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 

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
  

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