[1.2.5c] Trade unions

Trade Unions in the Labour Market

A trade union is an organisation that represents the collective interests of workers in negotiations with employers. By acting collectively, workers gain bargaining power they would not have as individuals — a single worker can easily be replaced, but a workforce that collectively refuses to work (strikes) poses a serious threat to production.

Trade unions operate primarily in two areas: negotiating higher wages and improving working conditions.

Impact on Wages

Through collective bargaining, trade unions negotiate wage agreements with employers on behalf of all their members simultaneously. The union's bargaining power rests on the credible threat of industrial action — strikes, work-to-rules or overtime bans that can disrupt or halt production.

Trade Union Impact on Wage Quantity of Labour Wage Rate DL SL W* Q* Wu (union wage) Qd Qs Potential unemployment

The diagram shows that when a trade union successfully negotiates a wage above the market equilibrium (Wu > W*), the quantity of labour demanded by firms falls (Qd) whilst the quantity supplied rises (Qs). The gap between Qs and Qd represents workers who want to work at the higher wage but cannot find employment — a potential consequence of union wage-setting above equilibrium.

Impact on Working Conditions

Beyond wages, trade unions negotiate improvements in the workplace environment. Key areas include:

  • Health and safety: unions lobby for safer working environments, reduced exposure to hazards and adequate protective equipment.
  • Working hours: unions resist excessive hours, negotiate rest breaks and push for limits on overtime obligations.
  • Job security: unions negotiate redundancy procedures, notice periods and protection against unfair dismissal.
  • Holidays and leave: negotiating annual leave entitlements, sick pay and parental leave provisions.
  • Equal pay and treatment: unions advocate for pay equality across gender, race and other characteristics within the workplace.

 Key Takeaways

  • A trade union represents workers collectively, giving them bargaining power they lack as individuals.
  • Through collective bargaining, unions negotiate higher wages and better conditions backed by the threat of industrial action.
  • Union-negotiated wages above market equilibrium raise pay for employed workers but may reduce the number of jobs available.
  • Unions also negotiate improvements in health and safety, working hours, job security, leave and equal treatment.
f) Trade union involvement in the labour market: • impact of trade union activity to improve working conditions and increase wages.