficult.
  • The power of trade unions lies in their two main tools of influence: restricting labor supply and increasing labor demand.
  • When unions want to increase the wages of union members or require employers to make other concessions, they can do so through collective bargaining.
  • If unions cannot negotiate or are dissatisfied with the results of collective bargaining, they may initiate a work stoppage or strike.
  • According to data from the US Bureau of Labor Statistics, the wages and salaries of union members are higher than those of non-union members.

What is a union?

A union is an organization that represents union members in negotiations with companies, enterprises, and other organizations. There are unions representing workers engaged in specific types of work and industrial unions representing workers in specific industries. The American Federation of Industrial Organizations of Labor Congress (AFL-CIO) is a union, and the American Federation of Auto Workers (UAW) is an industry union.

What does the union do?

Since the Industrial Revolution, unions have often been considered to have improved working conditions and wages. Many unions are formed in manufacturing and resource companies, companies operating in steel mills, textile mills, and mines. However, over time, unions have expanded to other industries. Unions are often associated with the “old economy”: companies operating in a strictly regulated environment. Today, a large part of union members are in transportation, public utilities, and government departments.

The number of union members and the depth of union penetration into the economy vary from country to country. Some governments actively prevent or regulate the formation of trade unions, while others focus the economy on industries that trade unions have not traditionally participated in.

Industry deregulation, increased competition and labor mobility have made the operation of traditional trade unions more difficult. In recent decades, trade unions have experienced limited growth as a result of the transition from an “old economy” industry that usually involves manufacturing and large companies to small and medium-sized companies outside of manufacturing.

Recently, potential union members have expanded to more companies. This makes collective bargaining a more complex task because union leaders must work with more managers and it is often more difficult to organize employees.

The development of modern workers has also changed the role of trade unions. When negotiating with managers, the traditional focus of union leaders has always been to represent workers, but when advanced economies no longer rely on manufacturing, the boundaries between managers and workers become blurred. In addition, automation, computers, and increased worker productivity have led to a reduction in the number of workers required to complete the same job.

How do unions affect the labor environment?

The power of trade unions lies in their two main tools of influence: restricting labor supply and increasing labor demand. Some economists compare them to cartels.Through collective bargaining, the union negotiates the wages the employer will pay. The union requires higher than the equilibrium wage (at the intersection of the labor supply curve and the labor demand curve), but this will reduce the working hours required by the employer.

Since higher wage rates mean less work per dollar, unions often face problems when negotiating higher wages and tend to focus on increasing demand for labor. Unions can use several different techniques to increase the demand for labor, thereby increasing wages. Union can and does use the following techniques:

  • Promote an increase in the minimum wage. The minimum wage increases labor costs for employers who use low-skilled workers.This reduces the gap between the wage rates of low-skilled and high-skilled workers; high-skilled workers are more likely to be represented by unions.
  • Improve the marginal productivity of workers.This is usually done through training.
  • Support the restriction of imported goods through quotas and tariffs. This increases the demand for domestic production and therefore the domestic labor force.
  • Lobbying for stricter immigration rules. This limits the growth of labor supply, especially low-skilled workers from abroad. Similar to the impact of raising the minimum wage, restrictions on the supply of low-skilled workers push up their wages. This makes highly skilled labor more attractive.

Trade unions have a unique legal status. In a sense, they operate like monopolies because they are not affected by antitrust laws.Because union control may have a great influence on the labor supply of a particular company or industry, unions can restrict non-union workers and lower wage rates. They can do this because the legal norms provide a certain degree of protection for trade union activities.

What can unions do in negotiations?

When unions want to increase the wages of union members or require employers to make other concessions, they can do so through collective bargaining. Collective bargaining is a process in which workers (through trade unions) and employers meet to discuss the employment environment. The union will present their arguments on specific issues, and the employer must decide whether to accept the worker’s request or to make a rebuttal.

The term “bargaining” can be misleading because it reminds me of two people bargaining at a flea market. In fact, the goal of unions in collective bargaining is to improve the status of workers while keeping employers operating. The bargaining relationship is continuous, not just a one-time thing.

If unions cannot negotiate or are dissatisfied with the results of collective bargaining, they may initiate a work stoppage or strike. A threat to strike may be as advantageous as an actual strike, provided that the employer considers the possibility of a strike to be feasible. The effectiveness of actual strikes depends on whether the shutdown can force employers to yield to demands.

This is not always the case. As seen in 1984, when the National Union of Miners in the United Kingdom ordered a strike, a year later it failed to reach a concession and was cancelled.

Are unions useful?

Whether unions have a positive or negative impact on the labor market depends on who you ask. Unions say they help increase wage rates, improve working conditions, and create motivation for employees to learn continuous job training. Globally, union wages are generally higher than non-union wages. According to the US Bureau of Labor Statistics, “Among full-time wage and salaried workers, the median weekly salary of union members in 2019 was $1,095, while the median weekly salary of non-union members was $892.”of

Critics point out that productivity changes and labor market competition are some of the main reasons behind wage adjustments, in order to refute the union’s claims.

If labor supply grows faster than labor demand, there will be a surplus of available employees, which will depress wages (according to the law of supply and demand). Unions may be able to prevent employers from layoffs through strikes or the threat of strikes, which will result in production shutdowns, but this technology may not be effective.

According to data from the US Bureau of Labor Statistics, 10.8% of the working population in 2020 will be union members.of

Like any other factor of production, labor is the cost that employers consider when producing goods and services. If employers pay higher wages than competitors, they will end up with higher-priced products, and consumers are less likely to buy these products.

The increase in union wages may be at the expense of non-union workers, who lack the same level of representation as management. Once a union is approved by the government, it is regarded as a representative of the workers, regardless of whether all workers are actually part of the union. In addition, as a condition of employment, unions can deduct union dues from employees’ wages without prior consent.of

Whether labor unions are the main reason for the decline in labor demand in the “old economy” industries remains to be discussed. Although unions do force wage rates to rise compared with non-union members, this does not necessarily force these industries to hire fewer workers. In the United States, as the economy shifted from heavy industry, the “old economy” industry has been in decline for many years.

Bottom line

Unions undoubtedly left their mark on the economy and continue to be an important force in shaping the business and political environment. They exist in a variety of industries, from heavy manufacturing to the government, and help workers get better wages and working conditions.

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