Trade Unions organizations of workers that aim at promoting and protecting the interest of their members (workers). They aim on improving wage rates, working conditions and other job-related aspects of workers.

The functions of a trade union:

  • Negotiating improvements in non-wage benefits with employers.
  • Defending employees’ rights.
  • Improving working conditions, such as better working hours and better safety measures.
  • Improving pay and other benefits.
  • Supporting workers who have been unfairly dismissed or discriminated.
  • Developing the skills of members, by providing training and educations.
  • Providing recreational activities for the members.
  • Taking industrial actions (strikes, overtime ban etc) when employers don’t satisfy their needs. These are explained later in this topic.

Collective bargaining: the process of negotiating over pay and working conditions between trade unions and employers.

When can trade unions argue for higher wages and better working conditions?

  • Prices are rising (inflation). The cost of living increase when prices increase and workers will want higher wages to consume products and raise their families.
  • The sales and demand of the firm has increased.
  • Workers in other firms are getting a higher pay.
  • The labour productivity of the members have increased.

Industrial disputes

When firms don’t satisfy  trade union wants or refuse to agree to their terms, the members of a trade union can organize industrial disputes. Here are some:

  • Overtime ban: Workers refuse to work more than their normal hours.
  • Go-slow: Workers deliberately slow down production, so the firm’s sales and profits go down.
  • Strike: workers refuse to work and may also protest, picket, outside their workplace to stop deliveries and prevent other non-union members from entering. They don’t receive any wages during this time. This will halt all production of the firm.

Trade union activity has several impacts:

Advantages to workers:

  • Workers benefit from collective bargaining power in order to establish better terms of labour
  • Workers feel a sense of unity and feel represented, increasing morale
  • Lesser chance of being discriminated and exploited

Disadvantages to workers:

  • Workers might get lesser wages – or none if they go on strike– as the output and profits of the firm falls and they refuse to pay

Advantages to firms:

  • Time is saved in pay negotiations with a union when compared to negotiating with individuals workers
  • When making changes in work schedules and practices, a trade union’s cooperation can help organise workers efficiently
  • Mutual respect and good relationships between unions and firms are good for business morale and increases productivity

Disadvantages to firms:

  • Decision making may be long as there will be need of lengthy discussions with trade unions in major business decisions
  • Trade unions may make demands that the firm may not be able to meet- they will have to choose between profitability and workers’ interests
  • Higher wages bargained by trade unions will reduce the firm’s profitability
  • Businesses will have high costs and low output if unions organise agitations. Their revenue and profits will god own and they will enter a loss. They may also lose a lot of customers to competing firms.

Advantages to the economy:

  • Ensures that the  labour force in the economy is not exploited and that their interests are being represented

Disadvantages to the economy:

  • Can negatively impact total output of the economy
  • Firms may decide to substitute labour for capital if they can’t meet trade union’s expensive demands, and so unemployment may rise.
  • Higher wages resulting from trade union activity can make the nation’s exports expensive and thus less competitive in the international market


In modern times, the power of trade unions have drastically weakened. Globalisation, liberalisation and privatisation of economies are making markets more competitive. Firms have more incentive to reduce costs of production to a minimum in order to remain competitive and profitable. Therefore, it is much harder for unions to force employers to increase wages. Most unions operating nowadays are more focused on bettering the working conditions and benefits.



Notes submitted by Lintha

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