The Role of Trade Unions (Cambridge (CIE) IGCSE Economics)

Revision Note

The Work of Trade Unions

  • Workers pay a monthly fee to join a trade union

    • The fee is called a subscription

    • Their membership ends when they stop paying this fee

  • Benefits of union membership include

    • Collective bargaining

    • Job-specific training

    • Legal representation in disputes

    • Discounts on a wide range of goods/services 

  • When collective bargaining fails and discussions break down, trade unions have several methods of forcing employers/governments to continue engaging with them

    • These methods are collectively referred to as industrial action and include

      • Strikes

      • Overtime bans

      • Work to rule

      • Go-slows
         

The Focus of Trade Union Efforts 

1. Collective bargaining on wages, working conditions and contractual terms

  • Negotiates for acceptable wage levels - often well above the minimum wage 

  • Negotiates for increased wages when comparative industries receive pay increases

  • Negotiates for inflation-linked pay rises

  • Negotiates for higher wages when firms are making higher profits

  • Negotiates standard weekly working hours and any overtime payments

  • Negotiates for improvements to working conditions and equipment

2. Protecting the employment of their workers

  • Negotiates for the retention and redeployment of workers when machinery (capital) replaces labour


  • Negotiates resettlement packages when firms relocate from one region to another and redundancy terms for those unable to relocate

  • Negotiates to minimise job losses when machinery (capital) replaces labour

  • Negotiates on a fair termination process when firms are struggling in an economic downturn

3. Influencing government policy

  • Negotiates with government on the creation/maintenance of minimum wage levels

  • Aims to influence policy through member action such as strikes

  • Negotiates to minimise job losses when machinery (capital) replaces labour

  • Negotiates on a fair termination process when firms are struggling in an economic downturn

Factors Influencing the Strength of Trade Unions

  • The higher the percentage of workers from a firm that belong to a trade union, the greater the collective bargaining power of that union with the employer

  • The higher the percentage of workers from an economy that belong to trade unions, the greater the collective bargaining power of the unions with the government

  • There are numerous other factors which influence the collective bargaining power of specific unions at different periods of time

Flowchart showing factors that influence trade union power: employee participation, state of the economy, unemployment, productivity, wage levels, labor-capital swap, union size, and firm profits.
Factors which influence the collective bargaining power of trade unions
  1. The unemployment level - the higher the unemployment level the weaker the bargaining power as firms can more easily replace existing workers

  2. Wage levels as proportion of total costs - the lower the percentage of total costs that a firms's wages represent, the higher the bargaining power

  3. Swapping labour for capital - the nearer the replacement cost of capital for labour to meeting the increased costs demanded by the union, the weaker the bargaining power

  4. The level of profits - higher profits strengthen the unions demands for higher wages

  5. State of the economy - less bargaining power in a recession and more when the economy is booming

  6. Overall size of the trade union - the larger the union the stronger their bargaining power

  7. The productivity of labour - if the workers are extremely productive, generating high levels of output from low levels of input, they are more valuable to the firm and the union has stronger bargaining power

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