Effects of Labor Market Changes - Coursework Example

Name Institution Course Tutor Date Factors which have led to ‘Closed’ Trade Unions to move towards being ‘Open’ Trade Unions Effects of Labor market changes Trade unions have been very influential in the labor market as efforts have been steered up to ensure that all the interests of employees are protected. Trade unions seek to protect employees from exploitations, discrimination and all sorts of unprofessional practices that may cause grievances in the cause of their duties. Collective bargaining power of trade unions has sought to foster unprecedented employees’ solidarity and ability to fight for their rights. How effective trade unions are in collective bargaining, however, depends on certain economic factors such as demand and supply for labor, availability of alternative production methods, availability of compensation on loss of work or income foregone during strikes and go-slows, financial availability and the general economic status of the country. The primary objectives of trade unions are collective bargaining, providing benefits to members, organizing industrial actions and promoting beneficial legislatives, (Martin, 1992). Closed trade unions are trade unions which restrict membership to particular group of workforce or occupation whereas open trade unions are unions where membership is not restricted and focuses on issues related to collective bargaining power. Trade unions have been of great importance in protective interests of workers. Webb (1920) articulates that The effects of trade union action through collective bargaining have been shown to have great impact on industrial behavior. Labor market plays an important role in the industrial growth and development. This is ultimately due to the quality, price and quantity of labor in the market. In a liberalized economy, the prevalent market wage rate is determined by forces of demand and supply for labor. However, other methods of wage determination are adopted by some firms especially private sector firms so as to maximize profit margins by covering marginal costs of labor. According to the theory of ‘labour market segmentation’ there are persistent wage differentials between fixed-term employees and standard contract employees, (Kruppe, et al, 2013, p.17). It needs to be understood that labor market segmentation plays an important role in trade unions as employees fall under different occupations of different wage rates. The labor market has been undergoing several changes which have factored in some elements of consideration to trade unions, resulting to their shift from ‘closed’ trade unions to ‘open’ trade unions. These changes include but not limited to: Labor Demand and supply: as the culture of entrepreneurship clouds many individuals across the globe, establishment of new businesses has happened to increase the demand for labor. Due to direct foreign investment and migration, the labor force has increased significantly resulting to high supply of labor in the labor market. As more businesses are established, more people are needed and this results to shift to open trade unions to effectively address the issues facing employees especially in the private sectors. Changes in Employment practice: There have been changes in employment practice in terms of remuneration, promotions, and work allocation structures. These changes have necessitated two trade unions facing a single employer such as union avoidance and union abundance. A common practice in USA has been union avoidance. These have in turn prompted close trade unions to move towards open trade unions to subject all employers from different industries to their employment policies and practice. This is through creation relaxing restrictions to their members and focusing on collective bargaining power rather than labor supply. In USA, the legal right to organize and collective bargaining was first extended to the majority of private sector workers with the passage of National Labour Relations Act 1935, (Fairbrother, 2013, p.34). Trends in Union Membership Early trade unions were characterized by strict entry of individuals to the unions. The closed trade unions were strictly monitoring labor supply. Closed trade unions only focused on particular class or group of workers. According to Turner (1962), closed unions tended to open up and come to recruit similar workers who have skills which might complement or substitute those of existing members. With the increasing conflicts within trade unions on political grounds, trade unions have had a difficult time to sustain membership as control disputes paved ways for open trade unions. A simple model helps account both for the logarithmic distribution of union membership and for the contrasting experiences of public- and private-sector unions since the 1970s, (Pencavel, 2014, p.138). The trends in Union membership has resulted to a shift to ‘open’ trade unions, to allow workers both in the private and public sectors, across all the age brackets to subscribe and benefit from their services. According to statistics by U.S. Bureau of Labor Statistics report, there has been a declining trend in membership since 1983 where the membership stood at 20.1% to 2012 at 11.1%. Disparity in union membership explicitly provides an understanding of why closed trade unions had to shift to open trade unions. Statistics provide further that, union membership rate for persons aged between 55-64 were at 15.6% and for employed youth at 4.2% of membership rate. Union membership gap between men and women has narrowed that of men dropping from 24.7% in 1983 to 12.0% in 2012. Black workers had the higher bunion membership rate than the Asian ad white men. Therefore, open trade unions have established a liberalized and democratic approach to allow workers join and leave voluntarily the trade unions to fill the gap that exists in the labor market as far as membership to trade unions is concerned. Initially, the membership gaps that existed with regards to sex, age and race in trade unions could have resulted from a closed system of trade unions, where only workers of particular occupations could join. There are other factors that have led to union membership decline which include: Attitudes and actions of employers: Employers might express a negative attitude towards trade unions causing avoidance of membership to trade unions. The action of employers to support trade unions, enforce their policies and political dimensions can affect membership to trade unions. Wage rates: Prevailing market wage rates determine the efforts and attitudes of workforce towards. Favorable wage rate could reduce unemployment and movement of workforce from one employment to the other. This in turn ensures that membership rate increases or is sustained. Unfavorable wage rate also influences the structure of membership in trade unions. The union membership wage premium has also influenced the move by unions towards an open trade union. Given that there still exists gaps between public sector wage premium and private sector wage premium, this is attributed to the workers’ occupation, job characterization, qualifications and demographics as in the case provided by (Blanchflower, 2010, p.92). Unemployment: Membership rate in trade unions in USA has been categorically contributed by unemployment. Even though unemployment rate has been declining, early trade unions faced significant decline in membership due to unemployment. On addressing the issue of unemployment, many people have sought employment through direct foreign investments and creation of opportunities through technological advancement. Increased employment has forced most trade unions to shift to open trade unions to allow the increasing number of workers in employment acquire membership and benefit from their services. Mergers and Amalgamation of Trade Unions Amalgamation refers to a situation where companies come together to form one big company, where the original names of the company cease to exist. Amalgamation has been very crucial as the merger companies’ benefit from management economies, technological economies, human resource economies and financial economies. Amalgamation has an effect of altering organizational structure and policies. However, the structural changes due to amalgamation poses significant problems to organizations as different ideologies are presented and harmonized, (Gumbrell‐McCormick, 2013, p.240). The main rationale behind companies forming mergers is financial reasons. Trade Union mergers have been amalgamating in order to offset the loss of financial reserves and resources resulting from declining membership, (Undy et al, 1981). Trade union mergers have been seen as a means to compensating for the decline of unionism within a competitive trade union arena. The dynamic labor market has resulted to trade unions mergers. The aspect of market liberalization has seen the labor market grow and the wage rate increase over decades now. The trade unions have shifted from closed to open unions owing to the needs of managing resources as they provide no restriction to memberships, and focusing only on issues pertaining to collective bargaining in sectors where workers’ welfare and salaries and wages are not up to standards. Trade Union membership has also been constantly impeded by variables such as; unemployment, workforce structure, economic globalization and economic structure. However, these impediments do not affect union membership in some countries, (Schnabel, 2013) References Blanchflower, D. G., & Bryson, A. (2010). The wage impact of trade unions in the UK public and private sectors. Economica, 77(305), 92-109. Gumbrell‐McCormick, R. (2013). The International Trade Union Confederation: from two (or more?) identities to one. British Journal of Industrial Relations, 51(2), 240-263. Kruppe, T., Rogowski, R., & Schömann, K. (2013). Labour Market Efficiency in the European Union: Employment Protection and Fixed Term Contracts. Routledge. Martin, R. (1992). Bargaining power. Oxford University Press. Pencavel, J. (2014). The Changing Size Distribution of US Trade Unions and Its Description by Pareto's Distribution. Industrial & Labor Relations Review, 67(1), 138-170. Schnabel, C. (2013). Union membership and density: Some (not so) stylized facts and challenges. European Journal of Industrial Relations, 0959680113493373. Turner, H. (1962), Trade Union Growth, Structure and Policy, Allen and Unwin, London Undy R., Ellis V., McCarthy W. and Halmos A. (1981) , Change in Trade Unions, Hutchinson, London. Webb S. and Webb B. (1920), History of Trade Unionism, 2nd edition, Longman, London. Read More