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Trade unions are formed to protect the interests of their members. Unions pursue the following objectives:
Unions receive income from:
Unions are most powerful in influencing the position of workers when:
Unions often represent workers in negotiations with employers. Collective bargaining is common in many industries, including motor vehicles, transport (rail, bus and tube) and public services, such as the police service, the Post Office, and fire and ambulance services.
In most cases of collective pay negotiations occur once a year, with union representatives meeting with employer’s representatives. If an agreement is reached it becomes a ‘pay settlement’, and if not it becomes a ‘pay dispute’.
Pay disputes may go to arbitration through the independent organisation, ACAS (Advisory, Conciliation and Arbitration Service).
Trade unions today are much less powerful than they were 50 years ago.
There are a number of factors that have contributed to their decline:
In 1980 there were just over 100 unions, with a combined membership of approximately 12m.
By 2008 there were less that 70 unions and membership had fallen to less than 8m and by 2018 membership had fallen to 6.23 million.
There are several possible consequences of the decline in membership, including:
There are a number of possible consequences of the decline in union power, including:
If a union is introduced into a labour market which has a monopsonistic buyer of labour the wage rate is likely to be determined through collective bargaining, with representatives of the monopsonistic firm bargaining with representatives of the monopolistic union. This situation is referred to as a bi-lateral monopoly.
The final outcome of negotiations will depend upon the relative power of both sides, and the specific objectives they have. If the balance of power rests with the union it may wish to raise the wage rate for all its members as well as secure an increase in employment. The goal would be to raise wages and employment to the competitive level.
Given that there is no completive level as the employer is the only buyers, the union will have to make an assessment of what the rates would be in a multi-firm scenario.
Diagrammatically, setting a union minimum for all orkers would make the supply of labour horizontal at the minimum given that all workers would get this wage - in contrast to the unrestricted monopsonist who would pay each worker a ‘marginal’ wage rate. Under the union minimum wage, the marginal and average wage rate would be identical.
The union could even push the wage rate above this, and while not maximising employment, it could still create an employment level above the monopsonistic level.
For example, at a minimum wage of £225 for all workers, the supply of labour is horizontal at this wage, with the MCL = ACL (S), and the profit maximising monopsonist would employ up to the point where the MCL = MRP, which is at 4 workers - i.e. the market wage rate and the market level of employment.
However, if the minimum wage is set above £225, demand will contract and fewer will be employed. For example, setting the wage at £255 will mean fewer workers employed, as shown. However, raising the rate would still create more employment than the unrestricted monopsonist until the rate exceeded £250. The effect of the minimum wage clearly depends upon its level, and whether it is set above the market rate - the greater it is above the competitive market rate, the lower the level of employment.
The impact of the union minimum wage also depends on the elasticity of demand and supply of labour. For example, if the demand for labour is relatively inelastic, jobs lost due to the minimum wage will be relatively small. Similarly, if supply is inelastic, the minimum rate may not result in a significant change in employment.
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