Trade Unions in the Work Place Can Only Have a Negative Impact on Productivity - Essay Example

Trade unions in the work place can only have a negative impact on productivity The end of 18th century came with change of traditional into modern by machines and factories and set the new era of Industrial Revolution. In the initial stages of this revolution most of the people worked in factories for long hours perhaps from early morning 5:30 am. to late in the evening 9:00 p.m. many of them including children were forced to work in this manner and was very hard for them. Many of them did not survive the hardship and died. Though Britain was where the Industrial Revolution began, it was also the place where reformations started. In 1932 when middle class males won the right to vote in Great Britain all the reformation started. Workers formed societies and in due course it was called trade unions. The aim of trade unions was to fight for better working conditions and better pay as a result changes were also brought to the working conditions such as 10 hour work days, child labour laws and required school. Therefore, a trade union is an organization which was formed to promote and protect the interests of a collection of workers. Often it was found that the interest of the trade union and the companies or factories had clashes that result in less productivity. This paper aims to provide information on how trade unions have had an impact on productivity. From the initial stages of its formation trade unions are the workers' representative when deciding on the wages or working conditions with employers and/or governments. The status of trade union varies for country to country or state to state. While in some countries trade unions possess substantial freedom, from the right to Freedom of Association, to public demonstrations and active protest against political opponents such as strikes, in other countries it is totally opposite. In these countries the trade unions are actively suppressed by political or military rules, with little or no freedoms. Besides, in these countries the prospect of violence or even death is high. Like it or not trade unions are political, and often attract both positive and negative consequences. Unions may organize a particular section of skilled workers which is termed as craft unionism or a cross-section of workers from different trades called general unionism, or attempt to organize all workers within a particular industry called industrial unionism. In every country these unions are further divided into "locals", and are often united in national federations. These federations themselves will affiliate with Internationals, such as the International Trade Union Confederation. Over the last few decades, trade unions have developed into a number of forms propagandize by differing political and economic regimes. The main aims, objectives and activities of trade unions vary but by and large can be categorized as follows: Trade unions in the early days, such as the Friendly Societies, often offered a number of benefits to insure members against unemployment, ill health, old age and funeral expenses. Friendly Societies was formed in 1881 under the Trade Union Act, the Registrar of Friendly Societies was in charge for registering industrial bodies as well as trade unions in the state of New South Wales. Similarly, in many industrialized countries, these functions have been taken up by the state. In addition, the provision of professional training, legal advice, and representation for members still remain among the main benefits of trade union membership. The second and one of the most important aims of trade union is that they are able to operate openly, are legal bodies and are recognised by employers, they may negotiate with employers over wages and working conditions. When their demands are not met, trade unions may organize strikes or resistance to lockouts if their particular goals are not agreed by the authorities. Trade unions may also encourage legislation favourable to the interests of their members or workers as a whole. They may also go to the extent of campaigning, undertake lobbying, or financially support individual candidates or parties for public office who will help to fulfil their demands (Wikipedia, 2007). Impact of trade unions on productivity There are several researchers working on the productivity effects of unionism in the past few years. Brown and Medoff (1978) are the pioneers who worked on this issue. Following the pioneering work and inspired by the controversial work of Freeman and Medoff (1979 and 1984), a number of empirical studies have examined the impact of union on productivity particularly in UK and the USA. Although a number of authors have estimated positive union productivity differentials, there is a common agreement in the literature about unionism having a negative impact on productivity and output (Clark, 1980; Nickel et al., 1989; Brown and Medoff, 1978; and Gregg et al., 1993). This negative impact on productivity is also reported by earlier economy-wide studies (Koedijk and Kremers, 1996; deFina, 1983; and Lovell et al., 1988). It is an important question at this point of time how does union functions bring about negative productivity Union productivity differentials may be a result of a variety of mechanisms. For instance, unionism can affect the organization and effectiveness of production at a firm-level especially in the pace of technological innovation and capital accumulation, training and manning levels and so forth. Unionism can have an impact on average wages and wage inflation. In addition it can also have its effects on inflation, interest rates, investment and output growth, as well as on the national comparative advantages and international trade. A number of studies at the firm and industry levels have provided substantiation of a negative productivity effect of unionism. Basically, negative union productivity effects can be assumed if unions impose strict rules or protest in the introduction of new technologies and working practices, or if they reduce profitability and investment. Alternatively, if the unions are with good intentions they can increase workers' participation and involvement and, hence, production efficiency. And in such cases by increasing their labour costs function, they can foster innovation and quality-based competition from the side of management. However, a more direct effect of unionism is assumed, as the latter can impact directly upon the productivity of the individual workers. In this case it is the marginal product of labour that differs between unionised in comparison with nonunionised workers. On the other hand, despite their theoretical distance, all these mechanisms exhibit some practical equivalence, both in technical and empirical terms (Asteriou and Monastiriotis, N.D.). Trade unions in many parts of the world have undertaken violence as an instrument to fulfil their demands. For instance, in Britain, according to the Trades Union Congress (TUC), 6 more than 3 million working days are lost due to violent incidents at work every year. The cost to industry of this lost time, lost production and compensation must run into hundreds of millions of pounds (Olsen, N.D.). There are also instances when the unions may not have the legal right to represent workers. This lack of status can range from non-recognition of a union to political or criminal prosecution of union activists and members, with many cases of violence and deaths having been recorded both historically and in the present day (ICFTU, 2005; Amnesty International, 2005). The International Brotherhood of Teamsters is referred to as the America's most violent union, with 1,456 reported acts of violence since 1975. The same study reported that in total, there have been over 9000 reported incidents of union violence in the US since 1975, and speculated that most union violence goes unreported, because of the coercive nature of the violence (Union Violence lookout, 1999). The United Mine Workers come in second place, with 885 violent acts recorded since 1975.Besides, during the 1990 New York Daily News strike, New York-area newspapers reported 71 acts of violence by striking union militants.Conversely the New York Police Department recorded more than 500 such events, and the Tribune Company recorded over 1,000. Ravenswood Aluminum strike in West Virginia during 1990, the Institute found 71 acts of violence by striking Steelworkers that were reported in newspapers, while the Company reported over 2,500 -- a ratio of 35:1 (Union Violence lookout, 1999). Hence, from these reports it is evident that the productivity is directly impacted with the increase in violence. Evidences from the history point at the facts that unions in many countries are responsible for the strikes and sometimes the closure of factories when their demands are not met. Unions challenge that continuous pressure put on management for higher wages, shorter working hours, retirement plans and other benefits has forced management to reduce costs and to operate businesses resourcefully. There may be a considerable element of truth in this statement, but at the same time there has been a tendency for certain unions to resort to restrictive practice, to slow progress and even to have an influence on the closing of plants (engr.siu.edu, N.D.). Though such acts may not be beneficial to individuals working in those companies, they are responsible for great economic loss to the country and are also responsible for unemployment. It is not that union workers are lazy, a favourite canard of the right; they are higher quality than one would expect for the job they are doing. However, unions often offer resistance to work processes that might increase efficiency, and not just ones that would decrease labour demand.Unions also spend a lot of time trying to work in featherbedding provisions to their contracts, in other words they force the management to hire more workers than required for a particular task. As a result of this union will have more people doing a job and more workers paying dues. However more workers may not have a dramatic influence on the productivity of the company. Further analysis if this situation points at the fact that the economic logic suggests that unions will only keep productivity high so long as they are a relatively less number of working force. If it happens that everyone has a high-paying union job, there is no incentive for workers to strive to keep their motivation high enough.Unions might not bring down productivity for industries in which relatively little innovation occurs or in which dependability trumps other factors such as speed and flexibility. They might show up in industries in which easy metrics exist to examine the quality of individual worker's output. Here is another example to prove this point. The American teachers' unions are believed to be the primary obstacle to improving America's public schools. Teaching is a unique profession and needs quality teachers. In fact, by compressing wages, it makes the problem worse. In areas where there is an excess supply of graduates, such as English and history, teaching programmes choose from the applicants who have comparatively few other opportunities; while in areas like science and math, where almost any qualified applicant has higher-paying alternative opportunities, they face permanent shortages. No company other than the computer industry that had to follow union rules or who had to shutdown and re-negotiate every now and then could have survived in such a rapidly changing and fiercely competitive industry. However it is still had to believe that union can bring about increase in productivity. If union members really can consistently provide higher productivity then unions would not need the government to make it illegal to hire competing workers. Unions would function more like cooperative firms that would contract out their members to employers. Employers would pay a premium for better employees. Instead, many of us can be witnesses that most unions collapse without the government compelling individuals to join the unions if they want a job. Southern states in American fatally undermined unions by the simple expedient of making compulsory union membership illegal. Free-trade also wrecks unions by providing competition. Such evidence suggests that unions represent rent seeking behaviour on the part of union of workers. And it is obvious that such situation rarely results in higher productivity (Economist.com, 2007). In many countries, a union may even acquire the status of a "juristic person" who has the authority to decide, with a mandate to negotiate with employers for the workers it represents. As a result unions have certain legal rights, particularly the right to negotiate collectively with the employer (or employers) over wages, working hours and other terms and conditions of employment. When there is such a support for the workers there will be many scapegoats among the workers. On the other hand the inability of both parties the union and the management to reach an agreement may lead to industrial action, ending up in either strike action or management lockout. In extreme cases, violent or illegal activities may develop around these events. All these will definitely result in negative productivity. There are instances in countries where unions may also engage in broader political or social struggle. Social Unionism encompasses many unions which use their organisational strength to propagandize for social policies and legislation favourable to their members or to workers in general. As well, unions in some countries are closely linked with political parties. In such cases even if a few the members are not willing to support, they will be forced to do so because of the fellow members (Wikipedia, 2007). Unions are also established by the service model and the organising model. The service model union aims more on maintaining worker rights, providing services, and resolving disputes of the workers. On the other hand, the organising model typically involves full-time organisers, who work by building up confidence, strong networks and leaders within the workforce; and confrontational campaigns involving large numbers of union members. Many unions are a combination of these two philosophies, and the definitions of the models themselves are still debated. Some research, such as that conducted by the Australian Centre for Industrial Relations Research and Training (ACIRRT), argues that unionised workers enjoy better conditions and wages than those who are not unionised (Wikipedia, 2007). Each and every country the unions function is influenced by various factors. For instance in Germany the relation between individual employees and employers are considered to be asymmetrical. As a result of this many working conditions are not negotiable due to a strong legal protection of individuals. But, there is a balance of power between labour unions and employers. Therefore the legal boundaries for collective bargaining are significantly wider than the boundaries for individual negotiations. Thus, overprotection of workers is avoided and flexibility is achieved. Such an understanding can also prove to be beneficial in terms of productivity. By and large, it can be concluded that trade union in the past history has not benefited the productivity. While in many cases it has promoted and protected the rights of workers in many instances it has forced them to pay high dues. In companies where well established union set up is present, even it a person is not willing to join the union, he is forced to do so. Besides the companies are at loss when the union calls for strikes. Violence has been and continues to be a threat to companies when they do not agree with the union's decision. As a result many incidences of death and injury are also faced. In such cases companies also sometimes have to pay for the heavy loss that occurs. The activities of union should be in such a way to promote productivity, increase profitability to the company and then demand for the wellness of the workers. Only then the productivity can increase. References Asteriou D. and Monastiriotis, V. (N.D.) Trade Unionism and Growth: A Panel Data Study, Retrieved April 18, 2007, from http://www.reading.ac.uk/business/images/content/emdp429.pdf Amnesty International, (2005) Colombia: Fear for safety/Death threats, Retrieved April 18, 2007, from http://web.amnesty.org/library/Index/ENGAMR230312005open&of=ENG-394 Brown C. and Medoff J. (1978), Trade unions in the production process, Journal of Political Economy, Vol.86, pp.355-378. Clark K. (1980), The impact of unionisation on productivity: a case study, Industrial and Labour Relations Review, Vol.33, pp.451-469. DeFina R. (1983), "Unions, relative wages and economic efficiency", Journal of Labor Economics, Vol.1, No4, pp.408-429. engr.siu.edu, (N.D.) Chapter 1: Productivity and Manufacturing Management, Retrieved April 18, 2007, from http://www.engr.siu.edu/staff2/deruntz/IT440/Chapter1.doc Economist.com, (2007) Do unions increase productivity Retrieved April 18, 2007, from http://www.economist.com/debate/freeexchange/2007/02/do_unions_increase_productivit.cfm Freeman R. and Medoff J. (1979), The two faces of unionism Public Interest, No57, pp.69-93. Freeman R. and Medoff J. (1984), What do Unions do Basic Books, NY. Gregg P., Machin S. and Metcalf D. (1993), Signals and cycles: productivity growth and changes in union status in British companies, 1984-1989, Economic Journal, Vol.103, pp.894-907. ICFTU, (2005) Cambodia: Continued detention of trade union leader Rong Chhun and arrest, Letter to H.E. Mr Hun Sen, Prime Minister, Kingdom of Cambodia, Retrieved April 18, 2007, from http://www.icftu.org/displaydocument.aspIndex=991223285&Language=EN Koedijk K. and Kremers, J. (1996), Deregulation: a political economy analysis, Economic Policy, Vol.26, pp.443-467. Lovell C., Sickles R. and Warren Jr R. (1988), "The effects of unionisation on labour productivity: some additional evidence", Journal of Labor Research, vol.9, pp.55-63. Nickell S., Wadhwani S. and Wall M. (1989), Unions and productivity growth in Britain, 1974-86: evidence from Company Accounts data, CLE Working Paper No. 1149, LSE. Olsen, L. (N.D.) Preventing workplace violence - we can't afford not to, Bureau for Workers' Activities, Retrieved April 18, 2007, from http://www.ilo.org/public/english/dialogue/actrav/publ/133/7.pdf Union Violence lookout, (1999) Teamsters, Mine Workers are Most Violent Unions, published by the National Institute for Labor Relations Research, March, 1999, Volume I, Issue 2. Wikipedia, (2007) Trade union, Wikimedia Foundation, Inc. Retrieved April 18, 2007, from http://en.wikipedia.org/wiki/Trade_union Read More