Are trade unions in terminal decline

Topic: BusinessComparative Analysis
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Last updated: April 11, 2019

Trade unions are organised groups of workers. Their primary objectives are to improve the pecuniary and non-pecuniary conditions of employment among their workers.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 a better chance of having an influence and giving an opinion.

The origin of trade unions can be traced back, at least, to the craft unions formed in the UK during the 19th century. From then union membership grew constantly almost everywhere, though at a different speed, until the 1970s-1980s. Afterwards, membership into trade unions dropped sharply more or less in every developed country, creating a potential gap between participation and representation workers want and the voice they get at their workplace.

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Statistical data, whose results will be later illustrated, show that the decline has been considerable. Nevertheless, it is difficult to predict if the decline is terminal or not. By analyzing the role trade unions play and the causes of their decline I will try to give my opinion in this debate.First of all, a premise is necessary: great divergence is part of the debate over trade unions. Unions face different organizational problems in different parts of the economy.

Furthermore, unionization patterns differ remarkably, both in levels and trends, between Europe and the United States, as well as within European countries. Finally, experts have dissimilar opinions about the future of the negotiating between firms and workers and the measures that should be adopted.Role of trade unionsBefore exploring the reasons that brought on the recent decline of trade unions, it is fundamental to briefly summarize the ways in which these institutions affect the micro- and macro- economy.Some people view labour unions as forms of monopolies that, while benefiting their own members, impose substantial costs on other members of society. In contrast, others view unions as the major means by which working persons have improved their economic status and as important forces behind great social legislation.

The latter approach views union formation as “a (second best) optimal behaviour for risk adverse individuals face to market failures or government intervention” (Checchi & Lucifora, 2002).As always, I think the truth lies in the middle. I also believe that the mix between these two sides of unionism and the impact of unions on economic and political outcomes depends mainly on the environment in which unions operate.

“What Do Unions Do?” by Richard B. Freeman and James L. Medoff offers a detailed description of the effects unions have on the economy and in the course of my essay I will refer mainly to classifications presented in that textbook.DataData and statistics concerning union density (fraction of members of unions over number of workers) and/or union membership (number of members in the union) show a clear pattern: a rise after the First World War until the 70s, and an almost general decline from the mid-70s up until now (Graph 1). However, it should be noted again that differences frequently occur among countries, sectors, etc.Graph 1: Union Density in %, Western Europe 1900-1990The decline is extremely evident when absolute and relative values are compared. Between 1978 and 1998, general employment increased from 110 to 127 million persons (OECD), whereas union membership decreased from 47 to 39 million.

Union density dropped from its post war peak of 42.6% in 1978 to 30.8% in 1998, the lowest level since 1945 (Freeman, 2005).

Density in the US fell from the 1950s through the mid-2000s to reach a 12.5% overall and 7.9% in the private sector in 2005. Density in the UK rose in the 1970s and fell in the 1980s and 1990s, mainly in the private sector, before stabilizing at a 29% overall and 17% of employees in the private sector in 2005 (Checchi & Lucifora, 2002).As far as divergence is concerned, the fall in union density in many OECD countries shows some convergence in the position of unions among advanced countries (table 1), but Pencavel (2000) correctly rejects the notion of convergence in labour institutions broadly. Collective bargaining coverage has diverged across countries, as countries with mandatory extension of contracts continue to rely on union-management negotiations to set pay. Moreover, differences in unionization between men and women are narrowing, but differences between manufacturing and services, the private and public sector, part time and full time employees, and large and small firms have remained (Freeman, 2005).Reasons for the declineIn order to understand if the decline that is affecting unions during the last decades is terminal or not I will first provide an explanation of the main reasons for this decline.

Then, I will present different points of view, including my own, that will attempt to identify possible solutions to the following problems.* Structural changes in the labour market. This reason is in primis referred to the European situation. Between the mid-1970s and mid-1980s the two strongholds of union membership and, even more, of union power, reached the limits of their expansion. These being the manufacturing sector and the public sector. In addition, although the majority of workers in all advanced countries work in what might be called standard employment (full time formal employment contract), the number of persons working under other contracts has grown rapidly. Part-time work has increased, a new form of “dependent self employment” is spreading, more women work than ever before, and there has been a significant shift from the production sector to the service sector.

The problem is that all these new groups prove more difficult to organize than the usual full time production workers. Every single aspect of this structural change has contributed to weakening the role of trade unions.* Government policies. “There can be no salvation for Britain until the special privileges granted to the trade unions (…) are removed.” (Hayek, 1980).

These words by Friedrich von Hayek are emblematic of the change of the public and politic opinion towards unions in the UK, and in general, in Europe. Too many requests, too many strikes and too many “other small problems” brought governments to adopt a hostile attitude towards trade unions in order to gradually limit their power, step by step. The reason why a change in government policies has led to a decline in union density is that a government can often act as a substitute to unions. State-provided unemployment insurance, employment protection legislation and wage indexation, just to name a few, through reduction of labour market risks can make unions redundant. Yet, statistics show that the effect of government policies in some countries has been limited.* Management opposition. The concept of Union Wage Effect is a fundamental point here. By Unions Wage Effect (UWE) it is intended the differential between union- wage rates and non union- wage rates.

US unions have far greater effects on wages than the unions in other countries (Blanchflower & Freeman, 1992). The large union wage effect gives US management an exceptional profit incentive to be able to oppose unions, and is a major reason why the US unionism has declined more than in other countries. Obviously, this issue is present in Europe as well, even if at a lesser extent. Besides, another reason for management opposition is that in such a turbulent product market as the last decades, they needed more flexibility than ever before. Consequently, they simply could not accept constraints from unions within their enterprises.

Moreover, this could explain, in part, the different pattern followed by private and public sector. In the private sector unions have little power to raise demand on goods and services carried out by union labour, so managements oppose unions as they are considered to be institutions that reduce profits. In contrast, in the public sector the role of unions is sometimes decisive, and this stems the diverse attitude of managers, being more willing to cooperate with them. As a result of the whole analysis, unions have declined due to the lack of cooperation, which is decisive for their action.* Business Cycle. There is an inverse relationship between unemployment and trade union membership and between real wages and trade union memberships (Rouwenhorst, 2004). From the 1980s unemployment rates skyrocketed, particularly in Europe, and real wages rose considerably. Consequently, when unemployment is high or employees earn more (in terms of real wages) the more likely it is that these people will not join a trade union.

What future?Now that the main reasons for the decline of trade unions are clear it is also possible to understand its implications.Unlike usual debates, regarding the decline of trade unions, most opinions are not predominantly extreme. The majority of the literature focuses more on the assorted reasons why trade unions have started to decline than on their future. Also, when experts dispute actions to undertake they often mention very similar alternatives. And if they were asked to answer the question: “Are trade unions in terminal decline?”, almost everyone would begin with: “Yes, unless..

.”, or “No, but…”.It is not due to lack of inventiveness, in fact I developed my ideas very steadily, but I would answer the same question by beginning in exactly the same way, simply because, in my opinion, it is the only plausible way, given the available data and current climate of uncertainty.Trade unions are on an unambiguous decline.

I do not think this decline should be considered as being terminal; however, radical changes are necessary. These changes should concern not only trade unions, but also government policies and management attitude.As far as trade unions changes are concerned, I strongly believe that the crucial role unions have played in the socio-political field in several countries up until the 1970s can never be regained. The reason lies in the fact that the recent structural changes, which have occurred in the labour market, have been the principal cause of the decline of unionization and they cannot be reversed now. Unions should adapt to this new “marginal” role so as to best satisfy workers’ needs, which was their original objective. The new social norm should be re-establish and rebuild the social custom of union membership at the workplace, although in a more flexible way.In “Why Fewer Workers Join Unions in Europe: A Social Custom Explanation of Membership Trends” (2002), Jelle Visser reports that “the key explanation for non-membership appears to be the inability of unions to make contact with, or provide sufficient support to, potential members”.

It means that people have not lost their interest in unions, but that they demand an innovative, proactive behaviour, able to cope with needs of the new labour groups. This requires a great responsibility from the key trade unionists, which too many times have failed so far. In my opinion the motto should be something like “less politics, more initiative”, in the spirit of Working America and similar decentralized organizations. Achieving these objectives will prove to be a very difficult and will require many years, but just adapting slightly, unions would be able to survive in such a different, new environment.Regarding government policies, I consider their role is determinant in attaining a socially desirable result. In order for unions to function correctly, they first require help from the government. As I said in the text, government policies can often be a substitute to what unions do, but sometimes it is necessary to grant more freedom to unions to achieve the best of workers needs. For example, unions have a direct informative advantage in monitoring labour market imperfections, such as in unemployment schemes.

In addition, unions are perceived by workers as closer to their own interests than political parties, and finally, unions can often be considered more liable than political parties.For all these and further reasons, it should be recognised that, at times, governments have to act as “complementary” institutions to unions, not simply as “substitutes”, as has happened too frequently during the last decades. A citation from “What Do Unions Do?” appears to be a very important issue, in my opinion, at this point: “..

.the ongoing decline in unionism deserves serious public attention as being socially undesirable. We believe the time has come for the nation to reassess its implicit and explicit policies toward unionism, such as it has done several times in the past.

And we hope that such a reassessment would lead to a new public posture toward the key worker institution under capitalism – a posture based on what unions actually do in the society and on what, under the best circumstances, they can do to improve the well being of us all.” (Freeman ; Medoff, 1984).Finally, I think the role of management has been too much speculative. It is true that unions lower profits because of the Union Wage Effect, and thus management has to contrast unions.

However very often, if not always, with cooperation it is possible to achieve both firms and unions objectives. This is what workers want and I strongly believe that it is now time to change an attitude that for too long has gone against interests of the society as a whole.ConclusionUnionization has followed a very clear pattern for all the 20th century.

It has risen sharply after the first world war and it has remained at high levels until the 1970s. After that, an obvious decline characterized the last decades and data are not very encouraging for the imminent future. Furthermore, it is essential to note that data differ slightly among countries, sectors, group of workers etc.

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