Trade unions

Key learnings

• •

  Union = organisation of workers

  A trade union is an organisation of workers formed to protect and improve members' pay and working conditions. Members pay a subscription; the union represents them — it is not the firm or employer. Its jobs: negotiate pay and conditions, protect members' rights and job security, and provide services like legal advice and training. The union sits on the workers' side, opposite the employer.

• •

  Collective bargaining

  Collective bargaining is when a trade union negotiates with an employer on behalf of all its members at once, rather than each worker bargaining alone. Because it can threaten to withdraw many workers' labour together — an overtime ban, a work-to-rule, or as a last resort a strike — the union has far more power than a single employee. This is how it tries to win higher wages, shorter hours and safer conditions.

• •

  Effects on the whole economy

  A union's higher wages benefit members but ripple outward. For firms, higher wages raise costs, cutting profits, jobs, or pushing up prices. For consumers, higher prices and strike disruption are costs. For the economy, strong wage pressure can cause cost-push inflation and a wage-price spiral — though unions can also raise productivity through training and reduce in-work poverty. Trace these knock-on effects, not just the groups.

• •

  What makes a union strong

  A union's bargaining power is greater when: a high share of the workforce are members (high union density); unemployment is low, so workers are hard to replace; the firm is profitable and can afford a rise; product demand is price-inelastic, so cost rises pass on to consumers; and the members are skilled and hard to substitute. Power is weaker in a recession, with high unemployment, a struggling firm, or laws that restrict industrial action.