The Impact of Trade Unions on Productivity

The Impact of Trade Unions on Productivity

1.0 Introduction

Trade unions are organisations that represent people at work. Their purpose is to protect and improve people's pay and conditions of employment. They also campaign for laws and policies which will benefit working people. Trade unions exist because an individual worker has very little power to influence decisions that are made about his or her job. By joining together with other workers, there is more chance of having a voice and influence. However, throughout last twenty years there has been much debate over the impact of trade unions on productivity. Trade unions have been defined by two faces, as outlined by Freeman and Medoff in What Do Unions Do? As the basis of much of the literature surrounding unions has stemmed from this, I would discuss it in detail in the following paragraphs.

2.0 The Two Faces of Trade Unionism

Trade Unions is essentially pluralistic in outlook, it covers not only the relations between employer and employee, but also the relations between employers and unions and between them. TU theory, practice and institutions traditionally focus more on the collective aspect of relations. This is evident from the central place occupied by labour law, freedom of association, collective bargaining, the right to strike etc.

It was the study of Freeman and Medoff that first created the concept of the two faces of unionism. The first face, put forward primarily by neo-classical economists is that of the Monopoly face.

Monopoly face: This side of trade unions assumes that most unions have the power to raise wages above competitive levels. This is argued has harmful economic effects. Freeman and Medoff break down the definition of these faces into three sections. The first section is on economic efficiency. In this, according to the monopoly face, unions work rules can decrease productivity. The next section is on the distribution of income. Monopoly face in here can increases income inequality by raising the wages of highly skilled workers and also they create horizontal inequities by creating differentials among comparable workers. Finally on the social nature of the organisation, union's monopoly face breeds corrupt and non-democratic elements, and discriminate in rationing positions.

The Collective voice/ institutional face: on the other hand is quite different. Under this, unions have positive effects on productivity, by reducing quit rates, inducing managers to alter methods of production and adopt more efficient policies and thus improving morale among workers.