Trends of Trade Unions - Term Paper Example

Trends of trade unions Introduction & Definition: Trade union has been one of the first fruits of industrial revolution the world over. Workers exploitation and harsh working conditions compelled the workers to form union and to bargain collectively instead of individually. Various definitions of trade union show that Trade unions are voluntary organizations of workers or employers formed to protect and promote their interests through collective action. An analysis of the above definitions reveals that a trade union must be: A combination of workers or employers Such a combination could be permanent or temporary Could include federation of two or more union and To regulate relations among workmen, between workmen and employers or among employers themselves. Trade unions, everywhere, as an organization undertake a variety of activities termed as economical, political, social psychological, cultural etc. All these activities could be broadly put into three major categories such as collective bargaining or negotiations mainly wage negotiations, industrial action and legal actions. Unions as representative of workers organizations bargain with employers or various such issues such as wages, allowances, bonus, hours of work, reinstatement etc. The unions have secure bargaining power by statute and bargaining is done with the presence of the third party. Trade unions and its impact: It has been quite a longtime the discussion is going on that trade unions affect productivity of workforce individually or collectively in positive or negative way. Dipp, Lupton and Aslop (2000, 2002) indicate a fall in the extent, which employers regard unions as damaging to industrial relations. Impact of trade unions on productivity and the economic performance of organizations have long been debated. The UK firms are primarily using the latest equipment, automation and technology, resulting in high labor productivity and the ability to produce quality products to meet the requirements of EU and US markets. Differences in technology, automation, age of equipment, levels of employment, all affect labor productivity. Most of the EU producers have increased their productivity in recent years by increased automation, improving technology, and downsizing, instigating “cultural change” programmes, and bringing in productivity-linked incentive pay schemes. British political climate hostile to the trade unions has considerably weakened trade unionism. The received wisdom is that unionization rates have fallen rapidly as unions have failed to become recognized in newly setup work places (Machins, 2000). Throughout the 1980’s a range of anti union legislative measures were introduced by conservative govt. and the seemed to have a particularly adverse effect on recognition in establishments’ setup after 1978 (Disney et. al. 1995). As Wood et al. (2003:119) point out the true importance of the legislation is that “it transforms any negotiations about recognition they (unions) may have with employers, since both sides know that the union can resort to the legal machinery.” In the UK influence of the unions is relatively weak, partly due to the highly competitive nature of the industry and its largely unorganized female workforce and most importantly the functions of unions has been taken over by the employers themselves. According to Metcalf (Kesselar and BayLiss, 1992:203) Britain was bottom in the 1960’s still bottom and performing relatively even worse in the 1970’s, yet top by a mile in 1980’s. The improved productivity performance of the manufacturing sector in the 1980s was attributable to the interaction of greater product market competition, high unemployment and anti-union legislation (Metcalf 1990; Crafts, 1993). Greater unionization is found to be associated with higher unemployment, in common with the results of many other studies (Nickell, 1998; Nickell et al. 2001; OECD 2002a, b). This is most likely reflects the fact that higher level of unionization can give rise to less competition in labour markets, and correspondingly relatively higher real wages. Above interpretation is confirmed by Nickell et al. (2001) who finds that greater unionization tends to increase real labour cost. Unions and wages: The extent of which unions will succeed in pushing up wage rates depends on their power and militancy. It also depends on the power of firms to resists and on their ability to pay higher wages. In different studies it has been found that union employees earn 10 percent to 20 percent higher wages than comparable non-unionized employees (Jarrel and Stanley, 1990; Freeman, 1982). The presence of a union also affects the company’s policy on pay raises. Unionized firms avoid using merit pay plans and are likely to give across-the-board pay raises to employees based on market considerations (Freeman, 1982). Unions prefer across-the-board pay rises to merit pay plans because they see the later as undermining union solidarity by encouraging employees to compete against one another to win higher pay increase. Unions have generally influenced employers to offer a more valuable benefits package to each employee (Freeman, 1981). Through collective bargaining; they have been able to negotiate packages with a broader array of benefits than non union workers receive. In unionized firm the employers pay for more benefits, while in non union firms employer and employee share the costs (Fosu, 1984). Unions can play an important role in monitoring and enforcing legally required benefits such as workers’ compensation and unemployment insurance. In contrast, management in a non union firm is not likely to make employees aware of their right to use these government-mandated benefits. In particular, the scope for unions to gain a better deal for their members depends on the sort of market in which the employers are producing. If the employers are producing under perfect or monopolistic competition, unions can raise wages only at the expense of employment. Wages can be increased without a reduction in the level of employment only if, as part of the bargain, the productivity of labour is increased Economic theory does not gives precise answer to the question that what happens when union monopoly faces a monopsony employer and what will be wage rate and level of employment. There is no equilibrium as such. Ultimately, the wage rate and level of employment will depend on the relative bargaining strengths and skills of union and management. Generally, unions may be in a stronger position to make substantial gains for their members when they are facing a powerful employer. There is often considerable scope for them to increase wage rates without this leading to a reduction in employment, or even for them to increase wage rates and employment both. The actual wage rate under bilateral monopoly is usually determined through a process of negotiations or collective bargaining. The outcome of this bargaining will depend on a wide range of factors, which vary substantially from one industry or firm to another. Sometimes when unions and management negotiates both sides can gain from the resulting agreements. For example, the introduction of new technology may allow higher wages improved working conditions and higher profits. The outcome of the negotiations will depend on the relative bargaining strength of both sides. In return for higher wages or better working conditions, unions might offer no strike agreements, increased productivity reduction in the workforce or long-term deals over pay. In turn, employer might threaten employees with plant closure, lock outs etc., or they might offer in return for lower wages increases, various tasks such as productivity bonuses, profit sharing scheme, better working conditions, more overtime, better holidays or security of employment. Therefore both side interests force them to negotiate. Never the less to gain the maximum advantage each side must persuade the other that it will carry outfits threats if pushed. The government can influence the outcome of collective bargaining in a number of ways. Recent changes: In recent years, the workplace relations have been changing drastically. The level of strikes fallen and alternative sources of expressing discontent came up. Sapsford and Turnbull (1994) states that, “Strikes are not synonymous with industrial conflict” (p. 249). Evidence from UK suggests that labour turnover has increased over the past two decades, while job tenure has declined (Burgess & Rees 1996: Gregg & Wadsworth 2002). However workplace dissatisfaction is not mentioned by Gregg & Wadsworth as a possible reason for this trend. The UK has experienced an extremely sharp decline in trade unionism. These falls has been attributed to different factors such as, unions have failed to become recognized in newly setup workplace (Machins, 2000), employment contracts have typically become more formalized and standardized, the role of new employment law etc. UK workplaces inclined towards greater individualization of the employment relation at the expense of collectivism (Kelly 1998). Basically unions are inclined and always emphasize on compensations and try to obtain higher wages from employer, which results in grater share from profits at the expense of organization plays havoc to employee-employer relationship. This relationship leads to conflict between management & employers as both adopting policies to each other (Gallie et. al. 1998; Kelly; 1998). Unions’ voice through effective communication between management and employees and the resolution of employee grievances lead to improved relationship with employers (Freeman & Medoff, 1984). Union affects on employment relations depend on their monopoly and voice role. Future unions’ relationship may lie on their emphasis on their voice role (Rubinstein 2001; Wachter 2003). Bargaining arrangements mediate the relationship between unions and perception of employment relations for various reasons. Fernie and Matcalf (1995: 401) agree “the benefits from having a union representation the bulk of the labor force in a work force flow from greater voice and representativesness and less fragmentation of work place employee relations.” Analyzing employer perceptions of employment relations in the Workplace Industrial Relations Survey (WIRS, 1990), Fernie et al. (1994:17) found “multi unionism contributes to inferior relations between management and labour.” If workers are close substitute, employers could use fragmented bargaining arrangements to ‘divide and rule’ them (Horn and Wolinsky, 1988). If they are highly complementary this eventuality does not arise and separate unions or bargaining arrangements may promote better relations by providing voice arrangements for different groups of workers. Unions may obtain a premium where bargaining coverage in high or multiple unions are present (Forth & Millward, 2002). Management employee relations can be viewed as one dimension in what is usually regarded as the multifaceted concept of ‘industrial relations climate’ This trend is likely to have been further enhanced by changes in the employment contract. Now unions are changing with the overall change in the working environment. Unions are consulted more often and both public and employers appear to be more sympathetic to a new style of partnership unionism. The new recognition agreements do not seem to have had negative consequences for organization. Despite two decades of decline, trade unions continue to have more significant influence over industrial workplace. Although, an average perceptions of the industrial relations climate are proper among employees in unionized workplace than they are among employees in non-unionized workplace, this average effect in misleading. Union’s effects on industrial relations depend upon their strength in the workplace, their effectiveness as perceived by employees and management attitudes to unions. Conclusion: The industrial relations climate in unionized workplaces is perceived to be as good as in non-unionized workplace, where there is a balance of power between union and management where employees view union as effective and where management is supportive of union membership. Conversely when unions are viewed as having too little power, where they are organizationally weak and where management discourages union membership, the industrial relations climate is perceived as particularly poor. Now unions are perceived as civil society organization due to its changing role in the current situation. UK policies and programmes have been geared to provide financial and technical support for trade unions and other civil society organization engaged in conflict resolutions. Unions can assist in reducing the causes of conflict and resolving work place conflict results in bridging divided communities. Unions can play a key role in representing working peoples view. Now trade unions have been adopting the different roles in the changing conditions and offering a different mix of services to their members. ***************************************************************** References: 1. Burgess, S. and Rees, H. 1996: ‘Job tenure in Britain 1975-92’, Economic Journal, 106: 334-44. 2. Crafts, N. (1993). Can De-Industrialisation Seriously Damage your Wealth? IEA, Hobart Paper 120. 3. Dibb, Lupton, Alsop 2000: Industrial Relations Survey. London: Gee. 4. Dibb, Lupton, Alsop 2002: Industrial Relations Survey. London: Gee. 5. Disney, R., Gosling, A. and Machin, S. 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