CIE IGCSE Economics 0455 Section 3 - Unit 20

Ayman Alam (B804)

CIE IGCSE Economics Notes

UNIT 20 – Trade Unions A trade union is an organization that has been formed by workers in order to represent their rights and interests to their employers, for example in order to improve working conditions or wages. Unions usually belong to national or international organisations Types of Trade Unions Craft Union General Union Industrial Union White Collar Union

represents a particular type of skilled workers represents workers from a variety of trades and industries; they can be skilled or unskilled represents all types of workers in a particular industry represents particular professions

Functions of Trade Unions     

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Improving pay and other benefits – Unions, on behalf of their members, put pressure on the firm(s) to increase the wages of the workers.

Negotiating with working hours Defending their employees’ rights and jobs - Unions persuade firms to make more use of labour rather than capital and so, in a way, protect the workers from being sacked.

Securing improvements in working conditions – Unions make sure whether the working conditions are peaceful, pleasurable and comfortable for the employees.

Better health and safety regulations – Stress, high blood pressure and headaches are common thing workers face and so unions make sure that workers are working in a healthy and safe environment.

Improving pensions, sick pay, etc.

Encouraging firms to increase worker participation in decision making Developing and protecting the skills of union members – Unions help with education on training schemes.

Collective Bargaining     

Collective bargaining is when representatives of workers negotiate with employers and their associations.

An individual worker may not have the time and ability to negotiate with his/her employer.

The employer may fire a worker if he/she asks for a wage rise or better working conditions.

An individual worker has limited bargaining power.

Unions consist of many members and so their bargaining power together is quite high.

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Ayman Alam (B804)

CIE IGCSE Economics Notes

Arguments that Unions put forward   

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Increase in productivity - Workers deserve to be paid more because their hard work caused an increase in their productivity.

Higher profit gained by firms - The industries have higher profits and so the workers deserve to earn more as the hard work done by them played a vital role to increase profits.

Maintaining wage differential - It is necessary for workers to maintain their wage differential. Since the workers doing a similar occupation got an increase in their wages, they should have the same percentage of increment too.

Increased inflation/cost of living - Inflation has risen by 5%. If the workers don’t get paid 5% more, how will they make ends meet and how will they maintain their purchasing power?

Factors that Affect the Strength of a Trade Union 

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A high level of economic activity – If the output and income of a country increases, the firms in that country are most probably doing better and so should have the ability to pay higher wages to their employees. If most people are already employed, firms will be competing for more workers. This means that firms are more willing to negotiate with trade unions about higher wages and better working conditions.

A high number of members – The more members a trade union has, the more funds it is likely to have to finance its activities. Another point is that their bargaining power (as a whole) will be higher and so employers will find it harder to replace labour who are part of a union with labour who are not part of any union.

A high level of skill – Skilled workers are very scarce in supply and they have an inelastic supply of labour. This puts them in a relatively strong position to negotiate more freely.

Derived demand – Unions that represent workers producing goods that are essential to consumers secure a strong position to bargain.

Industrial Action 

If negotiations on wage claims and working conditions go in vain, there are many actions a union may do to support their claim as shown below:

Overtime ban Work-to-rule Go-slow Sit-in Strike Picketing/protesting

Refuse to work more than normal hours Undertaking tasks required by their contracts only and not doing anything extra Deliberately working slow Refuse to leave place of work Refuse to work Refusing to allow anyone inside the workplace

Strikes  

There are two types of strikes; official (approved and organised by the union) and unofficial (not approved nor organised by the union).

Strike can be measured in three ways: 1. The number of strikes 2. The number of workers involved 3. The number of working days lost

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Ayman Alam (B804) 

CIE IGCSE Economics Notes

Governments try to avoid strikes by encouraging unions to go to arbitration. Arbitration is the involvement of a third party (can be a government body or just an independent third party) seeking to settle a dispute and reach an agreement.

Influence on the Supply of Labour 

Unions can seek to raise wages by restricting new workers joining the industry.

Positive and Negative Impacts of Trade Unions on the Economy

Some additional points: 

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It is less expensive, less time-consuming and less stressful to negotiate with a group of workers (being represented by a union official) at once rather than negotiating with each individual worker separately.

Encouragement of training increases the productivity of workers.

If unions manage to raise wages, this obviously affects unionised labour. However, it also affects non-unionised labour too. For example if a union of plumbers negotiate about a rise in wages and it is successful, those plumbers who are not members of the trade union will also experience a rise in wages.

Unions Around the World  

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In some countries, unions are illegal. For example Saudi Arabia and Maldives.

Some countries enforce certain laws that unions have to follow. For instance, Pakistan is very harsh on unions. Some of their laws include: 1. Ban any strike that can cause distress to the community 2. Ban anything that endangers the national interest 3. Ban anything that unions carry out for 30 days or more Union membership is quite high in countries like Mauritius but, in Export Processing Zones (EPZs), Mauritius has a relatively low number of union members. This is because the workers are threatened that their factories will be closed down if they join any trade union.

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Ayman Alam (B804) 





CIE IGCSE Economics Notes

On the contrary, unions are stronger and much more powerful in European countries. There is more union membership and membership has grown amongst women workers recently. It is higher in the public sector rather than the private sector.

During the 1980s to 1990s, union membership fell due to the following reasons: 1. Laws that weakened the rights of trade unions 2. A rise in unemployment France has the lowest union density in Europe with only 8% of their workers belonging to trade unions (compared to UK which has 30%).

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